Brazilian Judiciary Halts NFT Pyramid Scheme: Assets Worth $5.6M Seized

The Judiciary of Santa Catarina, Brazil, has taken decisive action against a suspected NFT pyramid scheme, freezing R$ 27.4 million in assets, equivalent to around $5.6 million USD. This move, disclosed by the Public Ministry of Santa Catarina (MPSC) last Thursday, aims to secure restitution for numerous victims.

The MPSC's investigation uncovered that the accused enticed clients with promises of substantial returns, reaching up to 20% per month, through NFT transactions involving purchase, leasing, and sale.

Operation 'Cripto X,' conducted by the civil police and public ministry in April, exposed the depth of the scheme. Luxury cars and a water scooter, totalling over $700,000, were seized during this operation.

Victims have reported losses exceeding $3.9 million, with the actual figure potentially higher. In response, the MPSC initiated a public civil action, seeking the return of funds, compensation for moral damages, and redress for collective moral damages to society.

Disguised as a crypto asset investment, this financial pyramid scheme resulted in the freezing of assets, including financial holdings, real estate, vehicles, and shares linked to eight individuals and 14 companies. These entities, suspected of being shell corporations, emerged simultaneously, sharing an address and lacking associated employees.

In addition to the civil action, the public ministry filed a criminal case, accusing the scheme's operators of crimes against the popular economy and criminal organization.

Operation 'Cripto X' saw the execution of 18 search and seizure warrants at addresses connected to the Florianópolis-based company and its associates. The criminal group allegedly attracted victims between 2022 and 2023 with false promises of high returns on crypto asset investments. Initially successful, the scheme faced challenges in December 2022, with liquidity problems and difficulties repatriating funds from foreign brokers.

As the scheme collapsed, the company's offices closed, and those responsible ceased communication with victims, resulting in significant financial losses.

Analogous to a financial pyramid scheme, this illicit business model promises quick, substantial returns to lure investors. However, its core mechanism relies on recruiting new members to sustain the structure and maximize gains, using funds from new investors to pay earlier ones and their interest.