An Ohio man who graduated from West Point and earned a law degree in Washington state has been charged in a bizarre Ponzi and investment-fraud scheme that allegedly combined the science of physics with a unique “momentum filter” that purportedly enabled him to predict how the futures market would behave with “an uncanny degree of certainty.â€
Enrique F. Villalba, 47, of Cuyahoga Falls, was charged in the scheme, which was conducted from Beachwood Ohio, prosecutors said.
Villalba is a graduate of the United States Military Academy at West Point and the University of Puget Sound School of Law, prosecutors said. Separately, he was sued by the SEC and the CFTC.
Prosecutors said investors losts millions of dollars in the scheme, and that Villalba used some of the money to fund coffee shops he owns in Hudson and Stow, Ohio. The coffee shops are known as “Rico Latte,” and the investment business was known as “Money Market Alternative LP.”
Villalba called his investment methodology “Money Market Plus,” saying clients could realize long-term gains averaging between 8 percent and 12 percent, prosecutors said. The scheme collapsed last year, after perhaps operating for more than a decade.
“Villalba represented that his knowledge of physics, when combined with his application of a unique ‘momentum filter,’ allowed him to predict with ‘an uncanny degree of certainty’ how the futures market would trend at various times during a given month, thereby allowing him to purchase and sell futures contracts to maximize gains,” prosecutors said.
Investors were told Villalba would place stop orders as a hedge against losses, but he did not place the orders, causing investors to lose “millions of dollars,” prosecutors said.
Money from investors was “converted” by Villalba to fund the coffee shops, buy property in Vermillion, Ohio, and also to make Ponzi payments to clients, prosecutors said.
The scheme netted about $29.7 million, prosecutors said.
“This case serves as an example to the public that the Department of Justice and the Financial Fraud Enforcement Task Force will fight fraud in order to protect the integrity of the financial markets,” said U.S. Attorney Steven M. Dettelbach.
“If you lie to investors, there will be a steep price to pay,” Dettelbach said. “This case resulted from tremendous coordination between the Department of Justice and civil enforcement agencies to protect the rights of investors all over the country.â€
President Obama started the Financial Fraud Enforcement Task Force in November.