SEC Announces More Charges in Massive Kickback Scheme to Secure Business of Venezuelan Bank
The Securities and Exchange Commission today charged the former head of the Miami office at brokerage firm Direct Access Partners (DAP) for his role in a massive kickback scheme to secure the bond trading business of a state-owned Venezuelan bank.
The SEC charged four individuals last month who enabled the global markets group at DAP to generate more than $66 million in revenue from transaction fees related to fraudulent trades they executed for Banco de Desarrollo Económico y Social de Venezuela (BANDES). A portion of this revenue was illicitly paid to the Vice President of Finance at BANDES, who authorized the fraudulent trades.
The SEC alleges that as managing partner of the global markets group, Ernesto Lujan was an integral participant in the wide-ranging fraudulent scheme that included sham arrangements to hide the kickback payments and route money to the BANDES official through shell corporations. Lujan and others charged in the scheme deceived DAP's clearing brokers, executed internal wash trades, interpositioned another broker-dealer in the trades to conceal their role in the transactions, and engaged in massive roundtrip trades to pad their revenue.
"For a scheme this bold to succeed, it required the sneaky collaboration of several individuals including the head of the Miami office," said Andrew M. Calamari, Director of the SEC's New York Regional Office. "Lujan and the others may have believed they were covering their tracks, but the SEC's exam and enforcement teams unraveled their fraud."
In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Lujan.
The SEC's amended complaint filed in federal court in Manhattan charges Lujan and the other defendants with fraud and seeks final judgments that would require them to return ill-gotten gains with interest and pay financial penalties.
The SEC's investigation, which is continuing, has been conducted by Wendy Tepperman, Amanda Straub, and Michael Osnato of the New York Regional Office. The SEC's litigation is being led by Howard Fischer. An SEC examination of DAP that that led to the investigation was conducted by members of the New York office's broker-dealer examination staff. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York, the Department of Justice's Criminal Division, and the Federal Bureau of Investigation.