US, Brazilian law enforcement seize $24 million in cryptocurrency generated through online fraud

November 5, 2020 TH Author

US and Brazilian authorities have seized $24 million in cryptocurrency connected to an online scheme that allegedly defrauded “tens of thousands” of investors.

Upon request from the government of Brazil, US law enforcement participated in “Operation Egypto,” a Brazilian federal investigation into the suspected scam, the US Department of Justice (DoJ) said on Wednesday.

The collaborative effort, made under the Mutual Legal Assistance in Criminal Matters treaty, tracked down suspect Marcos Antonio Fagundes, who is being charged with the operation of a financial institution without legal authorization, fraudulent management of a financial institution, misappropriation, money laundering, and the violation of securities law.

Prosecutors allege that between August 2017 and May 2019, Fagundes and co-conspirators used the internet to find and solicit investors — sometimes together with communication over the phone — and convince them to invest in new financial “opportunities.”

The victims of the alleged scam would then part with funds in either Brazilian currency or cryptocurrency, believing that the investment would be poured into companies that Fagundes and his associates controlled.

These companies, the DoJ says, were meant to then invest in virtual assets. However, only a “very small amount” of the funds were used for this purpose — while the rest went into the pockets of the alleged fraudsters.

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As a result, investors saw close to nothing in return for their cash.

“To carry out the scheme, the conspirators are alleged to have made false and inconsistent promises to investors about the way the funds were invested and exaggerated the rates of return,” the DoJ added.

Operation Egypto investigators estimate that tens of thousands of investors handed over more than $200 million.

After the Brazilian court issued a seizure order for any cryptocurrency held by Fagundes in the US, $24 million was recovered with help from the cryptocurrency exchanges holding his wallets.

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The investigation is ongoing. However, Brazilian authorities, the FBI, and other parties intend to hold the cryptocurrency as part of future forfeiture proceedings to try and compensate the investors involved, at least, to some level.

This week, the DoJ also announced the seizure of 27 web domains used by Iran’s Islamic Revolutionary Guard Corps (IRGC) to spread propaganda and misinformation under the guise of legitimate news outlets.

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