Yesterday in Miami, Luis Felipe Perez was sued by the Securities and Exchange Commission for defrauding primarily Hispanic consumers by investing money for fixed returns.
From 2006 until June 2009, Perez raised approximately $40 million in a Ponzi scheme affecting approximately 35 South Florida investors, many of whom were Hispanic. Using personal and family relationships while boasting of a successful track record in providing risk-free investments, Perez lured acquaintances to invest substantial sums of money for purported guaranteed fixed returns. Perez claimed the investments were collateralized by diamonds. Perez also told some investors they were beneficiaries on his life insurance policy, but failed to disclose he had let the policy lapse.
Perez offered investments in no-risk oral loan agreements or written promissory notes issued in his name, which provided annual returns ranging from 18% to 120% to be paid in monthly installments. Perez falsely told investors the purpose of the notes was to support his jewelry businesses and provide financing to pawn shops.
In an effort to raise more money in late 2007, Perez began telling prospective investors he would use their money to provide financing to pawn shops in New York, which he claimed paid him 5% to 10% monthly returns (60% to 120% annually).
Perez told at least one investor the pawn shops required large amounts of capital and would provide significant returns to those who provided it with capital. Because Perez could provide financing to the pawn shops from the money he raised from investors, he purportedly could guarantee investors 18% annual returns. Perez further represented diamonds would collateralize the investment.
In reality, Perez primarily used new investor funds to pay prior investors rather than to finance his jewelry businesses or pawn shops. Perez also misappropriated investor funds to support an extravagant lifestyle for himself and his family. From 2006 until the scheme collapsed, Perez used investor funds to pay himself and his family more than $6 million in salaries, bonuses, and lavish expenses. He used the money to: purchase a $3.2 million home and $1 million worth of jewelry for himself and his wife, lease $400,000 worth of luxury cars, take exotic vacations that cost him $200,000 a year, spend $300,000 on clothing for his wife, and spend $200,000 for meals at expensive restaurants.
In addition, Perez gave away more than $1 million to family members, spent close to $300,000 on travel by private jet, and purchased artwork costing $100,000. He paid himself an annual salary of $250,000. Perez’s extravagant spending also extended to $100,000 in political contributions.Jewelry Store and Pawnshop Owner Charged With Running Ponzi Scheme by Steve Rhode