In April, Brazil’s federal police stormed the helipad of a boutique seaside hotel in Rio de Janeiro state, where they busted two men and a woman loading a chopper with 7 million reais ($1.3 million) in neatly packed bills.
The detainees told police they worked for G.A.S. Consulting & Technology, a cryptocurrency investment firm founded by a former waiter-turned-multimillionaire who is the central figure in what is alleged to be one of Brazil’s biggest-ever pyramid schemes.
Police say the company owned by 38-year-old Glaidson Acácio dos Santos had total transactions worth at least $7 billion ($38 billion reais) from 2015 through mid-2021 as part of a Bitcoin-based Ponzi scheme that promised investors 10% monthly returns.
In hundreds of pages of documents obtained by The Associated Press, federal and state police and prosecutors accuse dos Santos and his associates of running a sophisticated racket defrauding thousands of small-scale investors who believed they were getting rich off Bitcoin’s steep appreciation.
He is now in a Rio jail awaiting trial on charges including racketeering, financial crimes and ordering the murder and attempted murder of two business competitors. He remains under investigation in the attempted murder of a third competitor.
In public statements, dos Santos has repeatedly asserted his innocence. His lawyers didn’t reply to AP requests for comment.
Despite the long list of charges he faces, dos Santos represents an unlikely hero to his fervent supporters. Many view him as a modest Black man whose unorthodox Bitcoin business made them wealthy by gaming a financial system they believe is rigged by wealthy white elites.
The case also underscores the fast-growing appetite for cryptocurrencies in Brazil, where years of economic and political crises have made digital currencies an attractive shield against depreciation of the Brazilian real and double-digit inflation.
Bitcoin /zigman2/quotes/31322028/realtime BTCUSD +0.94% fervor was particularly keen in Cabo Frio, the resort town of 230,000 where G.A.S. was based. As G.A.S. revenues rose, enriching early adopters, copycat firms sprang up, seeking to cash in on the craze. A wave of cryptocurrency-related violence soon followed.
With so many alleged pyramid schemes, Cabo Frio came to be known as the “New Egypt.” And as the town’s top dog, dos Santos was dubbed the “Bitcoin Pharaoh.”
Police say dos Santos began trading in Bitcoin after leaving his job as a waiter in 2014. A one-time evangelical preacher in training, he enlisted clients from the Universal Church of the Kingdom of God, Brazil’s largest neo-Pentecostal group, who earned a referral fee for bringing in fresh recruits and kicking back money to G.A.S., police documents say.
Jéfferson Colombo, a cryptofinance researcher at Sao Paulo’s Getulio Vargas Foundation, said religious groups are often targeted by pyramid schemers. “It’s through contacts that you increase the base of the pyramid,” he said.
In a statement, the Universal Church said it was cooperating with authorities and accused dos Santos of “harassing and recruiting” pastors and their flocks to join his company.
By 2017, dos Santos was starting to make serious money — and attract authorities’ attention. That year his company’s transactions totaled nearly 10 million reais ($1.8 million), 15 times higher than the previous year as money siphoned in and out of his bank accounts from all over Brazil, according to a federal police report.
The country’s financial intelligence unit also noticed the company — at the time registered as a restaurant — was regularly trading cryptocurrency on online exchange platforms.
The alleged scheme worked like this, according to prosecutors: Dos Santos would instruct clients to deposit their money – in cash to avoid further scrutiny – into bank accounts run by managing partners. The money would then be transferred to dos Santos or his Venezuelan wife, Mirelis Yoseline Diaz Zerpa, who would either pocket it, use it to buy bitcoins and other cryptocurrencies as well as traditional financial assets, or pay off other members of the scheme.
Clients were promised a 10% monthly return on their investments over 12- to 48-month contract periods, but did not own the bitcoins they were told G.A.S. was purchasing with their money. And, they were assured, it was risk-free: They would get their entire initial investment back at the end of the contract.
As Bitcoin fever grew, dos Santos was fast becoming a celebrity in Cabo Frio.“If he wanted to run for mayor, governor even, he’d win,” said Gilson Silva do Carmo, 52, one of dos Santos’ alleged victims.
The chubby young man in thick-rimmed glasses was also gaining a taste for the high life, police and prosecutors said. Dos Santos bought expensive jewelry and a swanky apartment as contracts poured in from elsewhere in Latin America and as far away as the U.S., Europe and the Gulf.