From Houston Landscaper to Stealin’ Millions via a Crypto Ponzi Scheme Targeting Latino Investors

Jay Dushkin’s A Self-Confessed Bounty Huntin’ Houston Lawyer. His Law Firm Violates Texas Law. https://t.co/HklJp4pM0q

— lawsinusa (@lawsinusa) October 27, 2022

On September 19, 2022, the Securities and Exchange Commission filed an emergency action to stop an on-going fraudulent and unregistered crypto asset offering targeting Latino investors, run by defendants Mauricio Chavez and Giorgio Benvenuto through a company Chavez founded and controlled, CryptoFX, LLC.

At the SEC’s request, the Court issued a temporary restraining order halting the offering, as well as temporary orders freezing assets and granting other emergency relief.

After a hearing on September 29, 2022, the Court also granted the SEC’s motion for a receiver and extended the asset freeze.

The SEC’s complaint alleges that, in 2020, Chavez began holding paid classes for the ostensible purpose of educating and empowering the Latino community to build wealth through crypto asset trading.

However, the complaint alleges Chavez had no background, education, or training in investments or crypto assets.

According to the complaint, the seminars were merely conduits for soliciting investors to give their money to CryptoFX, which Chavez would then supposedly use to conduct crypto asset and foreign exchange trading.

As alleged, Chavez claimed, among other things, to have earned outsized returns from crypto trading and to have “literally made over 5 millionaires in the last year.” He also provided investors false documents that, among other things, grossly overstated his crypto experience and guaranteed that investors would not bear any losses.

The defendants ultimately raised over $12 million from more than 5,000 investors.

The SEC alleges that Chavez was actually running a Ponzi scheme; rather than use investor funds for crypto trading, Chavez used more than 90% of investor funds to pay fake returns to investors, support his lifestyle, and purchase and develop real estate that he and Benvenuto controlled.

For his part, Benvenuto allegedly solicited a large investor into the scheme and diverted investor funds to himself and a company that he and Chavez owned, CBT Group, LLC.

In total, the SEC alleges that Chavez and Benvenuto made approximately $2.7 million in Ponzi payments while diverting almost $8 million for their own use, including nearly $1.5 million that Chavez spent on cars, credit card payments, jewelry, adult entertainment, and a house in his wife’s name.

The Commission’s complaint, filed in U.S. District Court for the Southern District of Texas, charges Chavez, Benvenuto, and CryptoFX with violating, or aiding and abetting violations of, the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The complaint also charges Chavez with violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and Chavez and CryptoFX of violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act.

The SEC seeks permanent injunctions, civil penalties, and disgorgement of ill-gotten gains with prejudgment interest against each defendant, as well as bars against Chavez and Benvenuto from serving as officers or directors of any public company.

The complaint names CBT Group as a relief defendant and seeks disgorgement of its ill-gotten gains along with prejudgment interest.

The SEC’s investigation was conducted by Jillian Harris and Carol Hahn of the SEC’s Fort Worth Regional Office, under the supervision of Jim Etri and Eric Werner. The SEC’s litigation will be led by Matthew J. Gulde and supervised by B. David Fraser.

Securities and Exchange Commission v. Chavez

(3:22-mc-00085)

District Court, N.D. Texas

OCT 26, 2022 | REPUBLISHED BY LIT: OCT 28, 2022