In brief
- Federal prosecutors have charged two OmegaPro executives with running a $650 million crypto scam masked as a forex investment platform.
- The pair allegedly used lavish events and false promises of 300% returns to lure investors worldwide, then froze withdrawals in late 2022.
- The DOJ’s case follows a wider crackdown, including last month’s sentencing of Gotbit’s founder for inflating token volumes through wash trading.
Federal prosecutors in the U.S. have charged two men with orchestrating one of the largest crypto investment scams in recent history.
Michael Shannon Sims, 48, and Juan Carlos Reynoso, 57, were indicted in the District of Puerto Rico for conspiracy to commit wire fraud and conspiracy to commit money laundering, according to the U.S. Department of Justice statement released Tuesday.
The pair are accused of defrauding thousands of victims worldwide of over $650 million through OmegaPro, which prosecutors described as a “global fraud scheme” disguised as a legitimate forex and crypto trading platform.
According to prosecutors, Sims and Reynoso established the OmegaPro multi-level marketing scheme in January 2019, instructing investors to purchase “investment packages” using virtual currency with promises that elite traders would generate massive profits through forex trading.
Prosecutors say the pair, along with others, lured thousands of victims with promises of triple-digit returns, only to siphon funds into crypto wallets they controlled.
They then distributed to insiders and high-ranking promoters to obscure the funds’ origins, with both defendants allegedly profiting millions from the scheme.
“As alleged, the defendants preyed upon vulnerable individuals in the U.S. and abroad, defrauding them of over $650 million by making false promises of substantial returns and that their money was safe,” said Matthew R. Galeotti, head of the DOJ’s Criminal Division.
Sims served as OmegaPro’s founder and strategic consultant, while Reynoso led operations across Latin America and parts of the United States, including Puerto Rico.
Prosecutors allege Sims and Reynoso used extravagant events, like projecting the OmegaPro logo on the Burj Khalifa, and social media displays of luxury to entice victims.
“Too good to be true”
Karan Pujara, founder of the scam defense platform ScamBuzzer, told Decrypt that crypto MLM scams exploit powerful psychological triggers.
“Even if something is too good to be true, many fall for it,” Pujara said, noting that “these scams based on false hope and high returns have been running for many years and may continue.” He added that, “The only thing that changes is the face of the scammer, who is greedy enough to steal, and the victim, who is greedy enough to YOLO their life savings.”
Pujara noted there’s “a very thin line between right and wrong” when it comes to high-profile influencers who participate in such schemes.
OmegaPro’s unraveling
The alleged OmegaPro scheme began unraveling in November 2022 when the firm disabled withdrawals, claiming technical issues.
Affiliates began reporting being locked out of their accounts around November 7th, with withdrawal problems escalating by November 20th, according to a report by BehindMLM, an MLM review site.
Despite assurances from Reynoso and others in January 2023 that investments were secure and being transferred to a new platform called Broker Group, victims were unable to access their funds from either platform, the report said.
The platform received regulatory fraud warnings from multiple jurisdictions, including France, Belgium, Spain, and Peru, before its collapse in July 2023.
The duo’s indictment follows the arrest of co-founder Andreas Szakacs in Istanbul last year after a Dutch whistleblower representing 3,000 defrauded investors alerted Turkish authorities, as per a local media report.
Turkish authorities believe the platform’s funds were linked to the infamous OneCoin crypto fraud that swindled investors of $4 billion in 2017.
“Based on previous hack and scam cases, the chances of recovering assets are very rare,” Pujara said, adding that scammers avoid traditional exchanges and use fake KYC details from other countries.
If convicted, Sims and Reynoso each face a maximum penalty of 20 years in prison on each count.
Just last month, crypto market maker Gotbit and its founder were sentenced for using wash trading to inflate token volumes.
Founder Aleksei Andriunin received a reduced sentence after pleading guilty, forfeiting $23 million in crypto.
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