Brazilian Prison System Officials Caught Using Bitcoin In $22M USD Scam

Crime, News | March 16, 2018 By:

Authorities in Rio de Janeiro recently uncovered a money laundering scheme involving government officials who were able to drain the funds meant for prison supplies by exchanging some of the proceeds to bitcoin.

According to Brazilian news outlet Agência Brasil, the scam involved misstating the budget spent on food for state-run prisons, ultimately diverting funds worth $22.4 million – though only a small portion of the total was converted into bitcoin.

After the scheme was discovered, search warrants were issued to 28 different sites, with seven people having been arrested so far. Among those arrested are Rio de Janeiro’s former state secretary of Prison Administration, coronel Cesar Rubens Monteiro, and delegate Marcelo Martins, director of the Department of Specialized Police of the Civil Police.

A government official stated that former Rio de Janeiro governor Sérgio Cabral was the one who spearheaded the prison fund racket. In 2017, Cabral had been sentenced to 14 years in prison for corruption and money laundering charges.

The money laundering scheme has reportedly been going on since 2001 after a company headed by entrepreneur Filipe Paiva, Induspan, was hired to supply snacks to state-run prisons. An initial contract with the company ended after being analyzed in 2010, as Induspan was charging above market prices, despite employing prisoners at very low rates.

Luíz Henrique Casemiro, Superintendent of the Internal Revenue Service in Rio, revealed this was the first time cryptocurrencies were used in such an operation.

“We drew attention, in the Federal Revenue, regarding this specific operation, because for the first time [the] operations [involved] bitcoin,” Casemiro. [There] were remittances made with the purchase of bitcoin.”