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Litigation Release No. 19358 / September 2, 2005

United States v. Carlos H. Soto-Cruz, CR. No. 3:04-00127-CCC-GAG-1


The United States Securities and Exchange Commission ("SEC") announced that on August 18, 2005, the Honorable Judge Carmen Consuelo Cerezo, United States District Judge for the District of Puerto Rico, sentenced Carlos H. Soto ("Soto"), a former Morgan Stanley DW, Inc. ("Morgan Stanley") registered representative, to twelve years in prison for his involvement in a fraudulent scheme in which he raised millions of dollars. Judge Cerezo ordered Soto to pay a restitution of more than $25 million for the benefit of defrauded investors.

Soto is a defendant in a pending civil action filed by the SEC on February 11, 2004, in the United States District Court for the District of Puerto Rico. The SEC's complaint alleged that Soto, while employed at Morgan Stanley, raised at least $50 million by telling investors that he would invest their funds in low risk mortgage-backed securities issued by the Government National Mortgage Association (commonly-called "Ginnie Maes"), but instead diverted the investors' money to accounts in the names of false companies he controlled. The complaint further alleged that Soto used the funds for personal use and to engage in speculative and risky trading, including short sales. The SEC has already obtained a temporary restraining order, a preliminary injunction and asset freeze. The SEC's litigation against Soto is continuing.

On February 19, 2004, Soto was arrested in San Juan, Puerto Rico. The United States Attorney's Office in Puerto Rico charged Soto with one count of securities fraud and one count of mail fraud based on the same conduct as alleged in the SEC's complaint.

For more information see Litigation Releases No. 18574 (February 12, 2004), and No. 18625 (March 16, 2004).


Modified: 09/12/2005