He was helping us: investors cheer CEO accused of scamming them

For Louisiana Francois, who sank $10,000 (about R164,000) into what prosecutors say was a Ponzi-like crypto scheme, driving four hours from her home outside Boston to watch the man who allegedly took her money appear in court was easy.

But she didn’t go to condemn him. She went to cheer him on.

“I’m standing with Eddy Alexandre because he was helping us,” Francois said. “As a nurse, I used to have two jobs. Because of EminiFX, I have only one job right now.”

EminiFX was the platform Alexandre marketed as a crypto- and foreign-currency exchange based on unique proprietary technology. Federal authorities say that technology was smoke and mirrors, and that Alexandre scammed hundreds of clients out of at least $59m (R964.4m), luring them with “promises of huge passive-income returns".

They allege he invested just a few million of the funds, adding rewards to his clients’ balances for recruiting others to the platform and using the growing influx of cash to keep his first victims happy with handsome “returns”. He promised weekly gains of at least 5% and to make them millionaires as the platform traded for them through its “Robo-Advisor Assisted account”, the US says. 

A preliminary report by the court-appointed receiver in a parallel civil suit brought by the Commodity Futures Trading Commission believes the damage to 62,000 EminiFX clients to be as much as $250m (R4.09bn).

Along the way, the government alleges, Alexandre dipped into the giant trough to treat himself to a new BMW and other luxuries.

He was arrested in May and charged with commodities and wire fraud. He has pleaded not guilty.

Hunting for returns

The allegations come at a volatile time in financial markets, with cryptocurrencies and other alternative assets experiencing sharp declines and investors hunting for returns. Alexandre is accused of denying his clients even the chance of an upturn.

Ponzi schemes, in which funds from later investors are used to pay earlier ones, can go undetected for years before imploding. The Ponzi-like fraud the government alleges lasted only about nine months, during which Francois said she was able to make withdrawals.

To her and hundreds of other Alexandre investors who gathered at the federal court in Manhattan last Wednesday, the bad guys are the government and the receiver, whom they see as depriving them of their funds. Some were dressed for court in suits and dresses, while others proudly wore T-shirts or sported buttons proclaiming, “We support our CEO”.

“After his arrest, everybody is struggling,” said Ricardo, an EminiFX investor from Pennsylvania who declined to give his last name. He said some clients had run into financial problems, including unpaid medical bills, because they couldn’t get at their money.

“You said you’re going to protect me?” Ricardo said of the government and the receiver. “I don’t believe that.”

Guaranteed 5% — a week

EminiFX solicited funds from investors starting in September, according to prosecutors and the CFTC. Then, every Friday, their accounts would show a weekly return of 5% to 9.99%, as well as the bump for recruiters.

The vast majority of their funds was never invested, according to the government, which cites actual investments of only $9m (R147m), mainly in individual equities and single-equity options. Those investments led to losses of $6m (R98m). Meanwhile, the US alleges, Alexandre transferred about $15m (R245m) to his personal bank account, some of which he used to buy the BMW.

Alexandre, described in a May 12 statement by prosecutors as a 50-year-old living in Valley Stream, New York, hosted Zoom webinars every Thursday to update clients, according to the criminal complaint. In at least one of those meetings, the US says, he told investors they could quickly become millionaires, as long as they didn’t make any withdrawals.

Alexandre’s lawyers declined to comment on the case, as did prosecutors and the CFTC. David Castleman, the receiver, pointed to a website available to investors that explains the process of recovering funds.

‘Not going to wash dishes’

Supporters of Alexandre also travelled from  countries such as Canada, France and Haiti, having organised themselves on messaging app Telegram after the arrest, Francois said. Many cited the weekly statements and ability to withdraw gains as proof EminiFX was legitimate. They also consider Alexandre a driving force for positive change in their lives.

In the conference, at which a March 27 trial date was set, they were mostly silent. Alexandre, who is on $3m (R49m) bail and under house arrest, gave short answers to basic questions from the court. 

Jean Guillaume, an EminiFX investor and Haitian-American who drove to court from Philadelphia, said the case against Alexandre, a black man, was racist. He offered hypothetical examples of people of colour enriched by EminiFX and quitting jobs he said corporate America needs to fill with cheap labour.

“These two people are not going to wash dishes,” any more, Guillaume said. “These two people are not going to be in the nursing home because they’re gonna have money. And then, when they’re losing that workforce, it’s a threat to them.”

‘Receivership = deceivership’

After court, supporters gathered outside hoping to catch a glimpse of Alexandre as he left. Chants broke out, some led by people with megaphones.

“We don’t need your receivership!” they called out. One handwritten sign read, “Receivership = Deceivership”.

Many were unimpressed with the hearing, accusing the prosecution of delaying because, they said, it had no evidence against Alexandre. Some said they would convene at the courthouse every step of the way, however minor or momentous the occasion.

“I don’t care if the case takes six months, a year, two, three, 10 years,” Francois said. “I will stay and wait for Eddy Alexandre because he was not doing a scam. He was helping us.”

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