view | The FBI claims to have busted a major crypto Ponzi scam. It just got bigger.

Opinion

We are in An era where investors are tricked into becoming millionaires by sinking their money To cryptocurrency-related companies or platforms.

Scammers are capitalizing on the crypto craze big time. In the year Since the beginning of 2021, Americans have lost more than $1 billion to cryptocurrency scams, 60 times the losses recorded in 2018, according to the Federal Trade Commission.

A company called EminiFX claims to have developed a proprietary trading system that invests people’s money in the cryptocurrency and foreign exchange markets.

When the Justice Department and Commodity Futures Trading Commission filed complaints against the company about the alleged Ponzi scheme, they believed the fraud amounted to $59 million.

But that turned out to be an underestimation, according to an initial report by David Castleman, a New York partner at Reigns Feldman, who was appointed receiver for EminiFX.

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The Department of Justice and the Commodity Futures Trading Commission said EminiFX was a Ponzi-style scheme owned by New Yorker Eddie Alexander that promised participants a guaranteed return of at least 5 percent each week.

Castleman said the investigation found $250 million collected from investors and 62,000 EminiFX user accounts between September 2021 and May 2022. Alexander’s attorney, Emil Bove, did not respond to a request for comment. Alexander has pleaded not guilty, according to the Justice Department.

Based on Castleman’s forensic look at EminiFX, the complexity of the platform and the production of what appear to be spontaneous returns is impressive.

This is not what I followed. Thousands of investors, many from Haiti, are standing behind Alexander. Nearly 14,000 EminiFX investors have signed a change.org petition in support of Haitian-born Alexander, who many believe is a victim of racism.

“We will fight this together,” wrote one petition signer. “When will we get a break from this discrimination? I’m sure things would have turned out differently if we were of a different race.” Another wrote, “If we want to get out of poverty, the system is telling us (blacks) to stick to basketball, football, and rap music.”

The FBI claims to have operated a crypto Ponzi scheme. Investors refuse to believe it.

Many investors I interviewed were convinced that the profits they saw in their online accounts from Alexander were real. “He gave you every week,” said Markens Nicholas, who helped start the change.org petition. “So that makes it more believable.”

Here’s how the platform works based on the investigation. EminiFX users deposit money or crypto into the system. It was a multi-level marketing platform where people could earn bonuses by recruiting others. Account balances are shown in US dollars. Investors deposit their money in “e-wallets” or “trade wallets”.

“Every Friday, a weekly “ROI” or return on investment between 5 percent and 9.99 percent is applied to each EminiFX user’s account balance, with the same ROI for all users,” the report said.

Data from the EminiFX system showed positive returns on a weekly basis, from a low of 5.01 percent to a high of 9.99 percent. “I didn’t find any investment activity to support those returns,” Kastman said in an interview.

An investor who deposited $10,000 in cash on Oct. 15 and opted to invest the returns into a trading portfolio would have seen a balance sheet of more than $77,000 by the time the company closes in May 2022, according to Castleman’s report. That was an unusual and highly unlikely comeback in such a short period of time.

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Castleman’s investigation found more than 22,000 withdrawal transactions from the EminiFX platform between November 2021 and May 2022 totaling nearly $35 million. However, a lot more money was coming into the operation. If the company took in more than $250 million, that might explain how investors never realized their profits weren’t real.

According to Castleman’s report to the court, “many users appear not to have withdrawn or redeemed their funds.” Generally, a Ponzi scheme involves people being paid from the money collected from other investors rather than from investment returns.

After researching all possible investment activities, Kastman said he can’t figure out how the weekly returns applied to EminiFX user accounts are generated. He could not find any evidence in any EminiFX file or code base of the existence of a proprietary trading system known as Robo Assisted Adviser Account or RA3.

The report found that none of the previous employees understood how the weekly return on investment was derived, what RA3 was or how it worked. By the time Castleman took over the stage, the total billings of all trade purses were reported to be about $512 million.

But He could only acquire assets worth about $170 million. In total, more than 3,650 bitcoins are included in the Estonian cryptocurrency exchange, which is worth more than $85 million based on the July 20 transaction price.

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However, Bitcoin price volatility from November 2021 to May 2022 has not resulted in consistent positive weekly returns being applied to EminiFX user accounts. During the stock market sell-off, the price of Bitcoin was falling sharply.

Some trading was taking place, but it was in Alexander’s personal brokerage account. The records show that Alexander invested $9 million, “only in funds that can clearly be seen on EminiFX’s corporate accounts,” Kastman reported. And after that, Alexander’s personal business lost more than $7 million — not the healthy profits he claims. When a receiver is appointed.

The receiver has shut down EminiFX’s website and operations and has been seeking any and all assets. Available in English and French, eminifxreceivership.com is a dedicated website designed to provide investors with information and ultimately a claim process.

Although Alexander has not yet been brought to trial, for the tens of thousands of people who believed in him, the hope of getting rich by investing with EminiFX will not happen.

“Most investors are concerned that their money is going to a receiver they don’t trust,” Nicholas said.

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