SEC Obtains Final Judgments Against Companies Operating a Pyramid Scheme and Their Promoter
Litigation Release No. 24496 / June 11, 2019
Securities and Exchange Commission v. DFRF Enterprises LLC, et al., Civil Action No. 1:15- cv-12857-PBS (D. Mass. filed June 30, 2015)
The Securities and Exchange Commission obtained final judgments against two purported gold mining companies and one of their promoters who were previously charged with operating a pyramid and Ponzi scheme.
In June 2015, the SEC charged Heriberto C. Perez Valdes, a former Florida resident, Massachusetts-based DFRF Enterprises LLC, and Florida-based DFRF Enterprises, LLC, along with six other individual defendants, for their roles in a pyramid and Ponzi scheme that targeted investors in Spanish and Portuguese-speaking communities. The SEC alleged that investors were falsely told that the DFRF entities, purported gold mining companies, owned more than 50 gold mines in Africa and Brazil, and that an investment in these companies would be fully insured and guaranteed. The defendants allegedly raised more than $15 million from at least 1,400 investors between 2014 and 2015 by recruiting new members in pyramid scheme fashion to keep the fraud afloat. Commissions were allegedly paid to earlier investors in a Ponzi-like fashion to encourage their recruitment efforts.
On May 14, 2019, the U.S. District Court for the District Court of Massachusetts entered a final judgment against Valdes enjoining him from violating the registration and antifraud provisions of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The final judgment further ordered Valdes to pay $657,840 in disgorgement and prejudgment interest and a $551,403 civil penalty.
On June 5, 2019, the court also entered a final judgment against DFRF Enterprises LLC and DFRF Enterprises, LLC, enjoining them from violating the registration and antifraud provisions of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment further ordered the DFRF entities to pay, on a joint and several basis, $17,840,352 in disgorgement and prejudgment interest, and imposed a $775,000 civil penalty on each of them.
The SEC's litigation in this matter continues against the alleged orchestrator of the scheme, Daniel Fernandes Rojo Filho, and alleged promoters Wanderley M. Dalman, Gaspar C. Jesus, Eduardo N. Da Silva, Jeffrey A. Feldman, and Romildo Da Cunha.