Mauricio Chávez presented himself as an expert in cryptocurrencies willing to teach the secret of his success to Latin investors.
He bragged about making millionaires out of those who followed his advice.
In reality, according to the Securities and Exchange Commission (the SEC), what he did was trick some 5,000 investors into giving him their money in a pyramid scheme in which he assured that his victims would obtain great benefits. .
In reality, he spent most of the money on his own investments, such as buying houses, jewelry and a car, and on personal expenses, including night clubs, according to the US financial watchdog.
The SEC filed in court on September 19 an emergency action to stop an ongoing fraudulent and unregistered crypto asset offering targeting Latino investors, run by defendants Mauricio Chavez and Giorgio Benvenuto through a company Chavez founded, CryptoFX, LLC.
At the SEC's request, the court halted the offering, issuing temporary asset freeze orders and other emergency measures.
Following a hearing held last Thursday, September 29, the court also granted the SEC's motion for a receiver and extended the asset freeze.
Chavez, 41, who lives in Houston, Texas, had no experience, education, or training in investments or crypto assets, but in 2020, he began teaching paid classes (at a cost of $500 to $1,500 per course) with the alleged purpose to educate and empower the Latino community to create wealth through investment in crypto assets.
He provided investors with false documents that, among other things, exaggerated his experience in crypto and guaranteed that investors would not suffer losses, according to the SEC.
His courses were held in different places in Texas, California, Illinois, North Carolina and Louisiana.
The lawsuit contends that the seminars were nothing more than a way to ask investors to give their money to CryptoFX, which Chavez would then allegedly use to invest in crypto assets and currencies.
As alleged, Chavez claimed, among other things, to have made spectacular profits and to have "literally made more than five millionaires in the last year."
He promised potential capital gains of 90% in six months.
The defendants ended up raising more than $12 million from more than 5,000 investors.
The SEC alleges that Chavez was actually running a Ponzi scheme, a pyramid scheme.
Of the 12 million, Chávez and his partner Benvenuto only really invested one million in crypto assets.
A part of the money, about 2.7 million, was used to pay false returns to some of the investors and make his story more credible, the classic pyramid scheme.
The bulk of the money went to real estate investments, including a house in the name of Chavez's wife that he bought for $540,000.
For his part, Benvenuto, 55, allegedly solicited a large investor to enter the scheme and diverted investor funds to himself and a company he and Chavez owned, CBT Group.
A luxury lifestyle
The SEC alleges that Chavez spent nearly $1.5 million living a luxurious lifestyle.
Among the expenses detailed by the supervisory body in its lawsuit are some $460,000 spent on cars, $267,000 in credit card payments, $196,000 in purchases, including some luxury establishments, $186,000 in the Post Oak Hotel, a five-star establishment, Houston stars where he had apparently taken up residence, $110,000 in travel, $101,000 in restaurants, an additional $19,000 in jewelry, and $15,000 in hostesses ("adult entertainment establishments," the SEC calls them).
The supervisor believes that he also spent $30,000 to buy a salon in Houston.
The Commission's lawsuit, filed in Texas Southern District Court, accuses Chavez, Benvenuto and CryptoFX of violating, or aiding and abetting the violation of, the anti-fraud provisions of various laws.
The SEC requests permanent precautionary measures, civil sanctions and the return of undue profits with interest, as well as the prohibition that Chávez and Benvenuto act as officers or directors of any listed company.