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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

Litigation Release No. 21830 / January 28, 2011

SEC v. David J. Hernandez et al., Case No. 1:09-cv-3587 (N.D. Ill.)

USA v. David J. Hernandez, Case No. 0:09-cr-516 (N.D. Ill.)


The Securities and Exchange Commission announced that on January 14, 2011, U.S. District Court Judge Robert Gettleman sentenced David J. Hernandez, of Downers Grove, Illinois, to serve 200 months in prison for conducting a fraudulent investment scheme that resulted in more than $6.4 million in losses to more than 250 investors. In addition, Judge Gettleman ordered Hernandez to pay more than $6.4 million in restitution to the victims of his fraud.

The criminal case was filed on June 17, 2009 when the U.S. Attorney's Office for the Northern District of Illinois filed a criminal complaint against Hernandez charging him with one count of mail fraud. On July 8, 2009, the U.S. Attorney's Office filed a grand jury indictment against Hernandez charging him with 4 counts of mail fraud. In January 2010, Hernandez pled guilty to one count of mail fraud.

On June 15, 2009, the Commission filed its own civil action against Hernandez for the same conduct. The Commission sought and obtained emergency relief, including an order restraining Hernandez from further violations of the antifraud and registration provisions of the federal securities laws and an order freezing Hernandez's assets and the assets of several relief defendants. The Commission's complaint alleged that between at least February 2008 and June 2009, Hernandez solicited investors to purchase "guaranteed investment contracts" by making false and misleading statements about his background, the existence of the company that issued the investments, the uses of investor proceeds and the safety of the investments. The complaint alleged that Hernandez, also doing business as "NextStep Financial Services, Inc.," sold the guaranteed investment contracts in person and through NextStep Financial's website. Hernandez also claimed that he had an extensive background in banking and business, including having business and law degrees, and that NextStep Financial was a successful company that invested in payday advance stores. The complaint further alleges that Hernandez told investors that their investments were safe because they were covered by insurance. According to the Commission's complaint however, Hernandez never received the claimed degrees, his "banking experience" included a prior federal conviction for wire fraud and NextStep Financial was a defunct corporation with no financial services operations other than running this scheme. In addition, the complaint alleged that Hernandez never invested in the payday advance stores or purchased the insurance that covered investors' funds and instead, Hernandez used the majority of the investors' funds to pay existing investors their promised returns and diverted the remaining funds for his own benefit, for the benefit of his wife, and into his other business ventures, including several companies charged as relief defendants in the Commission's action. The Commission previously obtained judgments against Hernandez's companies charged in the complaint. The SEC's civil action against Hernandez and relief defendant Gina Hernandez remains pending.

For further information, see Litigation Release Nos. 21085 (June 15, 2009) and 21279 (November 4, 2009).



Modified: 01/31/2011