Cyber-crime
After guilty pleas, prison terms, and seizures, the DOJ has opened the compensation process
The US Department of Justice has begun accepting applications from victims of the AirBit Club crypto Ponzi scheme for a slice of more than $400 million in forfeited assets tied to the fraud. The compensation fund currently lists about $150 million as available for payout.
Launched in 2015, AirBit Club’s schtick was that it ostensibly offered investors guaranteed daily passive income through cryptocurrency mining and trading.
It was pitched as a trustworthy multi-level marketing initiative, although prosecutors have since said it mainly preyed on “unsophisticated investors,” running conferences and expos as ways to demonstrate its legitimacy.
Members were given access to an investor portal, which would display sums they wanted, and expected, to see – daily profits building as promised.
However, these figures were entirely fabricated. Investors’ money was never used for cryptocurrency mining or trading; instead, prosecutors said, it was pocketed by the fraudsters behind AirBit Club and used to fund additional recruitment events across the United States, Latin America, Asia, and Eastern Europe.
Of course, when investors tried to withdraw their funds, they were met with delays, fees sometimes exceeding 50 percent, or just plain old account freezes.
According to a dedicated website established for the compensation scheme, victims must meet a number of criteria in order to prove their eligibility, including that they used their own money to invest, did so without willful ignorance of the scam’s illegitimacy, and that they had funds still inside AirBit Club at the time of its collapse in August 2020.
Those who withdrew their funds before that time, likely incurring the huge withdrawal fees to do so, will not be eligible.
“Investor euphoria over new technology is all too often fertile ground for fraudsters,” said US Attorney Jay Clayton for the Southern District of New York. “It is our job to root out those fraudsters.”
“Here, the defendants led a multimillion-dollar pyramid scheme based on lies about virtual currency trading and mining. They now face justice, and this outcome should deter anyone who may be tempted to target others with false promises of high returns in virtual currency investments.”
Five AirBit defendants
Five defendants involved in the AirBit Club scam were sentenced in 2023 after pleading guilty, including co-founders Pablo Renato Rodriguez and Gutemberg Dos Santos, who received prison terms of 12 years and 40 months, respectively, in addition to extensive forfeiture orders.
Both Rodriguez and Dos Santos were previously sued by the SEC in 2017 for their roles in a separate pyramid investment scheme, Vizinova, and paid $1.7 million in penalties.
Cecilia Millan and Karina Chairez were identified in court documents as senior promoters in the AirBit Club scheme. Millan was sentenced to five years in prison and three years of supervised release, while Chairez received a sentence of one year and one day in prison followed by three months of supervised release.
The final member was Scott Hughes, described as the scheme’s attorney. He was sentenced to 18 months in prison and three years of supervised release after pleading guilty to laundering approximately $18 million for AirBit Club, through domestic and foreign bank accounts, as well as an attorney trust account that was reserved for handling his practice’s clients’ funds.
He also helped the group erase negative articles about it from the internet. In one case, Hughes engaged a website removal company to remove 15 articles calling AirBit a scam. The group paid $3,000 for each of the 15 takedowns, court documents stated. ®
