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The U.S. Securities and Exchange Commission (SEC) ordered the emergency shutdown of an ongoing fraudulent crypto offering targeting the country’s Latino community.
CryptoFX, a Texas-based firm run by Mauricio Chavez and Giorgio Benvenuto, both residents of Houston, allegedly “used the attraction and novelty of crypto assets to solicit money from unsophisticated investors,” promising vastly outsized returns on their investment, per an SEC filing released Monday.
Despite having no experience, background, or training in investments or crypto, Chavez has been teaching paid classes “for the ostensible purpose of educating and empowering the Latino community to build wealth through crypto asset trading.”
However, these seminars, which were held since 2020, “were merely conduits for soliciting investors to give their money to CryptoFX,” with the firm using a referral system to recruit new investors, according to the complaint filed in the U.S. District Court for the Southern District of Texas.
Chavez also allegedly provided investors with false documents that, among other things, overstated his crypto experience and guaranteed that they would not bear any losses.
Crypto Ponzi funds lavish lifestyle
CryptoFX ultimately raised over $12 million from more than 5,000 investors, according to the SEC.
However, rather than using the money for the stated goal of making profits from crypto trading, Chavez used more than 90% of the funds to pay fake returns to investors, and support his lavish lifestyle that included cars, jewelry, adult entertainment, a house bought in his wife's name, and purchase and development of real estate that he and Benvenuto controlled.
Benvenuto is meanwhile accused of soliciting a large investor into the scheme and diverting the funds to himself and CBT Group, LLC, a company that he owned together with Chavez.
The SEC alleges that CryptoFX co-founders spent approximately $2.7 million on fake returns to some investors to make their story more credible, while illegally diverting almost $8 million for their own use.
The complaint accuses the defendants of violating federal securities laws, with the SEC seeking “permanent injunctive relief, civil penalties and the return of ill-gotten gains with interest,” as well as barring Chavez and Benvenuto from serving as officers or directors of any public company.
Last month, a Florida man pleaded guilty in a federal district court to participating in a cryptocurrency-based Ponzi scheme that defrauded investors of approximately $100 million.
For nearly two years, Joshua David Nicholas of Stuart, FL, acted as the “head trader” of EmpiresX, a cryptocurrency investment platform that promised investors daily profits of one percent achieved through a trading bot that, in reality, never existed.