The bitcoin community has been filled with scams over the past few months. Finally, law enforcement has caught up to at least one team of scammers.
Police in Brazil have arrested and charged 11 suspects after they were found to be connected to a pyramid scheme. The scheme was uncovered after one of the owners purchased an airplane using proceeds from the company.
Police are describing the team of 11 scammers as a criminal organization. The police seized R $3.6 million during the arrests (about $1.15 million USD).
The scammers have been charged with a felony for running a criminal organization, participating in money laundering, and using false documents.
Over the past few months, the scammers have reportedly collected money from 40,000 victims. These victims were encouraged to buy fake “Kriptacoin” tokens in exchange for fiat currencies or cryptocurrencies. In reality, the Kriptacoin tokens had no apparent value. Like many other bitcoin pyramid schemes, the scammers marketed the coins as “the next bitcoin” despite the fact that there was no basis or value to the currency.
Investors finally caught onto the scam when they tried to withdraw their money – but found they weren’t able to access it. However, the pyramid scheme didn’t officially cease operation until police arrested the founding team.
Kriptacoin’s Creators Were Caught Buying A Plane
Obviously, the creators of Kriptacoin weren’t the smartest criminals in the world. The team got caught after they purchased a plane under a shell corporation named Royal Family.
That corporation was based in Brasilia, where it reportedly bought perfumes and party tickets for resale. However, police reportedly found a connection between Royal Family and the Kriptacoin pyramid scheme.
In any case, the company that sold the plane to the scammers got suspicious when they received payment in the form of multiple cash cheques.
Nevertheless, the scammers successfully purchased the plane and used it to travel weekly between Rio, Minas Gerais, Brasilia, and other regions of Brazil.
The last trip was made on September 17, according to an investigation by TV Globo.
How The Kriptacoin Scheme Worked
The scammers reportedly joined forces at the end of 2016, launching Kriptacoin in January 2017.
Anyone who joined the organization was promised enormous profits. Investors were told they could expect returns of 1% per day, every day. The only “catch” was that the balance could be withdrawn after one year – not earlier. Investors also received their returns in the Kriptacoin digital currency – a useless currency with no value in relation to fiat or cryptocurrencies.
The team of 11 scammers went to great lengths to make the investment seem legitimate. They advertised on billboards, purchased TV and internet advertising slots in Brazil, and even took pictures with Brazilian celebrities, for examples.
Investors were also given an incentive to recruit more people to the business. Anyone who recruited people could receive a 10% bonus. The company continued growing.
According to police in Brazil, one of the victims deposited R $200,000 (about $70,000 USD). When that investor tried to withdraw the money, they were reportedly threatened by executives of the company.
Meanwhile, the team of 11 scammers used about 20 fake names, making the management team look larger – and more legitimate – than it actually was.
The end result of Kriptacoin was the same as many other bitcoin pyramid schemes and investment scams we’ve seen in recent weeks: investors are promised enormous returns, and they see those returns deposited into their accounts in the form of a digital token. Investors think the company is legitimate, so they begin to tell their friends about it.
When they try to withdraw any profits, however, they find that their money is no longer accessible – it’s been spent by the leaders of the pyramid scheme on things like planes.
Ultimately, the Kriptacoin story is blowing up news sites across Brazil. We’ve seen similar scams taking place across the United States, China, the UK, Russia, and other major cryptocurrency-using nations. Let’s hope police in these countries are as successful at tracking down criminals. Stories like this weaken the perceived value of the cryptocurrency industry as a whole.