US charges 17 more people over $300 million pyramid scam that targeted Latino investors

The pyramid scheme that the United States began to dismantle in 2022 had a much larger dimension than was previously known. The U.S. Securities and Exchange Commission (SEC) announced Thursday the filing of charges against 17 more people in the case, in addition to the initial two charged, over a scam carried out through the firm CryptoFX that promised large returns through cryptocurrencies and that eventually raked in over $300 million. According to the document, the scam was aimed mainly at the Latino community in the United States and more than 40,000 people were affected.

The mastermind of the scheme, Mauricio Chavez, presented himself as a cryptocurrency expert willing to pass on the secret of his success to Latino investors. He asked them to entrust their money to him with promises of high returns. In reality, he spent most of the money on payments to lend credibility to the Ponzi scheme, self-investments — such as the purchase of houses, jewelry and a car — and personal expenses, including at nightclubs, according to the SEC, as it previously warned when it ordered CryptoFX to cease operations.

CryptoFX was headquartered in Houston, Texas, but took money from investors in at least 10 U.S. states and two foreign countries, according to the SEC. The supervisor’s complaint alleges that from May 2020 through October 2022, the 17 additional indicted individuals — from Texas, California, Louisiana, Illinois and Florida and ranging in age from 28 to 60 — were part of the CryptoFX network and solicited money from investors by variously promising that they would achieve returns of 15% to 100% by trading cryptoassets and currencies.

“We allege that CryptoFX was a $300 million Ponzi scheme that targeted Latino investors with promises of financial freedom and life-altering wealth from ‘risk-free’ and ‘guaranteed’ crypto and foreign exchange investments,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement. “In the end, the only thing that CryptoFX guaranteed was a trail of thousands upon thousands of victims stretching across ten states and two foreign countries. A scheme of that size requires lots of participants, and as today’s action demonstrates, we will pursue charges against not just the principal architects of these massive schemes, but all those who further their fraud by unlawfully soliciting victims.”

In the seminars the network organized, they assured victims that these were risk-free investments and that their money was insured even in the event of a world war or a widespread blackout. They also promoted themselves in Zoom meetings and through social networks. They attracted mainly cash investments, ranging from $500 to $300,000.

The perpetrators set up a pyramid scheme for victims to bring more investors into the fold. They promised a 7% commission for each of the investors recruited and an additional 3% for those brought in by second-tier investors. They also gave a special 3% bonus if participants brought in sums above a certain level. Millions of dollars were used to pay these commissions and lend credibility to the Ponzi scheme.

The indictment asserts that two of the defendants, Gabriel Ochoa and Dulce Ochoa, continued to illegally raise money even after the supervisor intervened CryptoFX in September 2022. Gabriel Ochoa demanded that two investors rescind their SEC complaints in order to recover their investments. Another defendant, Maria Saravia, allegedly told the investors that the SEC indictment was false.

The new statement claims that the mastermind of the scheme, Mauricio Chavez, used $1 million from investors to buy a house in Conroe, Texas. The initial brief spoke of another $540,000 single-family home in his wife’s name.

In the 2022 complaint against Chavez and his right-hand man, Giorgio Benvenuto, the SEC alleged that Chavez spent almost $1.5 million on a luxury lifestyle. Among the expenses detailed by the supervising agency are some $460,000 spent on cars, $267,000 in credit card payments, $196,000 in purchases, including at luxury establishments, $186,000 in the Post Oak Hotel, a five-star Houston establishment where he had apparently established his residence, $110,000 in travel, $101,000 in restaurants, $19,000 more in jewelry and $15,000 in what the SEC described as “adult entertainment establishments.” The supervisor believes he also paid $30,000 to buy a hair salon in Houston.

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition