This article was originally published on October 16, 2024 in Revista Anfibia.

Cover art by Sebastián Angresano

Around 8 p.m., the streets of the town of San Pedro were empty. At the soccer clubs, games and practices come to an untimely halt. Conversations are interrupted. About a third of the inhabitants receive an alert on their cell phones and have barely 40 minutes to act. When customers reappeared at the store at 600 Molina St., a few blocks from the bus terminal, Claudio Núñez greeted them with a sarcastic laugh and a question: “Did you ‘trade’ already?

Claudio, 52 years old, laughs. He had just traded like everybody else, as had his wife, Alejandra Lobianco. They both learned to use the word in a different way just a few months ago, but the grocery store owner and the auto mechanic already seem like born market traders: they bought and sold cryptocurrencies in minutes with an app on their cell phones. Or so they thought. They each invested US$200, which they will probably never see again.

***

Between 12,000 and 20,000 people from San Pedro, a large town in the Buenos Aires province where the last census counted almost 70,000 inhabitants, joined RainbowEx, a supposed crypto trading platform that promised an extraordinary profit in dollars of between 1 and 2% per day. That means an annual interest rate of 3,490%. Managed by a foundation called Knight Consortium, the company would send a nightly “signal” via the Telegram messaging service indicating which cryptocurrency was worth buying and what yield it would give. The person who sent the messages called themself Ali and used the avatar of an Asian woman. People in San Pedro nicknamed them La China — “the Chinese woman.”

On October 7, everything (what they had or what they thought they had) vanished into thin air. There had been feverish coverage about San Pedro for days. Journalists had claimed that the platform was a pyramid scheme, and there was a new message from Ali — users wouldn’t be able to take out their money for 14 days. Sources in the crypto sector claimed that the news generated a small panic nationwide and that while the story featured prominently, there were considerable money withdrawals from the most established cryptocurrency wallets.

Today, a provincial and a federal court are investigating the platform and those behind it.

In one, Federal Prosecutor Matías Di Lello, head of the Decentralized Prosecutor’s Office of San Nicolás, is investigating the platform for unauthorized financial intermediation and money laundering. Di Lello is being supported by the General Prosecutor’s specialized cybercrime division (UFECI by its Spanish initials). He ordered the raid of two financial firms that exchanged RainbowEx “money” for U.S. dollar bills. The owner of one of them, Matías Liberatti, was indicted alongside Luis Pardo, the platform’s visible leader.

Meanwhile, Prosecutor María del Valle Viviani is leading the provincial case and has already taken testimony from alleged victims. Privately, she insists that those who invested did not commit any crime and encourages them to testify.

Neither RainbowEx nor Knight Consortium are registered with the National Securities Commission. The evidence seems to indicate that it is nothing more than a pyramid scheme. The app never allowed real cryptocurrency purchases. The only thing that was real was the influx of new investors who put in money for the established investors (and who also took commissions for entering “referrals”).

***

Once thriving, San Pedro receives tourists, harvests peaches and oranges, manufactures paper and candies in the Papel Prensa and Arcor plants, and exports grains from its port. In 2007, the place became famous over an announcement that Disney World park would be built there, a project promoted by the Jamaican businessman Max Higgins. The announcement alone caused a real estate boom in the area, but it ended up being revealed as a fraud: Higgins never had the rights or the money to build the amusement park, and the life of luxury he flaunted was financed through a Ponzi scheme. He was neither the first nor the last. “When you get to the city, there is a sign that says ‘San Pedro: capital of fossils,’ because there is a paleontological focus. But it should say ‘San Pedro: capital of Ponzi schemes,’” a local resident said, laughing.

According to a province’s statistics institute, almost 10% of the people of San Pedro could not cover their basic needs in 2023. A union leader, a national official, micro-entrepreneurs, and employees who live and work in the area agree on one thing: there are not enough jobs.

Luis Pardo, RainbowEx’s public-facing leader, promised “financial freedom” to investors, saying they would not need to work anymore. Some people quit their jobs. Son of the ex-partner of Mayor Cecilio Salazar, Pardo was one of the stars at a dinner that Knight Consortium organized on Saturday, September 21, at the Hotel Emperador in Buenos Aires City. Several people from San Pedro attended, fascinated by the universe to which they had gained access. One RainbowEx fan had quit his job at a San Pedro company and was earning US$200 a day on the platform. It was the first time he had set foot in a five-star hotel.

The company also promised that the next event would be held in New York City on February 15, 2025. People erupted at the prospect of travel, but also at the reassurance that the scheme would continue for another year.

Kevin (not his real name,) a businessman who put AR$100,000 as the initial investment in May and ended up with almost AR$7 million, did not share the sentiment. He stocked his store, changed his van with the profit, and invited several acquaintances to the scheme, always warning them to withdraw the initial capital as soon as possible. He knew that the scheme would eventually crash. Kevin and his friends, who had become investors, got T-shirts made with a slogan on the back: “Today, La China will pay for everything!”

The employee of another store in downtown San Pedro, whom we will call Karen, invested a month ago to diversify her income, “but already knowing, from the comments that were being made, that this platform was going to collapse in December.” 

“Most people who put money in knew this was going to happen. It’s not like people went in blind and trusting,” said Karen, who also spoke on condition of anonymity.

But the real stars of Emperador Hotel gala were Timothy Murphy and Jeremy Jones, virtual finance gurus from the United States and leaders of Knight Consortium. They spoke about “connecting with local communities” at the event under the slogan “Together we ride, together we shine.” Maximiliano Firtman, a journalist and programmer following the case, discovered on October 7 that Murphy and Jones were, in fact, Maurycy Lyczko and Filip Walcerz — two Polish actors who came from Warsaw to Buenos Aires to play the entrepreneurs. 

“The risk of it going wrong was extremely high. And it turned out well, beyond the fact that I caught them,” said Firtman.

Last week, La China announced that the platform would be withdrawn from the country and that users would have until October 17 to withdraw what they had deposited. However, they had to pay US$88. At least 2,000 people have already made the payment and accumulated more than US$175,000.

Kevin chose to speak without revealing his real name because he was convinced it was “a mafia” involving trade unionists and journalists. Kevin continued to trade with his “savings” in the platform “just in case” but considered the more than US$2,000 left in his account as lost. He decided not to put the US$88 to recover his money: “No, that is a scam.”

Karen said she knows people who were able to withdraw the money without issue before it started to spread through the national media. “Once that happened, people were afraid, had doubts, and started to withdraw the money. But we all, or most of us, think that it fell precisely because of the diffusion it had. I know people who took out a lot of money and bought cars or land. There were no people who were swindled.”

Like Kevin and other investors, she believed that the local newspaper La Opinión and its editor-in-chief, Lili Berardi, were behind the fall of the platform. Berardi had to file a lawsuit in Viviani’s prosecutor’s office for threats she was receiving. “Stupid old woman, you ruined us because you are envious”, says one of the many messages she received. “If our paths cross in the street, I’ll kill you,” says another. In San Pedro, it seems, rumors run faster than the truth.

***

With only eight journalists, La Opinión conducted an unprecedented investigation together with the IT security company Birmingham Cyber Arms Ltd., which revealed a hacking of RainbowEx’s backend. A group of cybercriminals began selling access to photos of RainbowEx users holding their ID cards, which are often used as a form of identification on online platforms. Earlier this month, they leaked 5,300 photos as a sample which La Opinión then analyzed. The hacker left a message to the company: “Mr. Pardo and RainbowEx don’t care about the security of their customers and decided to ignore us.”

The analysis of the leaked data revealed that 62,000 registered users (including those from San Pedro) invested more than US$49 million. “RainbowEx is in Salta, Bahía Blanca, Gualeguay, Gualeguaychú, Neuquén, Tigre: each one has its La China with different names. In each Telegram group, you have the same photo but with a different name.”

Among the investors who put money in San Pedro are council members of all parties, members of the municipal Executive Branch (including the author of a project against child gambling), and a whole class of high school students.

La Opinión also revealed the true identity of La China, the ever-present avatar in all RainbowEx groups. In a video, she introduces herself as a “Knight Consortium analyst” but is, in reality, an Indonesian actress and broadcaster: Kristin Natalis.

But San Pedro’s La China was Maximiliano Braga, who works in a garden center and a furniture store in a small municipality on the outskirts of the town. He sent the daily alerts to San Pedro RainbowEx users from a phone number with a Chinese area code. According to La Opinión data, he withdrew more money than Pardo, which would place him higher up the pyramid, the heights of which are still unknown.

***

Alejandra Lobianco, who lost US$200 to the platform, doesn’t blame Berardi or La Opinión: in her opinion, the people who do just don’t have the courage to admit they’ve been conned. “My daughter doesn’t sleep, I don’t sleep. Not because of the money: because of the powerlessness I felt, because of the way they swindled us, for having made us believe something that was a lie. We felt in San Pedro as if we were illiterate”.

Lobianco feels that people laugh, that they consider them stupid. “’Didn’t they realize they were being swindled?’ No. Because we saw that for the first time, people had money and could buy a pair of sneakers, pay their rent, buy a Playstation for their children, buy a motorcycle to go to work.” She, in particular, was saving for her daughter, for her graduation party, and also for her future, she says. “To help my daughter pay for an apartment and for her to go study in Rosario.” “I talked to my daughter and she was telling me ‘It’s done, leave it, mommy, it’s over,’ and I told her no, that I’m going to be a thorn in her shoes.”

There are, however, several people who continue to believe La China. Others, according to neighbors, have already joined other investment schemes that offer even higher returns than RainbowEx.

A judicial source said that San Pedro is an “adversarial” town. In addition to RainbowEx, local prosecutors’ offices have their hands full with a recent spike in crimes, including homicides, gunshots, and gender-based violence. The source fears that RainbowEx could be a spark that accelerates the spiral of aggression, predicting clashes between those who changed their vehicles and those who saw their savings vanish, between those who recommended entering and those who fell for the ruse — a boom in violence following the boom in consumption. When the dust settles, it will become clearer how a pyramid scheme works and that, in order for some to win, others have to lose.