Alleged scammers used a trading platform that offered residents of the Argentine city of San Pedro the opportunity to double their investment in dollars in a month and a half.

An alleged cryptocurrency pyramid scheme has recently astonished Argentina. A third of the residents of San Pedro, a city of 70,000 located 170 kilometers from Buenos Aires, have reported being victims of a large-scale scam, as reported by the Argentine media Rosario last Tuesday.

Rainbowex, a fake trading platform promoted by the Knight Consortium Foundation, a foundation composed of a group of shareholders supposedly operating on the stock exchange and attracting investors worldwide, promised nearly 20,000 people to double in dollars their investment in a month and a half. An outstanding performance. The problem? Rainbowex and Knight Consortium have no legal structure. In other words, they do not exist.

Polish actors embody the directors

The so-called foundation operated through promoters scattered throughout the city of San Pedro, who encouraged residents to invest their money on the platform. The only condition was that they had to, in turn, recruit new participants, following the classic mechanism of pyramid schemes.

“A friend told me about the platform in March. He promised a return on investment in dollars, explaining that I would receive my money in 45 days. I transferred pesos via a virtual wallet,” said Mariano, an alleged victim of the scam, to the Argentine media TN.

A woman known as “La China” (The Chinese) sent nightly messages to investors via a Telegram channel, indicating the “right moment” to buy and sell cryptocurrencies.

The main lure of the scam was the promise of earning up to 2% interest per day in dollars. Additionally, investors were told they could withdraw their funds at any time. They could then convert the cryptocurrencies into pesos, returned to their original virtual wallet, or exchange them at financial agencies for dollars or pesos. The agencies then charged a 5% commission.

An Argentine economy in recession

Amidst an Argentine economy in recession and growing poverty, the scam attracted both the less well-off and the affluent, all searching for dollars. Indebted, the country has been plagued by inflation for years: The rise in the general price level in Argentina reached +211% in 2023.

Javier Milei, a self-proclaimed ultra-liberal economist, elected president of the Argentine Republic in November 2023, had based his program on the proposal to “dollarize” the economy before temporarily abandoning the project to avoid depleting the country of its meager foreign exchange reserves.

Upon taking office, the Milei government launched numerous economic reforms, impacting the wallets of Argentinians, such as the more than 50% devaluation of the peso, the national currency. The goal was to reduce the country’s chronic budget deficit drastically.

When suspicions began to surface regarding the Rainbowex scam, as reported by TN, the leaders of the so-called foundation organized a “conference” in a luxury hotel in Buenos Aires to reassure investors seeking dollars.

The police later discovered that the supposed directors at this event were, in fact, Polish actors.

These actors were Filip Wałcerz, 44, with commercials and a few extra roles in Polish TV series and films to his credit, alias “Jeremy Jones,” the so-called director of operations for the Knight Consortium, and Maurycy Lyczko. The latter claimed to have been hired by a person of Asian origin who provided him with a script and a pay of 1,500 dollars.

Suspicions of a pyramid scheme

Investors began to ask questions when Maximiliano Firtman, an Argentine journalist, sounded the alarm via a post on the social network X, which has since gone viral. “It’s all a simulation, they are all crazy to believe that these people are the wolves of Wall Street,” the post reads.

Shortly thereafter, many residents of San Pedro contacted the foundation’s leaders via the Telegram channel for explanations. “The technical service informed me that there were some logistical problems, but be patient,” the alleged scam’s leaders replied to reassure the investors.

In scams based on the “Ponzi scheme” model (named after Carlo Ponzi, the infamous Italian fraudster), the initial investors receive supposed returns that are actually funded by the capital brought in by newer investors.

When revenues decrease, or when many investors decide to withdraw their capital, the scam collapses.

Two investigations are already underway in Argentine courts. The Federal Justice is investigating whether crimes such as money laundering or illegal financial intermediation have been committed. In this context, two raids were conducted on Wednesday at one of the involved financial agencies — Overcash — and at the private residence of one of the alleged company promoters.

According to judicial sources consulted by La Nación, the main suspect is a certain Luis Pardo, arrested in 2019 for domestic violence.

This is not the first case of accusations of cryptocurrency and pyramid scheme scams in Latin America. In Brazil last year, citizens denounced a dozen Brazilian cryptocurrency companies that allegedly scammed several million Brazilians.