August 20, 2020
Prosecutors said that operators promised crypto returns for cash, but in reality, they spent money on cars, jewels, and exclusive homes.
One of the five operators of the alleged scheme, Gutemberg Dos Santos, was arrested today in Panama and is awaiting extradition to the U.S. while four of them were accused in U.S. courts recently.
The co-founders of AirBit Pablo Renato Rodiguez and Dos Santos and their lawyer Scott Hughes, together with AirBit promoters Cecilia Millan and Jackie Aguilar, were charged with running a multi-level marketing scheme. The DOJ stated this in an indictment filed in the District Court for the Southern District of New York and was unsealed last Tuesday.
“The defendants put a modern-day spin on an age-old investment scam, promising extraordinary rates of guaranteed return on phantom investments in cryptocurrencies,” Acting U.S. Attorney Audrey Strauss said in a statement.
The SEC charged Millan and another AirBit promoter, Margarita Cabrera, acting as unregistered brokers when selling AirBit Club securities.
According to the prosecutors, AirBit was founded in 2015 by Rodriguez and Dos Santos and committed their scheme by hiring promoters. Millan and Aguilar focused on recruiting Spanish-speaking investors through YouTube videos and small, extravagant gatherings.
The victims saw money accumulating through online portals and gave them access to their accounts. But in reality, there were no profits; attempts to withdraw their money were met with interruptions, prosecutors said. For the time being, AirBit Club operators allegedly spent the tens of millions they reeled in from investors on cars, jewelry, and luxury homes. According to the DOJ, they also used the money to travel around the world and finance extravagant international expos to recruit more investors.
An article from last year said that the Sao Paulo Public Ministry was also investigating AirBit. They described AirBit’s violent efforts to attract new recruiters and said that AirBit promoters had a “very close and poorly explained relationship with the evangelical empire.”
According to SDNY prosecutors, Rodriguez, Dos Santos, Hughes, and Millan laundered at least $20 million in investor funds with the use of various foreign and domestic bank accounts, together with an attorney trust account administered by Hughes. Rodriguez and Dos Santos initially hired their lawyer Hughes to look after them in the U.S. Securities and Exchange Commission’s 2017 implementation action over a prior suspected pyramid scheme through Vizinova, a cloud-based computing company. It was resolved in 2017 when Rodrigues and Santos paid $1.7 million in consequences through Hughes.
Prosecutors charged all five defendants with wire fraud conspiracy. Rodriguez, Dos Santos, and Hughes are also facing a bank fraud conspiracy charge, and, along with Millan, conspiracy to commit money laundering.
The wire fraud and money laundering charges each carry a last term of 20 years in prison, while the bank fraud charge conveys a maximum term of 30 years in prison.