A nationwide fraud scheme targeting Latino investors had claimed at least 30 local victims according to a warning provided by City Hall this week.
Multiple households have contacted officials claiming they have been victimized by a crypto Ponzi scheme run by agents of CryptoFX, LLC., a business at the center of a federal enforcement action in Texas.
According to the Securities and Exchange Commission, regulators filed an emergency action to stop an on-going fraudulent and unregistered crypto asset offering targeting Latino investors, run by defendants Mauricio Chavez and Giorgio Benvenuto through CryptoFX, LLC in September.
Officials allege Chavez began holding paid classes for the stated purpose of educating and empowering the Latino community to build wealth through crypto asset trading. Crypto assets include digital currencies like Bitcoin or NFT art.
However, the SEC said Chavez had no background, education, or training in investments or crypto assets.
“According to the complaint, the seminars were merely conduits for soliciting investors to give their money to CryptoFX, which Chavez would then supposedly use to conduct crypto asset and foreign exchange trading,” said the SEC in a statement.
The SEC also alleges he provided investors false documents that, among other things, grossly overstated his crypto experience and guaranteed that investors would not bear any losses. The defendants ultimately raised over $12 million from more than 5,000 investors.
“The SEC alleges that Chavez was actually running a Ponzi scheme; rather than use investor funds for crypto trading, Chavez used more than 90% of investor funds to pay fake returns to investors, support his lifestyle, and purchase and develop real estate that he and Benvenuto controlled,” said the statement. “For his part, Benvenuto allegedly solicited a large investor into the scheme and diverted investor funds to himself and a company that he and Chavez owned, CBT Group, LLC. In total, the SEC alleges that Chavez and Benvenuto made approximately $2.7 million in Ponzi payments while diverting almost $8 million for their own use, including nearly $1.5 million that Chavez spent on cars, credit card payments, jewelry, adult entertainment, and a house in his wife’s name.”
The local victims reached out to city officials prompting an official warning from City Hall.
“Recent information suggests that representatives of CryptoFX are continuing to communicate with local residents, primarily through the WhatsApp chat service, and actively soliciting funds,” said the city in its warning. “The City urges residents who are looking to put money into any crypto-related investments, to conduct research and exercise extreme caution.”
If asked to give money to CryptoFX representatives or its affiliates, residents should contact officials.
Potential victims can visit, https://www.cryptofxreceiver.com for information about filing a fraud claim.
Additional resources
California Department of Financial Protection and Innovation (https://dfpi.ca.gov): The DFPI is a statewide agency that provides consumer protection in financial transactions, and regulates financial services, products, and professionals. You can file a complaint with the DFPI at https://dfpi.ca.gov/file-a-complaint/.
Haven Neighborhood Services (https://www.havenservices.org): Haven is a community-based organization that offers free financial coaching for clients. Haven staff can help victims file claims with the court-appointed Receiver in the CryptoFX SEC case. Diana Arciniega: diana.arciniega@havenservices.org (213) 375-4663.
The Santa Monica Police Department, in collaboration with Familias Latinas Unidas (“FLU”), is planning an outreach event addressing fraud prevention, in Spanish and English. The program will address common financial scams, detection and prevention of financial scams, and additional tools for consumers. To learn more about this event please contact community.affairs@santamonica.gov.