The Securities and Exchange Commission on Tuesday filed a complaint against two South Florida men posing as financial advisors who targeted members of the Venezuelan-American community in a multi-million dollar investment scheme.
Francisco Javier Malave Hernandez and Ricardo Javier Guerra Farias used a fake firm, Toller Stern Financial Services, as part of their scheme to defraud investors who bought close to $5 million in promissory notes. Most of the investors are members of the Venezuelan-American community, according to the SEC.
In a case of affinity fraud, the fraudsters who carry out scams frequently are, or pretend to be, members of the group they are trying to defraud, according to the SEC. Affinity fraud means the group could be a religious group, such as a particular denomination or church, or an ethnic group or immigrant community. It could be a racial minority or a particular workforce, including members of the military.
“An affinity group is any group that you belong to, be it professional, religious or social,” said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “Investors must always be aware and cautious of any individuals who are prospecting them through such a group.”
Read next: The greatest investment scams in history
“Be dubious about people who are marketing that way, particularly if they are using a religious affiliation,” he said. “That’s powerful. If people believe or have faith in the same way, there can be an instant establishment of trust.”
Malave and Guerra, along with the firm, used a combination of in-person pitches, emails, text messages, written marketing brochures and business plans, and a website to solicit investors and to falsely portray the investments as safe and lucrative, according to the SEC’s complaint.
And they also falsely represented to investors that Toller Stern and Toller Asset used investor money solely for the companies’ day-today operations and for working capital to invest in equities, crypto assets, real estate, and foreign exchange markets using an alleged automated trading platform, the SEC’s complaint alleges.
According to the SEC, Malave and Guerra never received any trading profits or money back from the trading platform. They also commingled Toller Stern and Toller Asset investor capital and used the commingled funds to make Ponzi-like payments to other investors.
Malave, directly and indirectly, misappropriated $558,900, and Guerra misappropriated at least $109,500, according to the SEC. They also misled investors about Toller Stern’s and Toller Asset’s financial conditions and operations.
The scheme unraveled during the first half of 2022 when Toller Stern and Toller Asset stopped making interest payments to investors, according to the SEC. Without admitting or denying the allegations in the SEC's complaint, Malave, Guerra, and Toller Stern consented to the settlement. The SEC is seeking $3.25 million in restitution and fines.
Plus, a $400 million Commonwealth team departs to launch an independent family-run RIA in the East Bay area.
The collaboration will focus initially on strategies within collective investment trusts in DC plans, with plans to expand to other retirement-focused private investment solutions.
“I respectfully request that all recruiters for other BDs discontinue their efforts to contact me," writes Thomas Bartholomew.
Wealth tech veteran Aaron Klein speaks out against the "misery" of client meetings, why advisors' communication skills don't always help, and AI's potential to make bad meetings "100 times better."
The proposed $120 million settlement would close the book on a legal challenge alleging the Wall Street banks failed to disclose crucial conflicts of interest to investors.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.