US Regulators Halt Crypto Firm for a Ponzi Scheme Targeting Latino Investors

CryptoFX, a Texas-based company, operated a Ponzi scheme that netted $12 million from thousands of investors, SEC says

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Bloomberg Línea — The US Securities and Exchange Commission (SEC) ordered the shutdown of the Texas firm CryptoFX for a Ponzi scheme to defraud Latino investors in the country.

The SEC says that CryptoFX began holding paid classes allegedly seeking “educating and empowering the Latino community to build wealth through crypto asset trading”.

Regulators said that since 2020 CryptoFX founders, Mauricio Chávez and Giorgio Benvenutto, targeted investors with no background, education, or training in investments or crypto assets.

A Court issued, at the SEC’s request, a temporary restraining order halting CryptoFX’s offerings as well as temporary orders freezing assets.

According to the SEC’s complaint, CryptoFX offered seminars for investors seeking to make a kill in promising crypto markets. But in the end, the SEC says, “the seminars were merely conduits for soliciting investors to give their money to CryptoFX, which Chavez would then supposedly use to conduct crypto asset and foreign exchange trading.”

The authorities said Chavez Claimed to have earned outsized returns from crypto trading and to have “literally made over 5 millionaires in the last year.” He gave investors, the suit says, false documents that, among other things, grossly overstated his crypto experience and guaranteed that investors would not bear any losses.

As alleged, Chavez claimed, among other things, to have earned outsized returns from crypto trading and to have “literally made over 5 millionaires in the last year.” He also provided investors “false documents that, among other things, grossly overstated his crypto experience and guaranteed that investors would not bear any losses. The defendants ultimately raised over $12 million from more than 5,000 investors.”

Real estate of their own

The amount raised by Chavez and Benvenuto was $12 million from more than 5,000 investors, mainly Latinos.

The SEC says Chavez used more than 90% of the funds he obtained to pay false dividends to investors, pay for his lifestyle, and acquire and develop real estate that he and Benvenuto controlled.

Crypto damage for Latinos and African-American

Many Latino and African-American investors in the U.S. have been encouraged to expose their finances to crypto platforms in the hope of positive returns.

A Morning Consult report presented in July reveals that 26% of Hispanic and 25% of African-American investors held positions in cryptocurrencies, compared to only 15% of their white counterparts in the US.

That means, the research firm said, that a greater proportion of minority investors in the U.S. have been exposed to and hurt by the debacle in the crypto markets.

From mid-2021 to the first half of 2022, the crypto market has lost more than US$2 trillion in value, Morning Consult said.