Mastermind in Alleged Billion Dollar Crypto Ponzi Scheme Arrested

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In Brief
  • Alleged Ponzi fraudster Santiago Fuentes, CEO of Arbistar 2.0, arrested.

  • Fuentes yet again claims that the arbitration trading bot is the issue.

  • $1 billion dollars defrauded in allegedly cunning crypto heist, investors are suing.

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Santiago Fuentes, CEO of Arbistar 2.0, was finally tracked down and taken into custody on Thursday, Oct. 22, at one of his residences in Tenerife, Spain, by police in south Tenerife, according to sources from the National Police, local news outlet Canarian Weekly reported on Oct. 22.



Fuentes is being accused of defrauding close to 32,000 investors in a Bitcoin (BTC) scam — a value worth nearly 850 million euros (about $1 billion, at press time). According to the police, there is an open investigation into Arbistar 2.0, a Spain-based crypto investment firm.

The arrest followed after nearly a hundred investors were defrauded a month ago when a peculiar “malfunction” of Arbistar’s arbitration trading bot occurred. However, beneath this elaborate facade, Fuentes reportedly was able to perform a cunning exit scam, allegedly pulling off a highly sophisticated crypto heist of nearly $1 billion in investment money from 120,000 clients.

This is according to the findings of Tulip Research, a forensic fraud investigative research firm, who described the company as a billion-dollar crypto Ponzi scheme. Fuentes chalked it up as a computer error. 

Nearly a hundred investors declared that they intended to launch a class action lawsuit against Fuentes, after their funds had been blocked by Arbistar 2.0.  



History repeats itself

The scheme reached its limit when on Sept. 12, Arbistar 2.0 decided to cancel one of the company’s most popular commodities, the so-called Community Bot. This meant that over 32,000 investors who collectively lost 10,000 BTC ($129 million, at press time) were blocked from accessing their Bitcoin investments, which had been placed in various products of the company. 

The issue affected an investment value of close to 9.3 million euros ($10.9 million, at press time), reminiscent of the “bot malfunction” the original Arbistar business model had got away with, as the vanished funds mysteriously ended up on the largest dark web market in Russia called Hydra. 

 

At that time, Fuentes himself, in a statement made by a video conference to local media outlet RTVC, clarified that “mismanagement caused the Community Bot to fall,” and emphasized the fact that it was “an arbitration robot, a computer process that was in charge of buying cheap [cryptocurrencies] and then sell them high automatically.”

He explained that there was an issue with the arbitration bot, “but it is not true that there is a scam or a bankruptcy,” as he tried to clarify that the rest of the Arbistar group was operating normally. “When I warned clients that this particular product was being closed, I was at my house and you will understand that if the intention was to scam, no one would act in this way,” said Fuentes.

“Just a computer error that we have to settle”

As he tried to console any contrary thoughts against the integrity of company, Fuentes insisted that Arbistar 2.0 was going to persevere and continue to discover a solution for the investors that had been affected, while accentuating that “direct action with each one so that they can earn as much money as possible” regarding negotiations. Furthermore, he said this would include advantages in other products offered by Arbistar 2.0 

According to Tulip Research, the level of deceit involved with the Arbistar 2.0 firm could amount to 850 million euros (about $1 billion, at press time).

“This is not a pyramid scam, or a Ponzi, or any story,” said Fuentes, defending Arbistar 2.0 in a video conference to Televisión Canaria. “It is just a computer error that we have to settle, liquidate and continue with our companies,” he added.

As previously reported, when asked whether ArbiStar had a license to receive money from investors, Fuentes stated that it was not necessary since the company dealt with cryptocurrency, which, according to the law, is not considered money.

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Jesse McGraw is a writer, information security researcher, and a prison reform activist. He is also a former black hat hacker and founder of the hacktivist group known as the Electronik Tribulation Army. He is also known by the moniker "Ghost Exodus." He has holdings in stocks and in Bitcoin, but nothing worth writing home about.

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