Beleaguered NeoBank Allegedly Made Poor Decisions with Unknown Investors, Leading to Declining Trust and Potential Fraud
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Despite being the subject of multiple news stories throughout August, there has been little insight into the decline of Migom Bank.
The once-promising young neobank bank from Dominica has become the subject of curiosity throughout the industry. From seemingly rash acquisition decisions to an utter failure to communicate with investors, clients, and users, the bank has earned a rather infamous reputation during its mission to rebuild and restructure following a seizure of services in early 2023. The bank continues to try to patch holes in its correspondent network, acquire new sources of capital, and assuage clients demanding to know where their funds went.
Recently, thanks to the efforts of privately funded private investigators, new information has come to light about internal decisions at Migom. Unfortunately for those hoping for a phoenix situation, this information only paints a picture of incompetence, recklessness, and a devil-may-care approach to high-profile investments.
A Meeting with New Investors
Through their inquiry of individuals related to the bank, the private investigator contacted a former Migom client who claims to be a personal friend of the bank’s COO. According to text message logs and photos of legal documents provided by this client, the situation here boils down to a backroom deal gone wrong.
During the later days of the bank’s success, they were allegedly approached by a controversial British-Brazilian investor who they would later learn had ties to several African and Russian oligarchs. At the time, such interest intrigued the bank’s upper management to the point that they were willing to have personal meetings with him. One such meeting evolved into a proposed meet-and-greet with several Brazilian and American crypto players, of whom one in particular stands out.
As these investigations are ongoing, real names cannot be used, and we will refer to him as Mr. Pereira. All claims are currently being investigated and are alleged at the time of publication.
Wild Claims Draw Moths to the Flame
Pereira led a group of self-proclaimed crypto and investment masters, including Mrs. Alves (pseudonym), who claimed she had a decades-long career on Wall Street and with European banks. While Alves flaunted her business acumen and presented herself as a member of the global banking inner circle, Pereira positioned himself as a self-made billionaire with five university degrees, and both the world’s biggest Bitcoin whale and miner. Pereira made several other claims during the meeting with Migom, including donating billions of USDT to Ukraine, using cellphones to mine Bitcoin at a rate of 1BTC per 8 minutes, and casually showing off a wallet — coincidentally named “Migom” — that supposedly contained over 10 billion USDT.
To finish his presentation on personal wealth, Pereira talked about his family’s personal holdings, such as mansions in Brazil, $500 million that was stuck in an old family account in Germany, $28 billion paid to a Dubai-based acquaintance (which Pereira managed), and over 500kg in gold that was stuck in Africa. His final incentive was that he was not only a founder of the famous Shiba Inu (SHIB) cryptocurrency but also held over 9 quadrillion SHIB, valued today at over $72 trillion. Readers may notice some similarities between these claims and all-too-common confidence schemes like the ever-present Nigerian Prince scam.
Now, as Pereira claimed to hold Migom Bank in high regard, he was offering to associate with them as a client and investor. He proposed making ongoing deposits of 5% of his Bitcoin mining operation, which at the time would amount to around $100 million daily. These transactions included a 1% fee paid to Migom Bank, meaning that after all other fees and transactions were finished, Migom would be earning no less than $500K daily. He also asked the bank to take custody of his “Migom” wallet, which he would leverage for a $5.3 billion loan with a 4.36% interest rate, and then deposit $50 million as an example of good faith.
Migom responded by giving Pereira several gifts, including a 1oz 24-karat golden coin, but Pereira had more contributions in mind. He requested a 4-bedroom residence in Central London, a top hotel for him and his associates to live at during these negotiations, a set of powerful computers, a flagship smartphone, a speedy Wi-Fi connection (from which to run his mining operations), and full access to Migom’s systems, servers, and wallets to audit the bank before investing.
Hook, Line, and Stinker
Migom bit, signed documentation verifying the deposit of the SHIB, and began to provide Pereira with his requested perks. It was not long before the investors’ promises began to fall through. Pereira started to complain about legal issues in Brazil that were preventing him from following through on his obligations, and that his Wi-Fi connection was too slow to respond in an orderly fashion. He eventually took his physical perks and disappeared, along with the Migom logs he had accessed and, allegedly, Migom’s stored cryptocurrency.
Migom was holding nearly 20 million stablecoins, almost 100 BTC, and over 65 ETH in their cold wallets, the safety and redundancy of which Pereira was allowed to inspect. Around the time of his departure, these funds allegedly went missing, while frequent emails from Migom’s president to bank clients promising that operations would be up and running in a matter of weeks, suddenly ceased. Migom later mentioned that they had experienced a significant “crypto loss,” followed by seemingly baseless claims about embezzlement from former investors and Russian associates. Prior to this event, Migom’s president allegedly boasted about carrying $50 million in his pocket, which may refer to the keys of client funds that had been turned into crypto following the loss of the bank’s correspondent network.
To complicate matters further, investigations into the other investors revealed that Pereira’s number 2, Alves, had worked for 11 different brokerage companies, from one of which she allegedly stole $570,000. As a result, her license had also been suspended by the US-based capital market company FINRA.
Beware the Wolf in Investor’s Clothing
With the lack of insight and resounding silence from Migom as to their internal operations during this crisis, speculation runs rampant. The collaboration, if true, points to startling incompetence that may have led to client funds and crypto being stolen out from under Migom’s nose. These investigations, alleged as they are, produced photographic evidence that suggests these claims are at least partially true.
Ultimately, it is simply more firewood on the pyre that Migom is slowly building for themselves. The truth of what happened will eventually come out, and the longer the beleaguered bank remains silent, the worse its reputation will grow. For now, hopefully, this new information will provide Migom clients with an idea of what occurred behind closed doors, and serves as a cautionary tale for both investors and bankers alike.