A warning issued by City Hall last week alleged that a nationwide fraud operation targeting Latino investors had claimed at least 30 local victims.
Several homes have been in touch with authorities to report being victims of a cryptocurrency Ponzi scam operated by employees of CryptoFX, LLC, a company at the center of a federal enforcement case in Texas.
In September, the defendants Mauricio Chavez and Giorgio Benvenuto were running a fraudulent and unregistered crypto-asset offering that targeted Latino investors through CryptoFX, LLC when regulators launched an emergency action to stop it, according to the Securities and Exchange Commission, Santa Monica Daily Press report.
According to officials, Chavez started offering paid seminars with the claimed goal of teaching and strengthening the Latino population to increase their fortune by trading crypto assets.
Digital currencies like Bitcoin and NFT artwork are examples of crypto assets.
The SEC asserted that Chavez lacked any experience, 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.
In addition, the SEC claims that he gave investors bogus paperwork that, among other things, vastly exaggerated his knowledge of cryptocurrency and promised investors no losses.
In total, more than 5,000 investors helped the defendants raise nearly $12 million.
"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 statement added.
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.
Other additional resources include the California Department of Financial Protection and Innovation (https://dfpi.ca.gov), DFPI, a statewide agency that provides consumer protection in financial transactions and regulates financial services, products, and professionals.
People can file a complaint with the DFPI at https://dfpi.ca.gov/file-a-complaint/.
A bilingual outreach program on fraud prevention is being planned by the Santa Monica Police Department and Familias Latinas Unidas ("FLU").
The workshop will cover common financial frauds, financial scam detection and prevention, and additional tools for consumers.
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