Bitcoin pyramid schemes wreak havoc on Brazil's 'New Egypt'

CABO FRIO, Brazil (AP) — In April, Brazil’s federal police stormed the helipad of a boutique seaside hotel in Rio de Janeiro state, where they busted two men and a woman loading a chopper with 7 million reais ($1.3 million) in neatly packed bills.The detainees told police they worked for G.A.S. Consulting & Technology, a cryptocurrency investment firm founded by a former waiter-turned-multimillionaire who is the central figure in what is alleged to be one of Brazil’s biggest-ever pyramid schemes.Police say the company owned by 38-year-old Glaidson Acácio dos Santos had total transactions worth at least $7 billion ($38 billion reais) from 2015 through mid-2021 as part of a Bitcoin-based Ponzi scheme that promised investors 10% monthly returns.In hundreds of pages of documents obtained by The Associated Press, federal and state police and prosecutors accuse dos Santos and his associates of running a sophisticated racket defrauding thousands of small-scale investors who believed they were getting rich off Bitcoin’s steep appreciation. A wave of cryptocurrency-related violence soon followed.With so many alleged pyramid schemes, Cabo Frio came to be known as the “New Egypt.” And as the town’s top dog, dos Santos was dubbed the “Bitcoin Pharaoh.”Police say dos Santos began trading in Bitcoin after leaving his job as a waiter in 2014. And Rio de Janeiro has recently said it wants to offer incentives to those paying city property taxes using bitcoins.Meanwhile, trades in Brazilian reais on the world’s largest cryptocurrency exchange, Binance, jumped to nearly $8.5 billion in the fourth quarter of 2021, from just $152 million over the same period a year earlier, according to market data provider Kaiko.In and around Cabo Frio, where residents had seen their neighbors reap rewards by investing their life savings in G.A.S., many began to fear missing out.Do Carmo was among them. Do Carmo invested 40,000 reais ($7,000) — just over half the money left in his retirement fund.In Cabo Frio, dos Santos’ success inspired other budding entrepreneurs to follow in his footsteps — not to mention those of Charles Ponzi, who died nearby in a Rio de Janeiro hospital charity ward in 1949.