Fintech CEO Arrested for Fraud, Argentina

Alejandro Muszak, the founder and CEO of Wenance, a financial technology company, was arrested on Monday on charges of fraud and criminal association after the company participated in an alleged “Ponzi scheme,” which defrauded investors of an estimated 1.5 million dollars.

Fraud in a Failing Company:

Muszak was earlier charged with another fraud case by the Argentine government in October after allegedly charging three individuals who had requested loans from Wenance more than what they owed.

Wenance is a finance company that offers loans to unbanked customers, offering those who would normally not qualify for loans from major banks loans with a higher interest rate than their banking competitors. This consumer base was allegedly why the company failed to pay 500 million dollars in interest to the company’s investors, with Muszak blaming a rise in delinquency in loan payments for the company’s failure to pay.

“We compete with banks, which have cheaper funding. It’s a business with much smaller margins due to the competition. Additionally, it’s a market that has suffered from increased delinquency over the past two years,” Muszak stated in August of 2023.

Muszak continued in the interview, “The reason for Wenance’s current situation is due to the increase in delinquency in the current portfolio. We provide loans and finance the purchase of appliances and motorcycles. In motorcycles, in the market, delinquency was 11%, and now it’s 19%, and in appliances, it went from 14% to 23%.”

Authorities arrested Muszak as he was leaving his home in Las Heras while entering his $120,000 Mercedes-Benz C63S, which was seized by authorities along with the businessman’s Apple computer and iPhone.

A History of Fraud:

The company has previously been ordered to cease operations in Uruguay by the Central Bank of Uruguay due to the company’s failure to make payments to its investors, 600 of whom filed complaints with the Uruguayan government.

A similar story led to Muszak’s arrest in Argentina, where 27 investors launched formal complaints against the company to the Argentine government. The company created a referral system in order to secure investors; this, along with Muszak’s reputation as a straightforward businessman and endorsements by respected investors, led to a number of individuals investing in the venture.

Authorities deemed Muszak a flight risk due to the businessman having family that lives outside of Argentina, alleging that he could easily flee to these countries where he would be supported by family members.

“Following the evidence collection period and the analysis of the documentation carried out by Prosecutor Guevara and his team, the representative of the Public Ministry requested the detention of Muszak, and San Isidro Guarantees Judge Alejandra Rodríguez Mentasti granted the measure. The investigated scheme is a classic pyramid scheme,” judicial sources told La Nacion.

This case, however, is not the only fraud case against Wenance. Another case, with an estimated 439 victims of fraud, has been taken to the courts in Buenos Aires in a case the authorities state may be combined with the case that led to the arrest of Muszak.