CABO FRIO, Brazil (AP) — In April, Brazilian federal police stormed the heliport of a seaside hotel in Rio de Janeiro state, detaining two men and a woman who were loading a load of well-packaged bills onto a helicopter. : 7 million reais, equivalent to 1.3 million dollars.
The detainees told police they worked for GAS Consulting & Technology, a cryptocurrency investment firm founded by a former waiter-turned-billionaire and the central figure in what is allegedly one of the largest pyramid schemes in Brazilian history. .
Police say the company owned by Glaidson Acácio dos Santos, 38, had total transactions worth at least $7 billion (38 billion reais) from 2015 to mid-2021 as part of a Ponzi scheme. , in which bitcoins were used, which promised investors a 10% monthly return.
In hundreds of pages of documents obtained by The Associated Press, police and federal and state prosecutors accuse dos Santos of running a complex scheme to defraud thousands of small investors who believed they were getting rich off Bitcoin’s strong appreciation.
Dos Santos is now in a Rio jail awaiting trial on charges including extortion, financial crimes and ordering the murder or attempting to murder two business competitors. He is still under investigation for the attempted murder of a third competitor.
Dos Santos has repeatedly claimed that he is innocent. His attorneys did not respond to requests for comment from Associated Press reporters.
Despite the charges, dos Santos represents an exceptional hero to his followers. Many see him as a modest black man whose unorthodox bitcoin business made them rich by tapping into a financial system they see as rigged by wealthy white elites.
The case also underscores the rapidly growing appetite for cryptocurrencies in Brazil, where years of economic and political crisis have made digital currencies an attractive shield against depreciation of the Brazilian real and double-digit inflation.
The fervor for bitcoin was very high in Cabo Frio, a tourist city of about 230,000 inhabitants, where GAS had its headquarters. As GAS revenues increased, enriching the scheme’s early participants, companies emerged that sought to profit by imitating its example. This was followed by a wave of crypto-related violence.
With so many alleged pyramid schemes, Cabo Frio came to be known as the “New Egypt.” And as the boss of the city, dos Santos was dubbed the “Bitcoin Pharaoh.”
Police say dos Santos began trading bitcoins in 2014, after quitting his job as a waiter. He recruited clients from the Universal Church of the Kingdom of God, where he once trained as a preacher, promising referral bonuses to those who brought in new recruits, authorities say.
In a statement, the Universal Church accused dos Santos of “harassing and recruiting” pastors and their faithful to join his company.
By 2017, dos Santos was making big money and attracting the attention of authorities. That year, his company’s transactions totaled 10 million reais ($1.8 million), 15 times more than the previous year. The country’s financial intelligence unit also noticed that the company, registered as a restaurant, regularly traded cryptocurrencies on online exchanges.
Prosecutors say the alleged scam worked like this: Customers deposited their money into bank accounts managed by managing partners. The money was then transferred to dos Santos or his Venezuelan wife, Mirelis Yoseline Diaz Zerpa, who then pocketed it, either bought bitcoin, other cryptocurrencies and traditional financial assets, or paid other members of the scheme.
Clients were promised a 10% monthly return on their investments in 12-48 month contracts, but did not possess the bitcoins they were told GAS bought with their money. Furthermore, they were assured, the business was risk-free: they would recover their entire initial investment at the end of the contract.
As the bitcoin craze grew, dos Santos was quickly becoming a celebrity in Cabo Frio.
“If he had wanted to run for mayor, even governor, he would have won,” admitted Gilson Silva do Carmo, 52, one of dos Santos’ alleged victims.
The plump man in thick-rimmed glasses was also gaining a taste for the good life, buying expensive jewelry and a fancy apartment as contracts poured in from elsewhere in Latin America, the United States, Europe and the Persian Gulf.
Experts believe that Brazil’s lenient laws regulating cryptocurrencies helped fuel dos Santos’ rise.
At the same time, the agency that regulates securities in Brazil was making cryptocurrencies more attractive: it authorized the country’s investment funds to invest in digital currencies in 2018, giving them greater credibility. Last year, Brazil approved publicly traded bitcoin funds, becoming the second country in the world to do so.
In and around Cabo Frio, where residents saw their neighbors make huge profits by investing their life savings in GAS, many began to fear missing out.
Do Carmo was one of them.
After being told by his therapist that he sold his house to invest in GAS and was receiving 10% monthly returns for a year, do Carmo invested just over half of his retirement fund.
In Cabo Frio, dos Santos’ success inspired others: some competitors promised even higher returns: 20% or more a month, something dos Santos did not like.
In mid-April, he told his associates that his rivals were encroaching on his territory, according to WhatsApp messages intercepted by federal police.
Four months later, Wesley Pessano, a cryptocurrency trader, was shot to death in his Porsche. The police accuse dos Santos of ordering the crime.
Rio state police also linked two assassination attempts to dos Santos. On March 20, a merchant was shot while driving his BMW through Cabo Frio. Three months later, the operator of another company was attacked with bullets and his car received 40 impacts. They both survived.
Things came to a head on April 28, when Rio police seized the 7 million reais at the Hotel Insolito Boutique helipad on the outskirts of Cabo Frio. A month-long investigation into dos Santos’s dealings then followed.
On August 25, the federal police raided more than a dozen properties linked to GAS, including the house of dos Santos, where they found him with 13.8 million reais (2.5 million dollars) and arrested him. Agents also found hard drives containing 10 times that amount in bitcoin, gold bars, jewelry and various sports cars.
A total of 16 associates were also charged, including Diaz Zerpa, the wife of dos Santos, who fled the country weeks before the raid and is believed by authorities to be in Florida. They say that he withdrew more than 4,300 bitcoins worth 185 million dollars (one billion reais).
Do Carmo has seen the case horrified: he had invested the rest of his savings in the company just a few weeks before.
“I thought, ‘My God, what have I done?’” he said. “You see everything you fought for, your whole life disappearing from one moment to the next.”
Brazilian police are still trying to uncover the true size of the dos Santos empire.
Prosecutors have identified at least 27,000 victims in at least 13 Brazilian states and seven other countries, including the United States, the United Arab Emirates, the United Kingdom and Portugal.
However, the true figure is likely much higher, said Luciano Regis, a lawyer who represents dozens of victims.
“It is difficult to have a conversation with someone in Cabo Frio who does not know someone who has invested,” he explained.