SEC Charges Miami Man in $40 Million Ponzi Scheme
FOR IMMEDIATE RELEASE
Washington, D.C., June 2, 2010 — The Securities and Exchange Commission today charged a Miami man for conducting a $40 million Ponzi scheme with funds primarily raised from investors in the local Hispanic community to purportedly support jewelry businesses and pawn shops.
The SEC alleges that Luis Felipe Perez arranged "no-risk" loan agreements with investors and promised to pay them guaranteed annual returns of 18 percent to 120 percent through monthly interest payments. Perez falsely told investors that their investments were collateralized by diamonds, and even led some investors to believe they were beneficiaries on his life insurance policy without disclosing that the policy had lapsed.
Rather than financing his jewelry businesses, the SEC alleges that Perez misused new investor funds to pay prior investors, and he stole at least $6 million for lavish personal spending on limousines, extravagant dinners, bodyguards, and political contributions that helped bolster his image in the local community.
"Perez created an aura of success around him to lure old and new acquaintances into investing substantial sums of money," said John C. Mattimore, Associate Regional Director of the SEC's Miami Regional Office. "Behind the luster of diamonds and jewelry, Perez told outright lies and made promises he couldn't possibly keep."
According to the SEC's complaint, filed in U.S. District Court for the Southern District of Florida, Perez began his scheme in 2006 when he began raising money from investors, many of them Hispanic, under the guise of investments in his purported jewelry businesses. Perez was the president and sole owner of Lucky Star Diamonds Inc. and Luis Felipe Jewelry Design Corp., neither of which ever had any employees. Both companies have now ceased operations.
The SEC alleges that Perez boasted a successful track record of providing risk-free investments in order to befriend new investors through word-of-mouth from previous investors. Among the misrepresentations made by Perez when convincing investors to invest money with him:
Perez told investors their money was also being used to finance pawn shops in New York from which he earned 5 to 10 percent returns per month that could be passed on to his investors. Contrary to his representations, Perez had no dealings with pawn shops and never provided financing to them.
Perez told some investors that diamonds from the pawn shops had specifically been set aside for them as collateral securing their investments. In some instances, Perez placed them in a bank safety deposit box to which he and the investor had access. However, unbeknownst to investors, the diamonds were fake.
Perez assured some investors that he added them as beneficiaries on his life insurance policy. However, what investors didn't know is that he defaulted on his policy premiums and as a result the policy had lapsed.
The SEC alleges that Perez misused more than $6 million of investor money to fund his extravagant lifestyle. Among his lavish personal purchases with investor funds were a $3.2 million home, $1 million worth of jewelry, and exotic vacations that cost him $200,000 a year. Perez also spent investor money to travel by private jet, buy expensive artwork, and make $100,000 in political contributions.
According to the SEC's complaint, Perez's scheme collapsed in June 2009 when he was no longer able to recruit new investors.
The SEC's complaint charges Perez with violating the antifraud provisions of the federal securities laws. The SEC is seeking a permanent injunction, sworn accounting, disgorgement of ill-gotten gains with prejudgment interest, and a financial penalty against Perez.
The SEC coordinated the filing of these civil charges with the U.S. Attorney's Office for the Southern District of Florida, which today announced criminal charges against Perez. The SEC appreciates the assistance of the criminal authorities in this matter, including the U.S. Attorney's Office, the U.S. Secret Service, the U.S. Immigration and Customs Enforcement, and the City of Miami Police Department.
The SEC's case was investigated by Steven J. Meiner, Tonya E. Tullis, Eric R. Busto, and Chad Alan Earnst of the Miami Regional Office. The SEC's investigation is continuing.
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For more information about this enforcement action, contact:
Associate Regional Director, SEC's Miami Regional Office
Edward D. McCutcheon
Assistant Regional Director, SEC's Miami Regional Office