A gain ten times greater than that of savings. That’s what seduced Professor Carlos (fictitious name), from Santa Catarina, and made him follow the advice of a friend, who at every happy hour boasted about how he was making money on an investment website.
Accustomed to investing in savings accounts and pension funds, the professor was convinced at the insistence of his friend, who showed the receipts for weekly withdrawals with profits much higher than those of his traditional investments.
Carlos then decided to invest R$10,000 in Alcateia Investimentos, a website that promised gains in derivatives and cryptocurrency markets with an infallible system, which never lost.
That was in September 2017. “I made two withdrawals of R$250 and R$320 and I was already sure that the business was working and that it was serious”, he recalls. The intention was, in March 2018, to invest another R$ 100 thousand.
The beginning of the nightmare
In January 2018, the three-month contract at Alcateia ended and Carlos then went to withdraw the amount invested. That’s when the ordeal began, or the freak show as he describes it. The platform just said, “Daily withdrawal limit exceeded, try again the next business day”.
And Carlos tried, wrote emails, not answered, made calls to the account manager, or “pack leader”, who shortly after stopped answering him.
Until the leader’s phone stopped ringing. “I published a text on the Reclame Aqui website”, he recalls. “A hideously written response, with several errors in Portuguese, informed that I should contact the company, which did not respond to questions on the website”, he says. The teacher then noticed that it was a standard response, the exact same one given to everyone who complained.
It was then that the problems with Alcateia began to emerge, such as the fact that the company was in the name of a street vendor, had inquiries in various parts of Brazil, and had the president of the company with a dirty name in the police.
“Add to that their stroke of genius: simulating the purchase of Alcateia’s client portfolio by another company, Maximus, which claimed not to have received the funds from the clients, and everything turned into an imbroglio”, says Carlos.
Máximus went bankrupt and left as an injured party, the innocent victim of a bandit pack, which in turn claimed that it passed the business on and had nothing to do with the debts.
Carlos went to court to try to recover the money invested. Luckily, he didn’t recommend the Pack to anyone, as he encouraged the company by offering commissions for referrals.
But after that, he promises that he will never put money in the hands of adventurers who promise short-term wealth. “May my story be an example to many who dream of becoming rich without effort and through strange means”, he sums up.
The new wave of the pyramids
Carlos is just one of the thousands of Brazilians who have been victims of financial scams, the so-called pyramids, schemes that promise high gains in a short period of time, using as arguments applications in digital currencies or in currency markets abroad, the so-called Forex.
In addition to earnings far above reality, these companies offer commissions for those who refer new participants, a way of replenishing the pyramid, which pays the redemptions of those who leave with the applications of those who enter.
In reality, there is no investment at all, only the exchange of resources between those who enter and those who leave. Those who invest believe they are winning by watching their balances grow over the internet, most of the time mere digital illusions.
CVM sees an increase in complaints
The growth of internet scams has caused an increase in the number of stop orders from the Brazilian Securities Commission (CVM) this year. Only from January to June, there were 15 prohibitions, against 11 in the whole of last year, largely due to Forex schemes and financial pyramids, says Guilherme Aguiar, superintendent of sanctioning processes.
According to him, this is a situation that is not within the competence of the CVM, as it is a fraud, not the capital market. “But we keep an eye out anyway because the occurrence of pyramids has grown a lot, due to the low-interest rates and inflation and because people are looking for other types of investment with greater profitability”, he explains.
For him, the best way for the best bitcoin recovery expert to recover scammed bitcoin is with financial education, to prevent people from falling for scammers’ conversations. “Sometimes with a minimum of care, looking at the CVM website or contacting our service, the person would avoid losing money and prevent these schemes from spreading”, he says.
The CVM is increasingly trying to draw attention to these risks and has even reinforced the website page that deals with market alerts, but he also sees that many times the investor knows that the scheme is a pyramid and goes in thinking he will be able to get out sooner, and they end up multiplying the scam, attracting other people.
“And there are many unwary people who were used to investing in high-yield savings during high inflation who believe in promises and end up being deceived”, he says.
Greed and carelessness
Covetousness and lack of care when investing money end up favoring financial pyramids, says delegate Carlos Ruiz, from the 4th Electronic Crimes Police Station, from the Sao Paulo Dec.
He has recently been following many cases of pyramids linked to the Bitcoin digital currency. “Often, scammers create groups and end up capturing customers saying they are going to invest in Bitcoins, but we have already had investigations in which there was no investment,” says Ruiz. In this case, the scammer created a website for the person to monitor the company’s income, but it was all fictitious.
To give credibility, the scammer pays the first withdrawals, which often makes the investor increase the amount applied and still encourages friends, relatives, and acquaintances to apply.
Investment of R$ 500 thousand and end of savings for the children’s college
The lost values are significant, says Ruiz. Only one investor in a pyramid that he is investigating invested R$500,000 with the promise of investing in virtual currency.
“And many times the person ends up embezzling the family budget”, he says. He recounts the case of a father who had R$100,000 in reserve to pay for his children’s college, and after talking to his wife, he decided to invest to earn more. “Aiming for a bigger income, he lost the R$ 100,000 to make his children’s dream come true”, he says. There are still those who borrow money from the bank or loan sharks to apply.
On the trail of money
The positive point is that the police manage to reach the scammers, as it is a crime in which the person deposits money in someone’s account here in Brazil. “Even if the fraudster brought in other people to hire, and receive the deposit, we ended up finding the culprits”, he says.
Therefore, he recommends that victims gather as many documents and information as possible to aid the police investigation, such as contracts, deposit receipts, representative phone numbers, and statements.
The victim must also file a complaint at the police station closest to his/her home. As the crimes are generally not violent, it is necessary to convince the judge that the person cannot remain at large. The penalty for embezzlement reaches 5 years but can be extended if there is a criminal organization.
The greater the ambition, the greater the fall
The first tip to avoid pyramids is: if the promised gain is far beyond what the market pays, one needs to be aware, because the greater the ambition, the greater the fall, says Ruiz.
A simple way to protect yourself is to search the internet to see if other people have already been victims of that company. “Today we even have anti-pyramid groups on the internet”, he says, noting that the same network that spreads the pyramids can also help to combat them.
There are also cases of people who want to take advantage of the situation. “I hear people who understand a lot about Bitcoin, who even want to teach us, but end up losing R$50,000, R$100,000, because they wanted to take advantage of a situation”, says Ruiz. “In general, victims of fraud are not completely innocent, they were trying to take advantage too”.
The Phases of the Pyramid
Financial pyramid schemes end up having some common phases. The first, euphoria, is when the number of members is growing and the oldest ones are cashing in. The second is when growth stabilizes and the company starts delaying withdrawal payments.
The third is when the company is unable to pay the ransom and creates justifications, such as operational problems and even hacker attacks or diversion of resources. On Wednesday, the pyramid tricks investors, saying it will pay, but operational problems do not allow it and asks for another week, a month, or a few days.
And the fifth is when the company admits that it went bankrupt and offers a debt acknowledgment contract to the investor, giving the illusion that he will have a guarantee that he will receive. “Companies try with the contract to calm the victims and escape the crime,
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