Cryptocoin Ponzi scheme AirBit Club co-founder jailed
12 years behind bars, and ordered to forfeit $65m in illicit proceeds
The co-founder of AirBit Club, a $100 million cryptocurrency Ponzi scheme, will spend a dozen years behind bars for orchestrating the international fraud and money-laundering scheme.
On Tuesday, 40-year-old Pablo Renato Rodriguez of Irvine, California, was sentenced to 12 years in prison for his role in the scam. The judge also ordered Rodriguez to forfeit $65 million in fraudulent proceeds as well as a Gulfstream Jet, Bitcoin seized from various wallets, and $896,483 in cash plus watches and jewelry from his California home.
"Rodriguez co-founded and led an international multimillion-dollar pyramid scheme that preyed on mostly unsophisticated investors with false promises that their money was being invested in cryptocurrency trading and mining," said US Attorney Damian Williams.
"Instead of investing on behalf of investors, Rodriguez hid victims’ money in a complex laundering scheme using Bitcoin, an attorney trust account, and international front and shell companies and used victims’ money to line his own pockets. Rodriguez is one of many recent examples of individuals exploiting cryptocurrency to commit fraud, and today’s sentence should deter anyone who may be tempted to defraud others with false promises of cryptocurrency investments."
Rodriguez's co-conspirators in the pyramid scheme, Gutemberg Dos Santos, Scott Hughes, Cecilia Millan, And Karina Chairez, have also pleaded guilty and are scheduled to be sentenced in early October.
According to court documents [PDF], Rodriguez and Dos Santos co-founded AirBit Club in late 2015, marketing it as a cryptocurrency multi-level marketing opportunity. The club's so-called "promoters" oversaw recruitment of investors willing to buy $1,000 memberships by falsely promising them passive, guaranteed daily returns from cryptocurrency mining.
The crew traveled around the US, Latin America, Asia, and Eastern Europe, hosting "lavish expos" and presentations to persuade people into buying AirBit Club memberships. These memberships included access to an online portal, which purported to show members' returns.
That portal, however, showed only made-up numbers. "While victims saw 'profits' accumulate on their Online Portal, those representations were false: no Bitcoin mining or trading on behalf of victims in fact took place," the indictment says. Instead the victims' money funded lavish homes, vehicles, and other personal expenses incurred by Rodriguez, Dos Santos and their crew.
Members who tried to withdraw their money "were met with excuses, delays, and hidden fees amounting to more than 50 percent of the victim's requested withdrawal, if they were able to make any withdrawal at all," according to the court documents.
One victim in 2016 accused the scammers of "running an illegal Ponzi scheme" after being granted smaller payments and being offered excuses about the larger amounts. "This smells suspicious to me," the person wrote in an email.
In another instance detailed in the indictment: in April 2020 a member received a notice that their account was closed, and their principal investment lost, "due to the economic and financial crisis caused by (Covid-19)."
Rodriguez, Dos Santos, Hughes, Chairez, and Millan also tried to cover up the scam and their illicit profits by asking victims to purchase memberships in cash, using third-party cryptocurrency brokers, and laundering the club's proceeds through several domestic and foreign bank accounts, including one attorney trust account managed by Hughes.
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This wasn’t the fraudsters first illegal rodeo. In 2017 the US Securities and Exchange Commission sued Rodriguez and Dos Santos for their roles in another pyramid investment scheme known as Vizinova. The two ultimately paid $1.7 million in penalties to the SEC.
Hughes represented the two men as their attorney in the Vizinova scam, and later helped them advance the AirBit Club scheme by, among other activities, helping the pair to scrub negative information about their activities from the internet.
In one instance, Hughes signed a contract with a website removal service to get rid of 15 different sites calling AirBit a "scam," and paid $3,000 for each removal, the court documents state.
If you are among the AirBit Club fraud victims, you can find more information about your rights and contact details for the victim witness coordinator here. ®