“I even sold my house”: the opaque multilevel business that Cuba can blow up

The success of an opaque digital assets company has led many to wonder if all of Cuba is not, perhaps, involved in a pyramid scam

Young Ruslan’s story was a success story. In his own words, he had joined Trust Investing (TI) in May 2019 with $ 15, the minimum investment accepted by the company. A year and a half later, Ruslan Concepción claimed to have a daily income of more than $ 100,000. He was a self-made millionaire, an example for thousands of Cubans hit by the economic crisis and the pandemic. Not even the government dared to cough at the recent director of the company, who could roam freely in a confined country. In mid-April, Ruslan Concepción and his family celebrated the success of the leading digital asset firm in the country at the majestic Hotel Nacional in Havana. On the Facebook profile of his brother, Wilhems Concepción, you can still see the photos of those happy days, in which the crypto asset manager grew unstoppably, exceeding 230,000 affiliates within the island. Ruslan and his family had bypassed all restrictions to travel from Las Tunas – his hometown – to Havana and enjoy their vacations at the exclusive hotel. “Most people spend 30 or 40 years of their life working WITHOUT REALLY GETTING ANYTHING. […] #EVOLUCIONA we are passing through this land, do not leave your dreams for later, do it HERE AND NOW”, still says a publication by Ruslan of the last April 10. Two days before he had given an account of the “dreams come true” by various members of the company, who had acquired cars and motorcycles, and the support of two popular Cuban singers who in a promotional video invited “come with us (sic)”. But even the best dreams are over. On April 22, Ruslan was arrested at the airport trying to travel to Russia with his family. This is the story of the man and the opaque company that has led many to wonder if all of Cuba is perhaps not involved in a pyramid scheme.

A story of success?

A week later, when the case was made public, his brothers argued that the accusation pointed to the probable illicit origin of the money he was carrying. Little more. To date, it is not even known with certainty where Ruslan is or under what charges he is being investigated. “The only certain thing is that in his house and in those of several of his friends they made tremendous searches and carried many things. Even his car, which he had left in a friend’s garage, they took away”, says Maikel, also a resident of the city of Las Tunas, who was about to join the company “when this exploded.” “Other people,” Maikel continues, “were not so lucky. Media Tunas has put their money in Trust Investing and it is logical that the town is in turmoil. Those who went to the Government the other day to demand explanations are only a small group compared to the thousands. that right now they don’t know if they lost the investment. ” An article on the subject, published on May 3 by ‘Cubadebate’, the main digital magazine of the Cuban government, surpassed 2,000 comments in a few hours, 10 times more than any of its other most popular articles. “I sold my house and my wife also, I sold a car that belonged to my grandfather and we put everything in ‘trust’ [sic] we are rented with the promise that in 10 months we would have double, and it turns out that now our accounts’ trust ‘They are frozen and we cannot even extract the money,’ lamented one of the readers.

In parallel with the arrest of Ruslan Concepción and several of his collaborators, at the beginning of May Trust Investing decided to intervene all the accounts of Cuban investors, under the pretext of having found “irregularities in balances and other operations.” This situation was not, however, addressed by the company directors during the conference for the second anniversary of the company, on May 9, despite the fact that the island’s ‘trusters’ represent more than a quarter of the total number of its affiliates.

A company in the shadows

“The Cuban State does not promote or approve the operation of this type of ‘companies’. None of them has a license to operate within the national territory, [their] operation is similar to what is known as Multilevel or Pyramid Scams, also called Schemes of Ponzi, [the public is] advised not to engage in operations of this nature. ” On May 13, the Central Bank of Cuba (BCC) issued a statement in which it fixed Havana’s position after two weeks in which the social networks linked to Trust Investing had entered a state of convulsion. But the official statement did not seek to clarify the doubts of the company’s local investors, but rather to respond to the threat made by the TI directive four days earlier: “We make ourselves available to the Cuban authorities in case they need any documentation. But we also warn If something happens to our boys, you are going to have 800,000 people against your Government, “Fabiano Lorite de Lima, the manager of Marketing Director, declared during the anniversary conference.

Clearly, his ultimatum did not sit well in the Palace of the Revolution. Just 24 hours later, the Cuban president, Miguel Díaz-Canel, referred to the matter, assuring that speculation with crypto assets was studied with caution by the country’s leadership (“its procedures could be a motive for fraud,” he went on to affirm), and the Interior Ministry expanded the scope of searches and arrests of company leaders. By Thursday, when the Central Bank released its note, it was decided to put aside the conventions and mention Trust Investing by name, within the list of companies that the authorities consider potentially dangerous. As the days go by, and in the face of the persistent blocking of their accounts, numerous Cuban trusters have begun to wonder if the company actually deceived them. Reasons are not lacking. With a stratospheric profit margin (200% within 10 months) and hardly any data from its board of directors (only the names of its leaders are known, the Brazilians Diego Chaves, Lorite de Lima and Claudio Barbosa, apparently domiciled in Spain ), Trust Investing is a big unknown. Starting with its legal registration, which in the past the company suggested that it could be found in Spain or Panama.

However, in June 2020 both countries explicitly denied having authorized the firm to provide investment, securities brokerage or advisory services. The National Securities Market Commission of Spain included the company in its list of “entities warned”, and the Superintendency of the Stock Market of Panama (SMV) considered it necessary to prevent “the public [since] that the website of the said company reflects physical addresses in Panama City [… and] it is not registered in the Public Registry, and it is not and has not been the holder of a license or registration issued by the SMV “. Since then, Trust Investing would have moved to Estonia, as recorded in several of its promotional videos and the statements of its CEO, Diego Chaves. The “open legal structure of Estonia, one of the most developed countries in Blockchain technology”, is presented as a guarantee of the reliability of Truster Coins, the “digital wallet” that the company intends to incorporate into its business scheme. The registration of companies in the former Soviet republic is a practice that has gained popularity in recent years, this newspaper explained months ago in an article co-authored with LABE Abogados. Using the figure of the “electronic residence”, natural and legal persons from other countries can establish their companies there, without even having to travel to Tallinn. The decision to settle in Estonia would be based on the interest to take advantage of the tax advantages of the local legislation. Or be an attempt to make the company’s fabric more complex, in anticipation of possible conflicts with its investors. In the middle of last year, the forensic financial analysis firm Tulip Research warned that the profits promised by Trust Investing did not correspond to the indices of a profitable company, that it did not have a specific product and that the reference bank that it named as an associate did not exists. Neither on the TI page, nor in its posts and videos, are details given about the ‘trading’ business it claims to do. Nor did the executive director respond when contacted for this report through his Facebook profile.

But Trust Investing continues to advertise so-called personal success stories to announce more ambitious projects. “In 2023 or 2024, when we reach the limit of our affiliates, we will have other products so that we can work,” Chaves anticipated in a recent broadcast. The office, however, did not look like that of a company that handles millions of dollars in competitive investment markets, but rather the living room of a house with little natural light. The newly appointed national director of the company wanted to take the opportunity to meet with his followers in meetings with little or no social distancing. While a few hundred meters from there, the police and health authorities demanded the use of masks and applied heavy fines to those who did not do so, inside the hotel facility the “Trust Investing family” celebrated its success without being disturbed.

Latin America “will be the global ‘hub’ of bitcoin”: Paraguay emulates El Salvador

The country is preparing to debate a legislative initiative to convert it into legal tender.

El Salvador’s decision to accept bitcoin as legal tender has generated a wave of interest in other Latin American countries that see cryptocurrencies as an opportunity to boost their economies and circumvent some of their inefficiencies. Panama, Mexico and especially Paraguay have taken steps towards a generalized adoption of the most operated of cryptocurrencies, with important legislation to provide a new legal framework, which makes analysts think that Latin America could become a world center of reference in cryptocurrencies .

El Salvador overtakes central banks and lights up a financial hub with bitcoin

The South American country is the one that is closest to following in the footsteps of the Nayib Bukele government, as Paraguayan Congressman Carlitos Rejala and Senator Fernando Silva Facetti plan to present a bitcoin bill in Congress on Wednesday, July 14, underlining the urgency of legislators to formulate a coherent digital asset strategy for their country. “I’m here to unite Paraguay,” Rejala tweeted last Friday, adding that he and his fellow legislator are planning a “mega surprise for Paraguay and the world.”

Without elaborating on what the new legislation will entail,

It is believed that, like El Salvador did in June, it will seek to have the creation of Satoshi Nakamoto considered legal tender in the country, which will imply the same advantages that the Central American nation theoretically enjoys. But, in addition, it is speculated that the future regulations will also introduce measures to turn the country into a world center for cryptocurrency investors, businesses based on these digital assets and, most likely, miners, given the low energy prices in Paraguay.

The technology entrepreneurs of the nation go to one when defending the suitability for the nation chaired by Mario Abdo Benítez to become a reference nucleus in blockchain and strategic technology in South America. This was defended last week, during the Talent Land Jalisco 2021 conference, by a group of businessmen from this industry, who closed ranks with the fact that the country has “all the conditions”. As they explained, the largest cryptocurrency in the world could be useful for sending and receiving remittances and for electronic commerce, still underdeveloped in the country, according to their vision.

In addition, the abundant and cheap energy production in this nation works as a magnet for cryptocurrency mining companies – dedicated to the process of obtaining these assets through computational power that consumes large amounts of electricity. Asian companies expelled from their countries by the strict regulations that hang over miners, especially China where these businesses have been banned, are landing in Paraguay where energy consumption is cheap thanks to the number of hydroelectric plants it has as it is the first country in the world in terms of energy availability per capita, as explained by the businessmen meeting in Jalisco last week.

For all the above, Latin American countries have all the numbers of being a global benchmark in ‘cryptos’ due to different factors. In the first place, according to Enrique Palacios Rojo, COO of Onyze, monetarily, “its financial systems are not as powerful as in Europe and the United States, and the banking system of its population is very low, which generates a great opportunity for the world of cryptocurrencies ”; secondly, “being one of the first countries in the world to draw up strict regulations for them allows them to position themselves as benchmarks.”

Finally, adds the expert, “thanks to the energy capacities in many of these countries of the South American and Central American continent, they serve as a claim for a sector such as mining that has been expelled from China due to the prohibitions of the great Asian giant” .

Cryptocurrencies in Cuba: the digital gold rush

As in the days of the American Old West, a new gold rush passes from person to person in the digital world: the cryptocurrency market.

Although there are no official figures that have counted the followers of this trend, some experts venture to estimate hundreds of thousands of users of “crypto” money in Cuba, especially in the variant of Bitcoin.

Meanwhile, and despite the fact that the use of cryptocurrencies in Cuba is closely associated with investment in the controversial company Trust Investing – to which we will dedicate another installment of this program – they are also increasingly used as a means of payment for services online, remittances or purchases of products online, which Cubans could not access otherwise.

About what cryptocurrencies are and what potentialities they have in Cuba, we spoke with Juan Alejandro Triana, Professor at the Center for Cuban Economic Studies at the University of Havana.

What are cryptocurrencies?

Cryptocurrencies, as the word says, are a currency, money as such, a commodity. They can be considered this way insofar as they are produced by the human being; that is to say, they are the product of human labor, of abstract labor.

It is definitely about money, since they fulfill the three basic functions of this resource: they serve as a means of payment in the world in transactions between people. They also serve as a means of value, because they express the value of certain goods through their price. And in addition to this they also serve as a means of hoarding. There are several people – companies even – who denominate their values ​​in cryptocurrency.

In this case I am talking specifically about the one that is most used internationally, which is Bitcoin, although it is not the only one, there are many cryptocurrencies, some more successful than others. There is Freecoin, Litecoin, Namecoin … that is, there are several types of cryptocurrencies, hundreds of them. However, Bitcoin, created in 2009, 2010, has been the most widely used and most famous cryptocurrency. Even recently, important companies such as Tesla, related to Elon Musk, have invested significant sums of money in Bitcoin and is already allowing its users, and the general public, to pay with it for their products. It is, as I said, a commodity and also a commodity-money.

But how is it created, where does the cryptocurrency come from?

Access to cryptocurrency and the creation of cryptocurrencies, for example, in the case of Bitcoin, is an extremely complex process, not in Cuba, but in the world. Creating Bitcoins, or the Bitcoin mining process, as it is commonly known, is a very complex process that requires technical skills, a fairly high level of education in encryption and the art of cryptography; therefore, creating the cryptocurrency is not a simple process.

In Cuba, people who have funds denominated in hard currencies, legal tender, in different countries, access the purchase of Bitcoin to carry out different transactions. But they can do it with the money in the bank. If the person, inside or outside of Cuba, has an account in an internationally recognized bank, and in so-called hard currencies, he can use the funds he has in those accounts to buy the cryptocurrencies he wants. In the case of Cuba, with MLC cards denominated in dollars or other freely convertible currencies, it must be remembered that these are accounts domiciled in Cuban banks. These financial institutions suffer the stigma of US economic sanctions and are neither recognized nor frowned upon in many financial systems in various countries.

Personally, I do not know Cubans who have bought cryptocurrencies using the accounts they have in national banks. However, I am aware of the trade that exists within the Island for access to cryptocurrencies with Freely Convertible Currency (MLC) cards between individuals.

Is the use of cryptocurrencies legal?

That is one of the questions and also one of the most important barriers that people face when deciding whether or not to use Bitcoin. What’s going on? As I was saying, we can affirm that Bitcoin is money because it fulfills the three fundamental functions of money that I mentioned earlier. As it is not centralized by Central Banks of the countries, Bitcoin lacks legal course and representation in these countries. No country in the world today, to my knowledge, uses Bitcoin for its actual business transactions. What’s going on? That among individuals the use of Bitcoin is allowed.

This resource has important advantages since it reduces transaction costs and times and eliminates the need for financial intermediaries. It is a business relationship, which involves a transaction between two people.

How to explain to people what it is or bring them closer to Bitcoin? Simply guiding them on how it is referenced to the value of this resource in US dollars. That is, today the price on the stock market for one Bitcoin is very high, around 50-55 thousand dollars for 1 Bitcoin in the stock market. Normally people do not own Bitcoins but, when you ask can I pay you in Bitcoin? or how much does it cost me in Bitcoin? what they answer is: 50, 60, 100, 200 dollars in Bitcoin.

For this there are different mechanisms. There are well established and secure payment gateways. There are also special purses or wallets where you can store this type of cryptocurrency to use them when necessary. As several countries have decided to regulate aspects related to Bitcoin, as well as various people or companies use it, it is gaining a little more, let’s say, in seriousness, in recognition.

There is also a kind of rejection by people who do not have extensive knowledge on the subject, because it is a currency that lends itself to so-called “financial scams” ​​and is very volatile. Furthermore, it is an extremely young coin. All this also generates a certain insecurity among people.

What would be the disadvantages of this new form of money?

The main disadvantages that I could see in the use of cryptocurrency is that it needs connectivity. You must necessarily be connected to the internet to be able to use it. As I said before, the high volatility of their price on the stock market also makes people reject them.

Bitcoin is very sensitive to speculation. There are some aspects that consider the value or the growth of the value of Bitcoin from, mainly, speculative processes. This definitely makes people suspicious when it comes to using it. And there is also the fact that the currency does not exist physically; There is no recognized authority that can regulate the movement of this cryptocurrency and this implies a set of disadvantages for its use.

Despite having been in use for 11 years, only in the last five or six years has there been a greater speed in the evolution and use of Bitcoin. It will be necessary to see what is the development of the same in the medium term. Without being a fanatic of cryptocurrencies, I do believe that they are a form of money, a commodity-money that is going to be used more and more frequently. When governments decide to regulate its use more widely, it will be given greater credibility with the general public.

How is the use of cryptocurrencies in Cuba?

Definitely the case of Cuba is extremely particular. Cryptocurrencies were not only used in so-called developed countries, although there is a fairly widespread use in these types of countries. Even the so-called underdeveloped countries have seen them as a mechanism to access certain funds for different purposes, in a more secure and faster way.

In the particular case of Cuba, the fact that we are a country blocked by the United States hinders all kinds of trade between Cuba and the rest of the world. To date, the Cuban government has not yet regulated anything regarding the use of cryptocurrencies.

Others like Venezuela have regulated them and even promoted their use. Countries such as Russia and the United States, or many of the European Union, have begun to regulate not only the use of cryptocurrencies, but also some aspects related to them, such as the generation of profits, wealth and the payment of taxes on that wealth, which comes from using cryptocurrency trading.

In Cuba that does not yet exist. However, the cryptocurrency has already arrived and it is not something recent. There are no official figures in this regard, but some experts establish that there are more than 50 thousand cryptocurrency users in the country, others maintain that there would be more than 80 and up to 100 thousand cryptocurrency users in Cuba. In reality, there are no official records and I personally do not know an exact way to capture that data. But I do believe that there is a fairly widespread use, especially in city centers. Even if the use of cryptocurrency is not regulated in the country – it is not regulated in the United States, for example – individuals do use them for their transactions and for certain commercial relationships. It is not only used for the exchange of goods as such, that is, for the sale of some type of product and its payment in Bitcoin, but it is also used to send remittances from abroad to Cuba and to send money from Cuba to abroad.

This is a double-edged sword, because although it is not regulated or transparent by any institution, it means an advantage over the more than 200 regulations or sanctions imposed by the Donald Trump administration on Cuba in the last 4 years, which include restrictions on shipping. of remittances to Cuba. In this context, many Cubans inside and outside of Cuba have agreed to use this tool to receive money, even to buy products within Cuba.

There are people abroad who have access to cryptocurrency and buy products for their relatives within Cuba by paying with it. In this way, it could be considered as an advantage. However, the Cuban financial market as such is not yet sufficiently developed to accommodate them.

Cubans, who in general have a very good level of education, have found in the use of cryptocurrencies a certain way to avoid the effects of sanctions and seek alternatives for trade, to solve daily situations in the country.

What could the Cuban government do to boost the crypto economy and benefit from its use?

In the first place, the development of a market and financial institutions, much faster, deeper and more modern than those that exist today, must be promoted. Unfortunately, that does not depend on the will of the Cuban State, although much can be done about it.

In addition, international banks and institutions should be allowed access in a more expeditious manner, including some type of private banking or non-banking financial institution, more generally, within the country. But access to the phenomenon of Bitcoin and investment funds based on cryptocurrencies does not depend only on the country, but on how Cuba is seen in the international financial markets.

Definitely there we have the very negative impact of the US sanctions, which affect the image of Cuba, not only because of its own problems that the country has presented from a financial point of view, but also because of the unfair treatment that has been given to it as a result of these. sanctions, and for the deprivation of access to free trade in the international financial market.

We could also take advantage of the cryptocurrency phenomenon to become a revolutionary and entrepreneurial country, and begin to regulate and legislate regarding the use of Bitcoin, not only so as not to be left behind in terms of what the Latin American region and the Caribbean, but also as a way of responding to the development and acceptance that Bitcoin has had in Cuba in the last five years.

I believe that we should be more proactive from the legislative point of view, as other countries such as Japan, Russia, or regional bodies such as the European Union have done. In this way, we would be more prepared from the legal point of view for when it is decided – if it is decided – the use of Bitcoin to carry out official transactions or for a more generalized use within the population. All this depends on the proactivity of the Cuban State and its priorities in the short and medium term development plans.

However, we must be optimistic, because, in short, the phenomenon of cryptocurrency is going to be part of the future without a doubt, not only of the financial markets and the international economy, but also of Cuba, to a certain extent.