US cracks down on crypto Ponzi scheme targeting Latino investors

Mauricio Chavez presented himself as a cryptocurrency expert willing to teach the secret of his success to Latino investors. He boasted of making millionaires out of those who followed his advice. But according to the Securities and Exchange Commission (SEC), Chavez was actually running a Ponzi scheme. He convinced 5,000 people, with little prior knowledge of the crypto asset market, to invest in CryptoFX, a company he founded with partner Giorgio “Gio” Benvenuto. Chavez then used investors’ money to buy himself houses, jewelry and a car, and on lavish nights at nightclubs, according to the financial supervisor.

According to a press release issued on Monday, the SEC filed an emergency action on September 19 to stop Chavez and Benvenuto, who were accused of perpetuating “multimillion dollar securities fraud directed at Latino investors.” At the SEC’s request, the court issued a temporary restraining order halting the offering, as well as temporary orders freezing assets and granting other emergency relief. After a hearing on September 29, 2022, the court also granted the SEC’s motion for a receiver and extended the asset freeze.

Chavez, a 41-year-old resident of Houston, Texas, had no experience, background or training in investments or crypto assets, but in 2020, he began teaching paid classes (with courses costing between $500 and $1,500) for the purported purpose of educating and empowering the Latino community to build wealth through crypto asset training. He provided investors with false documents that, among other things, overstated his crypto experience and guaranteed that investors would not bear any losses, according to the SEC. His courses were held at various locations in Texas, California, Illinois, North Carolina and Louisiana.

The lawsuit alleges that the seminars were nothing more than a way to get students to invest their money into CryptoFX, which would allegedly make crypto trades for them. According to the SEC, Chavez claimed to have made spectacular profits and to have “literally made over five millionaires in the last year.” He provided a table of potential earnings that showed investors earning back half of their investments in profits in three months and 90% in six months. Chavez and Benvenuto raised more than $12 million from more than 5,000 investors, according to the complaint.

Of the $12 million raised, Chavez and Benvenuto only invested $1 million in crypto assets. CryptoFX spent $2.7 million on paying fake returns to some investors to make his story more credible. But the bulk of the money was invested in real estate, including a house in the name of Chávez’s wife, which cost $540,000. For his part, Benvenuto, 55, allegedly recruited a large investor to enter the scheme and diverted the investors’ funds to himself and CBT Group, a company he owned with Chavez.

A luxury lifestyle

The SEC alleges that Chavez spent nearly $1.5 million on living a life of luxury. According to the complaint, Chavez spent $460,000 on cars, $267,000 on credit card payments, $196,000 on retail purchases, $186,000 at the Post Oak Hotel, a five-star Houston establishment where he had apparently taken up residence, $110,000 on travel, $101,000 on restaurants, $19,000 more on jewelry and $15,000 at nightclubs (described by the SEC as “adult entertainment establishments”). The watchdog also believes CryptoFX partners spent $30,000 to purchase a hair salon in Houston.

The complaint, filed in the US District Court for the Southern District of Texas, accuses Chavez, Benvenuto and CryptoFX of violating, or aiding and abetting violations of, antifraud provisions of federal securities laws. The SEC seeks permanent injunctive relief, civil penalties and the return of ill-gotten gains with interest, as well as bars against Chavez and Benvenuto from serving as officers or directors of any public company.