When businesses around the world agreed to take loans from La Jolla-based Ethos Asset Management, the deals seemed safe enough — after all, the company’s CEO sent one potential borrower a bank statement showing Ethos had more than $100 million in a Citibank account and another potential customer a financial statement listing more than $2.2 billion in assets.
But it turned out that both financial documents were falsified and that the Ethos CEO had forged the signature of an auditor from a San Diego accounting firm to lend legitimacy to the asset statement. Ultimately, Ethos took up-front fees from the borrowers duped by the falsified claims and failed to disburse the promised loan payments.
On Thursday, Ethos founder and CEO Carlos Manuel da Silva Santos, a 30-year-old Portuguese national, pleaded guilty in San Diego federal court to charges of wire fraud conspiracy and aggravated identity theft for a scheme that allegedly cost dozens of companies losses totaling more than $100 million.
Santos admitted in his plea agreement that he bilked more than $17 million from three U.S. companies, but in a September filing prosecutors alleged that Santos owes 53 identified victim companies in the U.S. and around the world more than $100.8 million in restitution.
An attorney for Santos declined to comment on his guilty plea Friday.
According to the plea agreement, Santos and unnamed co-conspirators presented Ethos as a “full-service project financing” firm that offered large loans to prospective borrowers in exchange for an up-front fee as collateral for Ethos to use. The plea agreement states that in some instances the deals were legitimate and Ethos “disbursed money to those clients to finance projects.”
But at other times Santos and the co-conspirators “made materially false, fraudulent, misleading and deceptive representations to prospective borrowers” about Ethos’ history of funding projects, the ability of the company to obtain financing, the source of that financing and the capital that Ethos had available, according to the plea agreement. When Ethos did strike a deal with a borrower, Santos would use the up-front collateral “to disburse loans to other borrowers, to engage in securities trading, to fund personal and business expenses, or to issue commissions to his co-conspirators.”
Assistant U.S. Attorney Edward Beeler described it as an “international Ponzi scheme” during a December 2023 detention hearing, according to a transcript of that hearing.
In a court document filed in September, prosecutors provided a screenshot of a WhatsApp message Santos sent in 2020 to a co-defendant that read “I’m Madoff the second,” an apparent reference to Bernie Madoff, the former chairman of the Nasdaq stock exchange who masterminded the largest known Ponzi scheme in history.
One of the firms bilked by Santos and Ethos was a company with gold mining operations in Canada and Colombia, according to the plea agreement and documents in a related civil case filed in New York federal court. According to allegations in the civil case, Ethos agreed to loan the other company $50 million for its mining operations in exchange for an $8 million up-front payment. Ethos published a news release touting the “new long-term financing partnership.”
In its civil suit, the mining company alleged that it paid the collateral, but Ethos loaned the company nothing. “Worse yet, Ethos has refused to return (the company’s) collateral despite its obligation to do so,” the civil suit alleged. Santos’ plea agreement lists that company as a victim owed $8.25 million in restitution.
The investigation of Ethos was led by Homeland Security Investigations, a component of the Department of Homeland Security. Court documents indicate the yearslong investigation also uncovered related fraud by a second San Diego-based financial firm. The CEO of that firm agreed to testify against Santos and pleaded guilty in a separate case to unlawfully obtaining more than $875,000 in COVID-era government relief loans in exchange for not being charged in the Ethos case.
Federal agents arrested Santos in November 2023 in New Jersey after he arrived in the U.S. from abroad. Prosecutors said that for several years before his arrest, Santos was living in Turkey and had business interests in Turkey, the U.S., Brazil and other nations.
Shortly before and after his arrest, agents seized more than $8 million from three Ethos bank accounts, according to the plea agreement.
According to an attorney who was representing him at the time of the detention hearing, Santos grew up outside of Lisbon and earned a master’s degree in accounting. He has remained in custody since his arrest, with prosecutors arguing he is a flight risk because he is a foreign national with few ties to the U.S. and both a lengthy prison term and a huge restitution order hanging over his head.
Santos is scheduled to be sentenced in April, with a restitution hearing to take place within 90 days after that. Prosecutors wrote in a filing last year that his sentencing guideline range is expected to be between roughly 15 and 19 years.
