U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21430 / March 3, 2010

SEC v. Gaston E. Cantens and Teresita Cantens, Civil Action No. 1:10-CV-20635-PAS(gme) (S.D. FL March 3, 2010)

SEC Charges Gaston and Teresita Cantens with Operating a $135 Million Ponzi Scheme and Affinity Fraud Targeting Cuban-Americans

The Securities and Exchange Commission announced today that it has filed an injunctive action against Gaston E. Cantens and Teresita Cantens, alleging that they conducted a $135 million Ponzi scheme and affinity fraud targeting Cuban-American investors, primarily from South Florida.

The SEC's complaint alleges that the Cantens, founders and co-owners of Royal West Properties, Inc. ("Royal West"), a Miami-based real estate developer, defrauded more than 400 investors by offering promissory notes claiming annual returns of 9 to16% purportedly backed by recorded mortgage assignments. Since 1993, the Cantens funded Royal West's real estate business by offering investors no-risk promissory notes. The Cantens assured prospective investors as to the safety of their principal and interest by touting Royal West's successful real estate business and promising to collateralize investor funds with recorded mortgage assignments. They further assured prospective investors by claiming they were personally worth over $65 million and, as to some investors, executing personal guarantees.

The complaint alleges that, contrary to these claims, Royal West was not generating sufficient revenues to repay principal and interest to investors and, since at least 2002, the Cantens were operating a Ponzi scheme, raising new investor funds to pay earlier investors. Moreover, since at least 2005, Royal West failed to record approximately one-third of the mortgage assignments. Finally, the Cantens misappropriated approximately $20 million of investor funds to pay themselves lavish salaries, to fund unrelated personal business ventures, and to pay their children and grandchildren.

The SEC's complaint, filed in the United States District Court for the Southern District of Florida, charges the defendants with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, sworn accountings, disgorgement of ill-gotten gains with prejudgment interest, and civil money penalties against the defendants.

See Also: SEC Complaint

 
http://www.sec.gov/litigation/litreleases/2010/lr21430.htm

Last modified: 3/03/2010