In San Pedro, Argentina, 16,000 people, a fifth of the population, signed up for a cryptocurrency exchange where everyone won. Until they didn’t.
At a backyard barbecue in San Pedro, Argentina, last May, Rafael Flaiman spotted a friend wearing a light blue blazer that looked a little too snazzy for the occasion. He needled the guy a bit. What’s with the jacket? Flaiman asked.
“La China pays,” the friend replied, with a triumphant smile.
La China? Flaiman grew up in San Pedro, a struggling riverside town of 70,000, and for 16 years he’s been a reporter at La Opinión, the local newspaper. But he’d never heard of someone named La China – Spanish for the Chinese woman – and had no idea why she’d bought a nifty new blazer for his buddy. A handful of the 20 people at the barbecue, it turned out, knew all about this mysterious figure and were eager to explain the singular way she’d earned them money.
Every weeknight at 9pm, they said, La China turned up on the Telegram channel of a cryptocurrency exchange called RainbowEx. There, she texted instructions to buy some type of crypto – invariably an obscure and thinly traded one, known in the industry as a memecoin – at a particular price. The same message said to sell the coin when it reached a certain, higher price, which it always did soon after.
It was as steady as a clock. Everyone on RainbowEx bought the coin, the value of the coin rose, everyone sold. Up ticked the balance in their RainbowEx accounts.
Nobody knew who La China was, where she was or whether she even existed. She was just a photograph of a young Asian woman on RainbowEx’s Telegram channel. The guy with the new blazer took out his phone and showed Flaiman photos of La China-enabled purchases by locals. A car, a motorbike, a television. Some people were renovating their homes.
These were major splurges in San Pedro, a place known for an annual crop of oranges, a large paper factory and little else when it came to moneymaking opportunities. Not that other parts of the country were thriving. For decades, Argentina has endured bouts of hyper inflation and two years ago the annual rate stood at a battering 211%. (It’s 2.8% in the United States.) More recently, the rate has fallen to about 67%, which around here counts as sweet relief.
Some at the barbecue that night thought RainbowEx might be far more than just a novel way to afford a stylish coat. It could be the foundation of an alternative economy, creating profits that are invisible and untaxed. La China could provide economic security, succeeding where the Government had failed.
There were sceptics at the party, too. RainbowEx investors received 20% of the profits earned by newcomers they recruited, a classic feature of a pyramid scheme. Plus, the exchange purported to offer returns of as much as 2% a day, which works out to roughly 137,000% in a year. Fantastical numbers.
Flaiman, 44, stayed at the barbecue until 3am on Sunday. That day, Lilí Berardi, the newspaper’s publisher, heard from a friend who’d been invited to join RainbowEx. In the weeks that followed she met others who’d signed up, and when she asked them concerned questions, they had variations of the same retort.
“What do you care what I do with my money? It’s my money.”
The sentiment, like La China, soon went viral. In the months to come, nearly one-fifth of the population of San Pedro, about 16,000 people, would invest in RainbowEx, piling tens of millions of dollars into the exchange. One resident said that by September 2024, the streets were quiet at 9pm because everyone was waiting for the latest tip.
Eventually, tiny San Pedro would become a national story and reteach a lesson as old as money: people who think they’re on the verge of life-changing wealth will believe almost any fiction. And at the heart of this fiction stood a character who seemed purpose-built for the moment – a few parts crypto whisperer, a few parts folk hero.
“La China was in our sights for a while,” Berardi said in a recent interview, “but how do you warn people who don’t want to be warned?”
A knack for oddball stories
Argentina has been a hotbed of financial scandal for years. Even Javier Milei, the country’s President, has been tainted. In February, he briefly promoted a memecoin, arguably the most disreputable financial instrument of the digital age. $Libra, as the coin is known, collapsed soon after Milei gushed about it on the social site X. Small investors lost about US$250 million ($422m). (The President deleted his post and has ordered an investigation.) Get-rich-quick schemes pop up constantly, targeting everyone from feminists to fans of Lionel Messi.
San Pedro, locals say, is fertile ground for hucksters. A former agricultural trading hub, it sits on the Paraná River about 160km northwest of Buenos Aires, and has a walkable, grid-like downtown, with an ice cream shop on nearly every block and stray dogs snoozing on sidewalks. It’s small enough that everyone seems to know everyone else.
Berardi, 65, is the media doyenne of this social network. In a recent interview in La Opinión’s office, she wore a caftan-like printed dress and a rope necklace, emitting an earth mother serenity that, from the evidence of her career, hides inner coils of steel.
The daughter of an Italian immigrant, she was born in San Pedro and was initially headed for a career in law. In 1983, when Argentina’s military dictatorship ended, a free press began to flourish and two years later she joined the staff of the town’s only radio station. She founded La Opinión in 1992. The print version was a casualty of Covid, in 2020. La Opinión now operates a website and a weekly radio and streaming show, hosted by Berardi, with a devoted local following.
The offices are a warren of small, cluttered rooms located on a side street downtown. In the back there’s a museum-style exhibition of La Opinión’s history, showcasing typewriters, cellphones and other hardware of the trade, plus awards. Stories are shellacked to the walls. The whole operation today has nine paid staffers. Money remains tight. One of the rooms has been transformed into a US$70 ($118)-a-weekend-night accommodation for tourists.
While much of La Opinión is mundane – a recent story ran with the headline “He left his bike in the schoolyard and it was stolen” – San Pedro has a knack for producing big, oddball stories. In 2007, it was the tale of a Jamaican national and self-styled entrepreneur named Max Higgins, who raised money for what he said would be South America’s first Disney theme park, called Disney Mundo, on the outskirts of town. He unveiled the plan after landing in a helicopter on the putative site of the future attraction, flanked by men dressed in Middle Eastern garb, said to be partners from the United Arab Emirates.
Berardi recalled studying the photos of the gathering and noticing that the headscarves on the Middle Easterners looked a lot like tablecloths. The scheme crumbled not long after Walt Disney Co. announced it had never heard of Max Higgins, and La Opinión ran stories about contractors who complained he hadn’t paid them. Some 5000 people, mostly from Central America, lost their investment. Higgins was later discovered barefoot and homeless in a Buenos Aires park, carrying a briefcase. News accounts in October of last year reported that he’d been committed to a psychiatric hospital.
When Berardi and Flaiman first heard about La China they thought immediately of Disney Mundo. That project had been doomed from its inception, a lie so public and bold that it’s hard to fathom why Higgins thought it would fly. And yet some residents of San Pedro were angry at La Opinión. They had imagined thousands of jobs and waves of visitors, a vision so appealing that they resented anyone who’d ruined the dream.
The La China matter was far trickier. Disney Mundo was the promise of an unrealised fortune. RainbowEx, it seemed, was already paying. And as the summer went on, the number of local investors kept rising.
“In May we started to gather information,” Flaiman said. “And in the middle of gathering that information, we knew we were at risk.”
The reporters quickly figured out that ground zero for RainbowEx was the workforce at Papel Prensa, a paper factory and the country’s largest newsprint supplier. A few men there had started calling themselves local representatives of a foundation called the Knight Consortium, purportedly based in Singapore and said to have links to RainbowEx.
The nature of those links was never quite clear, but the Knight Consortium gave RainbowEx a reassuring and civic-minded face. Five per cent of profits from the exchange, the consortium said, would fund local food banks and provide uniforms for youth soccer teams. To ensure the organisation got credit for this largesse, it put up banners and flags with the foundation logo next to everything it underwrote. RainbowEx wasn’t just a means to get rich, was the message. It was a shadow welfare system, too.
Word of this generosity spread fast, outpaced only by murmurings about RainbowEx’s returns. Carlos Rodriguez, a 66-year-old vehicle inspector, recalls that friends were buying new TVs, new washing machines. Butcher shops were selling out of meat for barbecues.
Rodriguez had his doubts, but his grandson prodded him. Put a little in. See what happens. At some point he started to think he’d be the only guy in town without a refurbished roof. Ultimately, he invested US$1700 ($2870) – in Argentina’s dollarised economy, everyone speaks in US greenbacks – a significant sum for him.
“Every day my grandson would tell me, you won US$13, you won US$15, you won US$17,” he said, sitting in a Howard Johnson’s restaurant one morning. “I’m getting ready for retirement and I thought, I could make US$1500 a month with this.” That would double his monthly retirement income.
Joining RainbowEx was easy, even for crypto newbies like Rodriguez. First, they downloaded the app from a website – it never appeared on Apple or Google’s app stores. Then, they visited one of the local private lending institutions called financieras. A clerk there would convert Argentine pesos into Tether, a cryptocurrency pegged to the US dollar. Anyone with cash and a mobile phone could walk into a financiera and walk out ready to trade.
By September, La China had an almost cultish following in San Pedro. People sold possessions or took out loans to bulk up their RainbowEx balance. Nighttime soccer games paused for La China breaks. Some people at the paper factory pocketed so much money, they quit their jobs.
‘Together we knight’
A phenomenon this big could not be contained to town lines. A Buenos Aires web developer and part-time investigative journalist named Maximiliano Firtman, who had been looking into financial scams, started getting tips about San Pedro. On September 15, he posted a kind of heads-up on X:
“I am told that in San Pedro, province of Buenos Aires, half of the town is hooked on a Ponzi scheme that claims to yield 1.5% daily.”
Though the post didn’t gain much attention, Berardi and Flaiman took notice. They had yet to publish a word about La China. In a recent interview, they offered a number of reasons. They were not 100% certain that it was a scam. They lacked the means for a deep investigative dive. They were busy with other stories.
Going against the Knight Consortium would also mean attacking an organisation that had the aura of a Robin Hood. And there was this: they would be writing about their friends.
“Maximiliano Firtman could say everybody that invested in RainbowEx is an idiot,” Flaiman said. “Well, those idiots are my neighbours. They play basketball with me, they are waiting in line at the supermarket with me. Could I say, ‘All of you are idiots’? No, that was not my place.”
The reporters still didn’t grasp how huge La China had become, they said. But it became impossible to ignore because of an event that took place on September 21. That evening, the Knight Consortium held a glitzy, dressy gala at the Emperador Hotel in Buenos Aires. A video recording on the platform’s Telegram channel captured a sit-down meal attended by a few hundred La China investors. The entertainment included professional tango dancers, singers and a big band ensemble.
Everything about the event suggested that the Knight Consortium had deep pockets and impressive leaders. La China was said to be too busy to attend, but two nattily dressed executives – Timothy Murphy, the marketing director, and Jeremy Jones, the chief operating officer – gave speeches and handed out cheques and gold plaques to the most prolific recruiters to the scheme. They posed in front of a huge backdrop emblazoned with the words “Together we Knight, together we shine,” in both Spanish and English.
Firtman studied a video of the event, and ran images of the executives, who were presented as Americans, through facial recognition software. One came up as a partial match for a Polish actor named Filip Walcerz, the other was a perfect match for another Polish actor, Maurycy Lyczko.
The discovery gave Firtman a pleasant jolt. Best known for writing and lecturing about software, Firtman, who is 44, has in recent years turned the study of financial scams into a kind of hobby. He can spend hour after hour in bloodhound mode once he’s discovered an intriguing odour. When he studied RainbowEx’s code, he made a startling discovery: all of the trades on it were fake. The nightly swaps of Tether for memecoins through the crypto exchange were pure show. It would later prove to be a deflating revelation for people who thought they were engaged in a cutting-edge activity – crypto trading. In fact, other than acquiring Tether, there was no buying or selling of crypto and no profits. People’s account balances went up only because whoever ran RainbowEx was manipulating the numbers.
It was all an elaborate simulation, one that survived on new recruits. The returns that allowed investors to buy new air-conditioners was just money whisked from the accounts of fresh victims. Like every Ponzi scheme, it was doomed.
On October 1, Firtman spoke on a national radio show about his findings. The next day, La Opinión published its first story about La China. “Knight Consortium representatives in San Pedro assure that ‘this is not a scam’” read the headline, which quoted those representatives, anonymously, sounding desperate and annoyed.
If that initial story treaded lightly, it was followed, on October 5, with an article that flat-out called RainbowEx a pyramid scheme. Two days later, Clarin, Argentina’s largest newspaper, published a story by Firtman stating that the two Knight Consortium “executives” were actually Polish actors, one of whom had appeared on Spanish and Polish soap operas and dramas.
That did it. A national TV network soon showed up in San Pedro to do people-on-the-street interviews about La China. The following morning, radio and television reporters from across the country were swarming the town. San Pedro had become national news.
Suddenly infamous, RainbowEx blocked investors trying to withdraw their money. The next week, La China announced that the exchange might be forced to exit the country and would relocate to a new website, called Rainbow PRO. Send US$88 ($149) worth of Tether, she instructed, or your account will be deactivated. About 2600 people paid this ransom, a total of more than US$220,000 ($372,000). It vanished, too.
As La China investors realised that their original outlay and their fake earnings had disappeared for good, they did not focus their rage on the elusive La China. They blamed the reporters at La Opinión.
On social media, anonymous posters claimed that Berardi and her husband were RainbowEx investors who’d maliciously pulled their own money out right before tanking the whole enterprise. An anonymous caller vowed to bury her. Someone else posted this warning on social media: “If our paths cross in the street, I’ll kill you.” She filed a complaint with the local court and slept with the windows open, she said, the better to hear intruders.
“No one came, though,” she said. “Online, everyone is brave.”
In mid-October, an anonymous hacker posted to the dark web a database with thousands of names of La China investors and a ledger showing how much each person put in and how much, if anything, they withdrew. La Opinión published information from this hack and shared the database with authorities.
It turned out that City Council members had put money into RainbowEx. So had an entire class at a local high school. So had the chief of police. Some people had extracted US$100,000 ($169,000) or more. Far more wound up with losses, on average about US$2000 ($3380). A few lost their entire life savings.
Many were irate about bidding farewell to their massive RainbowEx “holdings,” as fictional as they were. Federico, a musician in his 30s, who was eager to maintain his privacy and spoke only on the condition that his last name was not used, was on the verge of pocketing a few thousand dollars when RainbowEx shut down.
He participated even though he figured out months earlier that RainbowEx was a sham, he said one afternoon sitting at a restaurant in San Pedro. All of the “trading” happened on the exchange and on some evenings, Federico would look at real-world movement of crypto that La China had recommended buying. On the blockchain – which is to say, in reality – the coins were not budging. The bump that La China fans saw was bogus. Still, he clung to the thoroughly irrational hope that the profits in his RainbowEx account were real.
“I’m still crying about it,” he said, forcing a smile.
“I’m not the one who scammed you”
On December 19, the prosecutor’s office in San Pedro raided 22 locations and arrested seven people. Among those picked up was Luis Pardo, a 31-year-old who once worked at the paper factory. He was reportedly among the first to join RainbowEx, and he attended the September gala; in the video of the event he is holding a plaque and grinning beside one of the Polish actors. Records would later show Pardo withdrew more than US$200,000 ($338,000) from the scheme.
Paulo Cordara, a lawyer for Pardo and another person arrested, was interviewed on the radio by Flaiman in December and said that his clients didn’t create the Knight Consortium, have no idea who did and merely recommended that others invest in RainbowEx because it worked for them.
“They didn’t know this was a scam,” Cordara said, “and turned out to be victims who were also scammed.”
Pardo and two other San Pedro residents remain in prison, held on fraud charges. The prosecutor, Maria del Valle Viviani, said in an interview that she considered the three to be essential players in the scheme. She has until the end of the year to wrap up her investigation. About US$3.5m ($5.9m) worth of Tether has been seized, and US$46m ($77.7m) is missing.
Nobody seems to know where it is. The woman whose image was used as La China piped up from Taiwan to say, via her Instagram account, that her photo had been stolen and that she knows nothing about RainbowEx.
“I’m not the one who scammed you,” she wrote.
The Polish actors hired to play Knight Consortium executives were hardly more helpful. They said they were flabbergasted to learn that they had a cameo in a fraud, which they discovered when Firtman contacted them via Instagram in early October. As they explained in an interview posted to YouTube, the pair had been hired by a woman named Ashli from an Asian talent agency, with whom one of the men had previously worked. The two were asked to fly to Buenos Aires for an acting gig, which earned them US$1500 ($2335) in crypto.
This is what we do for a living, they explained, speaking from Poland, sounding pained and apologetic. We are actors. We play a role, reading lines written by someone else. We never knowingly deceive.
Firtman was initially sceptical. He came around when he saw that the actors had spent a few days in Buenos Aires and posted photos of their romp around the city to their personal Instagram accounts. One was appended with #Relax. Authorities, apparently figuring the two were oblivious to the scheme, have shown little interest in questioning them.
Same fraud, different logo
In early October, as Berardi sought a better understanding of RainbowEx’s mechanics, she interviewed on her radio show a cyberthreat specialist named Mauro Eldritch, a native of San Pedro who now lives in Uruguay. He told listeners that the exchange was a highly vulnerable mess. Since then, he’s learned much more.
RainbowEx is a version of a scam that has popped up around the world, he said in a recent interview, using a nearly identical software platform each time. He’s found iterations in Africa, Europe, Asia and North America, where examples have surfaced in Alabama and Washington state. At least 200 versions are currently active, Eldritch said in a phone interview. Each has a different name and many have La China-like characters dispensing crypto instructions. In a now-expired variant in Italy, the La China persona was called Dolly.
“These are basically all the same product,” Eldritch said, “with different backgrounds, different designs, different logos.”
He traced the original template for these “crypto exchanges” to a Chinese web developer site called DCloud, where it was uploaded in 2021. At the time, it was the scaffolding for a basic and aboveboard crypto app; the parts that facilitate fraud have been added by others. Many others, in fact. The scam appears to be run by a decentralised array of fraudsters, without any apparent co-ordination. In the RainbowEx case, determining who the perpetrators are, and arresting them, has proven to be a challenge. The Argentine authorities have asked Interpol to arrest two Malaysians, whose names have not been released. They are also looking for millions of dollars worth of crypto that disappeared from San Pedro accounts.
Eldritch’s best guess is that the platform is seeded like a virus into different communities, where it is then passed from one person to the next. (Many get a variation of the Knight Consortium to help give it legitimacy.) There were RainbowEx investors in other towns in Argentina, but nowhere did it thrive quite as it did in San Pedro. The place was big enough to attain critical mass and small enough to spread quickly. It also had the right combination of trust and desperation.
Today, the town has a new divide – winners and losers. Thousands of personal dramas have quietly played out. Wives learned that husbands had lied about the amount they had invested, and vice versa. People had to apologise to friends and relatives they’d recruited.
Carlos Rodriguez, the vehicle inspector, forgave his grandson for getting him involved. Rodriguez realises that money from his own pocket helped pay for a new home built by an acquaintance. Like a lot of winners, the guy with the new house is keeping a low profile, out of some combination of guilt or fear, Rodriguez assumes.
“But I’m not angry,” he said. “I let it go. It’s an experience. A bad experience.”
Berardi is still puzzling over the unhappy swathe La China cut through San Pedro. She doesn’t know if relationships in the town will fully heal. And she doubts that important lessons have been learned.
A local woman recently told her that she’d invested in something called CryptoMaster, trying to recover what she had lost with RainbowEx.
CryptoMaster has already collapsed.
This article originally appeared in The New York Times.
Written by: David Segal
Photographs by: Victor Moriyama
©2025 THE NEW YORK TIMES
