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.”
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“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.
Nine-month electronic trading freeze and share lending program at the center of dismissed claim.
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