The Villalobos Frères Fund:

There’s an old saying among expats here, “If you want to leave Costa Rica with a million dollars, come with two or three.”

Almost everyone knows Bernie Madoff, but how many have heard of the Villalobos brothers? Any expat who has lived in Costa Rica for more than 20 years certainly remembers the “Brothers”. Most newcomers know nothing about this infamous duo.

In the mid-1990s, an interesting new phenomenon hit some expats in Costa Rica. It seems many of them had wads of cash to burn. Where did they suddenly get these riches? The source of their high-flying lifestyle was the interest they had earned from a popular local Ponzi scheme called The Brothers.

As the old saying goes, “If it sounds too good to be true, it usually is.” Until 2003, a large number of North Americans living in Costa Rica were earning “high returns” on their money by investing with it. Brothers.

In general, these dollar returns ranged between 36 and 42%, depending on the duration and amount of the investment. It was almost impossible to find a grumpy in the 1990s and early 2000s who had no money with these guys.

Too good to be true? It was. At the end. Many investors made a lot of money while others ended up losing their shirts and having to go home. To this day, no one knows what happened to Enrique Villalobos or how he really earned his money. One thing is certain: while the business of the “Brothers” prospered, many gringos way of life.

The Villalobos brothers paid faithfully for over twenty years. With nearly 6,300 investors, the brothers were paying out at least nearly $2 million in interest each month.

Unfortunately, most investors were greedy and chose to let their money accumulate in order to become millionaires. Compound interest increases very quickly. Investments over $100,000 were common, and a few clients invested a million or more.

So how did the fund work?

Basically, you loaned the brothers a minimum of $10,000 and then they paid you 3% monthly interest. Those who entered at the beginning posed as bandits. Whereas those who let their money roll or invested in the end usually lost everything. The author personally knows a few people who have been very successful and others who have lost their money.

An expat jumped to his death from the fifth floor of the San Pedro mall after the government forced the Brethren to shut down.

The way the Villalobos brothers got away with this scam for so many years was the ingenious method of lending money to “friends”. They claimed that their investors were their friends who gave them personal loans. In return, the investors received a check for the amount of the investment.

However, it could only be cashed in if they first informed the Brethren who then covered for it. Really, all people got was a worthless piece of paper. Over the years, people demanded their investment back, sometimes with interest, and all their money was returned. The author personally knows many expats who have withdrawn money to buy homes in Costa Rica or start businesses.

A specimen check customers received for placing their money with the Villalobos brothers.

In July 2002, everything went to hell. The government froze the brothers’ bank accounts as they were investigated for money laundering and some of their Canadian investors who were allegedly drug traffickers.

Enrique Villalobos fled with a fake passport and his younger brother Osvaldo ended up with the bag. Osvaldo was eventually convicted of fraud, not money laundering, and was jailed for a few years and then released. No one knows where the Villalobos brothers are.

According to estimates, the “Brothers” have pocketed more than $800 million over the years.

There were many theories about what the brothers did with their investor’s money. Some say they were an underground bank to fund CIA operations. Others say that Enrique was a genius and was involved in selling weapons to foreign countries. According to one theory, he worked in the once very profitable business of exchanging Colombians pesos.

Whatever they did to pay the high interest, we may never know. During Osvaldo’s trial, the defense could not show how the brothers made money.

This led most people to believe that the money was coming in through the front door and out the back door, which is how a typical Ponzi scheme works. Since most people let their money roll and didn’t withdraw their monthly interest, this activity could theoretically have gone on indefinitely as long as new funds kept flowing.

A few years before the brother’s disappearance, a few similar copy operations were born. What they did was walk in the footsteps of the Brethren, preying on people’s credulity, the reputation and the Brethren formula to attract investors.

Many expats and others said, “If the Brothers can do it, why can’t these guys? Unlimited Savings (aka “the Cubans”) and “The Vault” were other businesses that offered high returns and relied on the brother’s success and reputation to lend credibility to their operations

Savings Unlimited was called the Cubans because the owner was a portly Cuban flimflam by the name of Luis Milanes. To attract investors, he began by offering a higher monthly interest rate than the Villalobos brothers. Investors could earn a whopping four percent per month.

Also, if you could invest other people, you could earn five percent a month. The Cubans claimed to have generated income through the chain of casinos they operated in Costa Rica.

Long story short, Milanes left town with around a quarter of a billion dollars on the books, months after the Brethren’s raid. The fugitive owner was arrested about five years later in El Salvador.

He was out on bail and roaming freely around San Jose with his bodyguards awaiting his day in court. None of its assets like casinos have been seized.

Update: Milanes fled the country again and ended up penniless in Mexico about three years ago.

The fallout from shutting down these high-interest scams has been felt in the expat community. Those who had all their eggs in one basket returned to their home countries while many who remained saw their lavish lifestyles drastically curtailed.

Here’s the article that made the headlines the wall street journalwhen the Brothers finally came down:

About the Author

Christopher Howard has lived in the country for over 40 years, is a Costa Rican citizen, Costa Rica’s leading relocation expert and has been conducting monthly relocation/retirement tours in Costa Rica for over 30 years. See He is also the author of the one-of-a-kind best-selling book, New Golden Door to Retirement and Living in Costa Rica – the official guide to relocation and “Guide to Costa Rican Spanish”, which can be purchased from: or

About Matthew Berkey

Check Also

Jamaica and Barbados to benefit from electric mobility initiative | Caribbean

SHARM EL SHEIKH, Egypt, CMC – Jamaica and Barbados will benefit from the first regional …