‘Pharaoh of Bitcoins’ is sentenced by the CVM to a fine of R$ 34 million

2023-08-30 01:10:40

© Reuters. ‘Pharaoh of Bitcoins’ is sentenced by the CVM to a fine of R$ 34 million

On Tuesday, the 29th, the Board of the Securities and Exchange Commission (CVM) condemned Glaidson Acácio dos Santos, the “Bitcoin Pharaoh”, to a fine of BRL 34 million for offering securities without obtaining registration and without the waiver. The financial pyramid disguised as an investment in bitcoins by the “Pharaoh” moved BRL 38 billion between November 2015 and May 2021 and left an estimated loss of BRL 9.3 billion.

Santos’ wife, the Venezuelan Mirelis Zerpa, who is on the run, and her firm, GAS Consultoria e Tecnologia, were also sentenced to fines of the same amount.

For the accusation of fraudulent operation in the securities market, they were also sentenced to a temporary ban of 102 months from acting, directly or indirectly, in any type of operation in the Brazilian securities market.

The accused did not constitute a defense, and the trial session was held in absentia.

A former waiter and former pastor, Santos piloted, from Cabo Frio (RJ), a fraudulent business that involved at least 8,976 people – 6,249 individuals and 2,727 legal entities -, indicates the CVM report, supported by information forwarded by the Public Ministry Federal (MPF). The scheme was dismantled by the Federal Police, with the Krytos operation, triggered in August 2021.

The “Pharaoh” has been imprisoned ever since. GAS, treated in a complaint by the MPF as an “illegal financial institution”, had its bankruptcy decreed in February of this year. Zerpa went to the US, where he would be trying to make a music career. The Venezuelan would have maintained accounts abroad, which would be supplied with resources from the fraudulent scheme.

Santos did not appear in the process filed by the CVM, but, in a session of the CPI on Cryptocurrencies on July 12, via videoconference, he denied that his company was a front for a financial pyramid scheme. He said the money-back guarantee was backed by “the company’s expertise.” The business promised an average return of 10% per month for 12 months.

“Pharaoh” alleged that he was unable to honor his commitments because of the PF: “The company GAS did not stop paying its customers. It was violated by the PF and paralyzed its operations”. The firm “has never been late even a day in nine years of operation”, he assured. “We always pay our customers in advance. By unlocking the resources that are on the platforms and taking what was hijacked by the PF, GAS has all the conditions to return to activities.”

PF investigations indicated that Santos was responsible for the commercial part of the scheme, seeking new investors and leading the other members in charge of raising funds. Mirelis Zerpa, with extensive knowledge of cryptocurrencies, was in charge of operations. After the outbreak of the Kryptos operation, “it was she who carried out several and successive withdrawals”, which added up to R$ 1.063 billion, points out the complaint by the Federal Public Ministry (MPF) that helped to subsidize the process at the CVM.

Framework

In 2019, the CVM received complaints about GAS for “allegedly offering investment opportunities with standardized membership conditions”, says the CVM report on the case. However, at the time, the Securities Registration Superintendence (SRE) of the municipality assessed that “it would be purely fraudulent schemes” and that there were no elements to characterize a collective investment agreement (CIC). Thus, the case was outside the jurisdiction of the CVM.

After having access to evidence obtained by the MPF and the PF, the technical area of ​​the CVM concluded that there was an effective investment in cryptocurrencies – of part of the funds raised – which represented sufficient evidence to revise the previous understanding. In April 2022, clarifications were asked from the “Pharaoh”, which did not respond. In July, a term of accusation was drawn up for fraudulent operation and for carrying out a public offering of unregistered securities.

The regulator’s technical area detailed that the Santos scheme had all the elements to qualify as a collective investment contract: there was investment; investments were formalized in a contract; the investment was collective; there was compensation offered to investors; the remuneration offered came from the efforts of the entrepreneur.

It also brought elements that constituted a public offer, with wide dissemination of investment contracts on a website and at events – including cults -, social networks, groups in messaging applications and videos available on the internet.

The accusation prepared by the technical area of ​​the CVM also indicated the practice of fraudulent operation, with “the use of a ruse or artifice intended to induce or keep third parties in error, with the purpose of obtaining an illicit advantage of a patrimonial nature for the parties in the operation, for the intermediary or for third parties”. The piece highlighted that GAS contracts specified that the funds raised would be invested in Bitcoins.

However, in practice, what happened was that the resources were transferred to several companies in the group that formed around the GAS and to individual bank accounts of the directors. They were also targeted at traditional banking products or services and in other cryptocurrencies.