Fundsz Promised 3% Return a Week. The CFTC Says That’s A Complete Fiction.

On June 30, 2023, Fundsz announced that it had returned 3.07% over the previous week and raised every participant’s account balance by that amount. According to the Larralde consent order, the number came from Rene Larralde, who “simply made up a fictional return” each week. The order finds this went on every week from October 2020 to July 2023.

Fundsz presented itself as a blockchain platform with a charitable glow, pointing to clean water, disaster relief and education on its website. The court finding is blunt: it “was not a charitable organization.” It was, the order says, a scheme that falsely suggested participants would earn more than 3% a week on average. Marketing promised “Passive Income with ZERO Effort on Your Part” and told people they could “Make Money While You Sleep.”

The pitch drew attention at scale. Fundsz’s website claimed more than 14,000 participants, and its internal records showed more than 10,000 of them deposited (“staked”) money. The Larralde order finds that thousands contributed tens of millions of dollars.

The mechanism was bookkeeping. Participants logged in and saw a balance. Each Friday Fundsz announced the week’s supposed return and adjusted every balance upward. The court found that Fundsz did not pay out trading profits; employees or agents “merely changed the numbers,” and those numbers did not relate to the assets Fundsz actually held.

The stated source of the profit didn’t survive scrutiny either. A promoter had told a Telegram group (the chat app Fundsz used to talk to participants) that Fundsz ran a proprietary algorithm, bought precious metals and never used more than 20% of its liquidity pool. The court found all of it false or misleading. There was no algorithm; when Fundsz traded at all, Rene Larralde made the decisions, sometimes at a loss, and in some periods did not trade. Fundsz itself later wrote on Telegram: “We do not trade.”

The order finds Larralde controlled every bank, trading and digital asset account, all held in his own name rather than Fundsz’s, along with what got reported to participants and how participant money was spent.

Two other claims were checkable. Marketing in 2023 celebrated “7 years of on time and accurate payments,” though Fundsz had existed since October 2020. And participants were told staked funds would be available “on the 181st day from the deposit date.” The court found that around June 23, 2023, after Larralde learned of the CFTC’s investigation through subpoenas, he halted withdrawals.

The Larralde order finds that he misappropriated much of the participant money for personal use. In approximately April 2023 he used $1,910,000 that originated as participant deposits to buy a house in Rockledge, Florida. Between approximately September 2021 and October 2022, he put more than $200,000 of deposits into his personal bank account. A Ford Expedition worth about $23,000 was also bought with participant funds.

Then the gap. The chart below compares four figures from the orders. They come from different dates and measure different things, so they aren’t a single before-and-after.

Three promoters are at the center of the later rulings. Their cases ended differently, and so does the strength of what can be said about each.

Juan Pablo Valcarce

In early 2022, an executive the order calls “Executive A” hired Valcarce to market Fundsz on a salary, having never met him. He got a seat on the advisory board and the title Chairman of the Board, though the order finds Executive A stayed in control, including of all participant funds. The order does not say who Executive A is.

Valcarce made dozens of videos, gave interviews and spoke at in-person meetings. On one webinar, another defendant claimed $589 would grow to $300,000 in four years and $10,000 to more than $5 million. Valcarce assured the audience, “this is all 100% real,” and advised people not to withdraw anything. The order also finds he said, “three percent a week, absolutely, you heard correctly,” and that he never knew whether Fundsz was profitable or what happened to participant funds. He was paid $69,135 in salary and resigned around June 2023 after receiving a CFTC subpoena.

Brian Early and Alisha Ann Kingrey

Early and Kingrey sat on the Fundsz Advisory Board and moderated its Telegram group, and Fundsz operated out of the individual defendants’ homes. Early described the supposed algorithm as “the secret to our sauce,” promised potential profit of 365% a year, and falsely claimed Fundsz traded forex. Kingrey explained the 3% payouts on Telegram by pointing to precious metals and “multiple healthy and sustainable sources of income.” The court found that once they learned of the CFTC investigation, they walked back their profitability claims and began a campaign to remove Fundsz from social media.

Both initially appeared without lawyers, consented to the preliminary injunction and filed answers. They later skipped required disclosures and discovery responses, and the court struck their answers as a sanction.

The CFTC regulates commodities trading, and the court concluded that bitcoin (or as I like to call it, ButtCoin), ether and precious metals all count as commodities, which is why fraud claims about Fundsz’s supposed trading fell within its authority. The legal charge against all three defendants was fraud through material misrepresentations. What’s this mean, you wonder? A statement is “material” if a reasonable investor would consider it important, and the court held that invented returns, a fictional algorithm and a nonexistent seven-year payment record clear that bar.

The source document for this investigation is attached below.