BULLETIN: Yet Another Florida Ponzi Scheme; SEC Accuses Luis Felipe Perez Of Operating $40 Million Fraud Backed By Fake Diamonds And Bogus ‘Pawn Shops’
EDITOR’S NOTE: Here’s one for your Bubba Blue notebook on the various ways to have a Ponzi scheme, as opposed to shrimp.
UPDATED 5:50 P.M. EDT (U.S.A.) A Miami man has been charged by the SEC with gathering $40 million in a Ponzi scheme, pocketing $6 million for himself and telling investors they were helping him finance his Florida jewelry businesses and pawn shops in New York.
Investors believed their money was safe because it was backed by the man’s jewelry operations, diamonds and life insurance, the SEC said.
The trouble with the claims of Luis Felipe Perez, according to the SEC, was that he “had no dealings with pawn shops and never provided financing to them.”
UPDATE 5:50 P.M: Perez also has been charged criminally by federal prosecutors with six counts of securities fraud, after a probe by the U.S. Secret Service and U.S. Immigration and Customs Enforcement, according to U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.
The criminal case is part of an ongoing series of actions by the interagency Financial Fraud Enforcement Task Force, which President Obama established in November 2009, according to Ferrer’s office.
At the same time, the SEC said, two “purported” jewelry businesses owned by Perez — Lucky Star Diamonds Inc. and Luis Felipe Jewelry Design Corp. — “did not generate sufficient revenue to pay investors’ principal and interest payments.”
Clients did not know that “his primary source of money to pay investor returns was from new investors,” the SEC said.
Although Perez said his offering was backed by “diamonds” in a bank safety-deposit box, the purported diamonds in the box “were fake,” the SEC said.
Meanwhile, investors’ funds were not protected by a life-insurance policy as Perez had claimed because he had “defaulted on the policy premium” and allowed it to lapse, the SEC said.
“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.”
While investors were imagining “guaranteed annual returns of 18 percent to 120 percent through monthly interest payments,” the SEC said, Perez spent $3.2 million of their money on a home, $1 million on jewelry for himself and his wife, $400,000 to lease luxury cars, $300,000 on clothing for his wife, $300,000 for travel by private jet and $100,000 on artwork.
In addition, Perez paid himself a salary of $250,000, gave away more than $1 million to family members and made $100,000 in political contributions, the SEC said.
The scheme collapsed in June 2009, when Perez “was no longer able to recruit new investors,” the SEC said.
Because the scheme largely targeted Hispanics, it also had an element of affinity fraud, the SEC said. About 35 investors were affected.
The U.S. Secret Service, U.S. Immigration and Customs Enforcement and the Miami Police Department assisted in the probe, the SEC said.
