we are in one Age when investors are led to believe that they can become millionaires by sinking their money into cryptocurrency-related companies or platforms.
A company called EminiFX claimed it had developed a proprietary trading system that would invest people’s money in cryptocurrency and the foreign exchange markets, also known as forex.
When the Justice Department and the Commodity Futures Trading Commission filed complaints against an alleged Ponzi scheme by the company, they believed the scam amounted to $59 million.
But that turned out to be a gross underestimate, according to a preliminary report by David Castleman, a partner at Raines Feldman in New York who has been appointed EminiFX’s receiver.
The Department of Justice and the Commodity Futures Trading Commission claimed that EminiFX, owned by Eddy Alexandre of New York, is a Ponzi-like scheme that promises participants guaranteed returns of at least 5 percent each week.
Castleman said his investigation found that from September 2021 to May 2022, $250 million was raised from investors and that there were 62,000 EminiFX user accounts. Emil Bove, an attorney for Alexandre, did not respond to requests for comment. Alexandre pleaded not guilty, according to the Justice Department.
Based on Castleman’s forensic look at EminiFX, the sophistication of the platform and its production of what appear to be phantom returns is astounding.
This is like no other case I’ve followed. Thousands of investors, many from Haiti, stand behind Alexandre. Nearly 14,000 EminiFX investors have already signed a change.org petition in support of Haitian-born Alexandre, who many believe is a victim of racial persecution.
“Together we will fight against it,” wrote one signatory. “When are we going to get a break from this discrimination? I’m sure things would have been very different if we were of a different race.” Another wrote, “The system is basically telling us (Black people) to stick to basketball, soccer and rap music , if we are ever to get out of poverty.”
Several investors I’ve interviewed are convinced that the profits they saw from Alexandre in their online accounts were real. “He gave it to you every week,” said Markens Nicolas, who helped start the change.org petition. “It makes it more believable.”
This is how the platform worked, according to the research. EminiFX users deposited cash or cryptocurrency into the system. There was a multi-level marketing aspect of the platform where people could earn bonuses for recruiting others. Account balances were reported in US dollars. Investors kept funds in their “e-wallets” used for deposits or “trading wallets”.
“Every Friday, a weekly “ROI” or return on investment of between 5 percent and 9.99 percent was applied to each EminiFX user’s account balance, the same ROI for all users,” the report reads.
Information from the EminiFX system showed positive returns every week, from a low of 5.01 percent to a high of 9.99 percent. “I haven’t found any investment activity that supports those returns,” Castleman said in an interview.
An investor who deposited $10,000 in cash on October 15 and elected to reinvest the supposed proceeds into a trading wallet would have an account balance of over $77,000 at the time the company closed in May 2022 seen, according to Castleman’s account. That would have been an extraordinary and highly unlikely return in such a short period of time.
Castleman’s investigation revealed over 22,000 withdrawal transactions from the EminiFX platform totaling almost $35 million between November 2021 and May 2022. However, much more money was poured into the operation. If the company has raised more than $250 million, that could explain why investors never realized their gains weren’t real.
“Many users appear to have never withdrawn or returned funds,” Castleman’s report to the court said. In general, a Ponzi scheme involves paying people not from investment returns but from other investors’ funds.
After researching all possible investment activity, Castleman said he could not understand how the weekly returns applied to EminiFX user accounts were generated. He could not find any evidence of the existence of the proprietary trading system dubbed the Robo Assisted Adviser Account or RA3 in any EminiFX file or anywhere in the codebase.
According to the report, none of the former employees understood how the weekly return on investment was earned, what the RA3 was, or how it worked. When Castleman took over the platform, total balances across all trading wallets were reportedly around $512 million.
but he could only find assets worth about $170 million. Included in this total are more than 3,650 bitcoins located on an Estonian cryptocurrency exchange that is worth more than $85 million based on July 20 trading price.
However, Bitcoin price volatility from November 2021 to May 2022 could not have resulted in the consistently positive weekly returns applied to EminiFX user accounts. Bitcoin’s price fell sharply amid a stock market selloff.
Something was traded, but it was in Alexandre’s personal brokerage account. Records show that Alexandre has invested $9 million, “almost entirely in funds that can be clearly traced to EminiFX corporate accounts,” Castleman reported. And even then, Alexandre’s personal trading resulted in over $7 million in losses — not the healthy gains he kept claiming — until a receiver has been appointed.
Recipient shut down EminiFX website and operations and searched for all assets. A dedicated website, eminifxreceivership.com, available in English and French, was set up to keep investors informed and eventually set up a claims process.
Although Alexandre has yet to be brought to justice, for the tens of thousands of people who trust him, hopes of making money investing with EminiFX will not come true.
“Most investors are concerned that their money is being held by a receivership that they don’t trust,” Nicolas said.
Pardise Ogean 