Federal DOJ criminal charges and a Commodities Futures Trading Commission civil complaint have recently been filed against Mr. Alexandre for the alleged operation of a ponzi-like commodities pool where investors received weekly interest in the nature of 5%-10% from the profits generated by a non-existent trading bot. The allegations include operating an unregistered commodities pool, fraud, material misrepresentations, embezzlement, wire fraud, and other similar charges.

There were approximately 62k investors globally who invested around $250mn and about $35mn has been repaid to some investors. The appointed temporary receiver is currently attempting to recover the totality of the company’s assets and wind down its operations since it is clear that no trading activity had ever occurred besides the purchase of Bitcoin, which may or may not be deemed an investment, as it can potentially generate capital gains. There is around $85mn more cryptocurrency outstanding somewhere in a wallet in an Estonian exchange that has been seized by their government and recovery is uncertain since it will be administered by the Estonian regulators.

The cases against Mr. Alexandre will likely be settled because of the obvious and incontrovertible evidence obtained by the investigators and receiver, and the threat of a lengthy prison sentence. Most of the funds will be recovered and investors are likely to receive some portion of their original investment back, and some of the investors who withdrew their profits are likely to be required to return their gains. The timeline for repayment is uncertain but are likely to begin in 2023 for smaller investors.

This case revolves around the charisma of an individual who was able to solicit millions of dollars in investor funds from unsophisticated investors, circumventing US law, and the faith these investors still apparently possess in this individual after all the evidence of egregious fraud has come to light. The defendant syphoned off millions from investor accounts, which were held directly by the firm and not a custodian, for his personal uses and after attempting to trade futures from his own account he lost 70% of that account. Furthermore, the price of BTC is significantly down as well exacerbating the fund’s losses.

Investor ignorance is at the root of the problem as they continue to get suckered in by similar schemes and the regulators need to do better at disseminating information that informs the public to seek professional advice before making such obviously dubious investments. Experts who review and investigate prospective investment for a living are equipped to conduct the diligence process with respect to any proposed venture where capital is sought. A few thousand dollars upfront to review and provide an opinion with respect to a venture can save a lot of pain down the road.

A few obvious tips to review before sending money to a pooled fund operator include: is the firm and are the principals licensed and regulated by a government oversight agency, whether federal or state or a foreign regulator? Did the firm make full material financial disclosures publicly or directly to investors? Are there financial statement with respect to a track record? Is there a custodian which is an independent insured entity that will hold investor funds (unless this is a syndication type illiquid investment)?

What is the track record in the industry and history of the principals managing the fund? What representational disclosures are made in the offering documents and are they realistic? Where is the offering entity organized? Is there a lock up period for principals and investors? Is the investment liquid? Have there been 3rd party audits conducted? And many many other items, each of which is bound to raise red flags to a professional advisor.   

Should you need a prospective investment reviewed and an opinion drafted regarding its viability don’t hesitate to reach out to Belenky Law Firm PLLC., as such reviews are conducted on a regular basis.