A criminal scheme run from inside Brazilian prisons has come under intense scrutiny after police dismantled a protection racket that extorted small business owners and laundered money using cryptocurrency.
The racket, exposed during a major investigation dubbed Operation Timeo, led to the seizure of cryptoassets worth $45,000.
Operation Timeo is an ongoing investigation led by the Polícia Civil in the state of Rio Grande do Sul, targeting an organised crime group accused of extortion and money laundering.
Rio Grande do Sul is located at the most southern part of Brazil.
Authorities believe the operation was being directed by inmates already serving time in Brazilian jails.
The gang reportedly used intermediaries to issue threats and collect extortion payments from business owners, while laundering illicit profits via cryptocurrency and shell companies.
According to investigators, these prisoners managed to coordinate fraudulent activities from behind bars, directing accomplices to pressure local entrepreneurs into paying for “protection” under the threat of violence.
The group focused on owners of small automobile garages in towns such as Estância Velha, Novo Hamburgo, Ivoti, Sapiranga, and Portão.
These businesses, involved in trading and repairing second-hand vehicles, were approached by individuals acting on behalf of the gang.
Source: Freepik
Victims were told to pay to prevent attacks on their businesses.
Police said these tactics were part of a broader strategy to extract money through intimidation and fear, with the proceeds being funneled into crypto wallets and processed through fictitious companies.
Police seized the equivalent of $45,000 in cryptoassets from digital wallets located across multiple cities, including Porto Alegre, Novo Hamburgo, São Leopoldo, Portão, Cachoeirinha, and Imbé.
In parallel, the authorities froze 13.3 million reais, or around $2.3 million, held across the bank accounts of 11 suspects.
While the specific cryptocurrencies used were not disclosed, officials confirmed that the funds were part of a wider laundering operation tied to the extortion scheme.
The financial trail suggests the gang attempted to mask the origins of their funds by moving money through crypto transactions and shell entities.
The São Leopoldo division for organised crime led the operation, deploying 60 officers to carry out 11 search and seizure warrants.
São Leopoldo is an industrial city located in the south of Brazil, in the state of Rio Grande do Sul, within the greater Porto Alegre metropolitan area and situated along the Sinos River.
One of the suspects was also found in possession of an unlicensed firearm, suggesting the potential for violence within the group’s operations.
The laundering strategy's complexity involved both digital assets and traditional banking systems.
Police noted,
“The group used crypto and shell companies to launder millions obtained through protection rackets.”
Investigators have identified 10 individuals and one company as current suspects, all of whom have links to inmates previously arrested during earlier stages of Operation Timeo.
Police say the case is still active and believe the network could extend further.
A spokesperson for the investigation stated that future developments “may reveal a broader criminal network” connected to both financial crimes and extortion schemes.
The continued use of cryptocurrency in this context has prompted Brazilian law enforcement to strengthen its tools and legal authority to combat digital financial crimes.
As Operation Timeo progresses, authorities aim to expose the full scale of a network that operated beyond prison walls, used crypto to hide its profits, and preyed on small businesses already under economic pressure.
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