Recession-Hit Argentina Gripped By ‘Ponzidemia’

A modest Argentine hamlet known for its oranges has become the symbol of a Ponzi scheme epidemic sweeping the crisis-hit country, costing thousands of people their savings.

Nearly 30% of the population of San Pedro, a town of 70,000 people located about 170 kilometers (106 miles) north of Buenos Aires, fell for an investing program pushed by two actors posing as businessmen, which offered up to 2% daily returns paid in cryptocurrencies.
Carlos Rodriguez, a 66-year-old resident, told Cadena 3 radio station that he trusted it, as did several of his family members, and that the RainbowEx app showed him making $80-100 each day, nearly doubling his salary.

However, the dream of free money in a country facing a severe recession and three-digit inflation quickly faded.

Rodriguez lost almost all of his savings.
He is one of perhaps 15,000 to 20,000 San Pedro residents who have invested in the platform, according to the town’s mayor, Cecilio Salazar.

Thousands of victims.
“We’re looking at a $49 million scam,” lawyer Adolfo Suarez Erdaire, who represents over a hundred alleged victims, told AFP, adding that he had “calls coming in from all over the country.”

Two Argentine nationals have been arrested in connection with the investigation.

A Ponzi scheme is a fraudulent scheme where new investors’ money is used to pay off old investors until the flow of new money dries up and the enterprise collapses. Similar suspected scams were also reported recently in Chubut and San Juan provinces in the south, Santa Fe province in the center and Cordoba in the north, all involving another platform, Peak Capital, which closed on October 18.

“There are thousands of victims,” the Chubut prosecutor’s office said, adding that the amounts swindled ran into the millions of dollars. “There is an epidemic,” Maximiliano Firtman, an IT expert, who investigated RainbowEx, told AFP. ‘La China’ Firtman followed the platform’s trail to a luxury hotel in Buenos Aires, where two men presenting themselves as US executives gave a talk last month to potential investors.

The businessmen were in fact Polish actors who were hired by an agency to play the part of slick money men. The scandal made headlines around the country.

RainbowEx, which claims to be based in Singapore, halted its operations in Argentina two weeks ago and demanded $88 from users to be able to withdraw their funds.

Many paid the money but did not recoup their investment.

The revelations come as Argentina’s economy sinks deeper into recession after months of tough austerity measures prescribed by libertarian President Javier Milei to tame one of the world’s highest inflation rates and erase a deep budget deficit.

More than half of the population of Latin America’s second-biggest economy now lives below the poverty line.

Becoming a teen millionaire

Firtman described the scams as “taking advantage of the crisis.”

He went on to say that young people, who are disproportionately afflicted by poverty (60.7% of Argentines aged 15-29 are officially classified as poor), were driving what he dubbed “Ponzidemia.”

“There are 19-year-olds who are teaching 16-year-olds how to become a millionaire in three months” using investment platforms, he said.

Sociologist Ezequiel Gatto connected the adolescent speculation mania to gaming.

“There’s been a gamification of money,” he told Pagina 12 daily, noting that the interfaces of some investment apps were similar to those of video games.

The scams take several shapes.

On Wednesday, a deepfake of Argentine footballer Lionel Messi advertising a scheme to make $75 into $2,000 in a week went viral on social media.

“You don’t need to be an economy expert or market connoisseur,” the bogus Messi claims, asking interested investors to join a Telegram channel.

The most well-known alleged hoax was perpetrated by self-proclaimed Argentine financial guru Leonardo Cositorto, who persuaded thousands of people in Latin America and Spain to invest in anything from bitcoin to hamburger eateries and automobile dealerships.

Investigators allege that Cositorto, who promised 7.5 percent each month in dollars and inspired a Netflix documentary, ran a massive pyramid scheme, which he denies.

He’s currently on trial for fraud.

AFP