Securities Law Blog

On June 2, 2010 a Miami man was charged by the Securities and Exchange Commission (SEC) for allegedly operating a $40 million Ponzi scheme that targeted the local Hispanic community. The SEC claims that Luis Felipe Perez began his scheme in 2006 when he began raising money from investors to purportedly support jewelry businesses and pawn shops.

Perez allegedly set-up “no-risk” loan agreements with investors and promised to pay them guaranteed annual returns of 18 to 120 percent in monthly interest payments. As president and sole owner of Lucky Star Diamonds Inc. and Luis Felipe Jewelry Design Corp., Perez supposedly used his businesses to solicit investments.

According to the SEC complaint, Perez allegedly made several misrepresentations to investors to secure their investment. Some in investors were purportedly told that diamonds had been specifically set aside for them as collateral securing their investments. Investors were provided with access to a bank safety deposit box that held the diamonds, which were later found to be fake. It was reported that in some instances Perez told investors that he added them as beneficiaries on his life insurance policy. Unbeknownst to investors, Perez had missed payments and forced the policy to default. Finally, the SEC claims that Perez falsely assured investors that they would earn monthly returns on their money that was also being used to finance pawn shops in New York, which never existed.

Before Perez’s Ponzi collapsed in June 2009, the SEC claims that he misused new investor funds to pay prior investors. Perez allegedly used the classic Ponzi-style scam to steal at least $6 million to support his extravagant lifestyle and make political contributions to help bolster his image in the local community, according to the SEC complaint.

The SEC complaint charges Perez with violating the antifraud provisions of the federal securities laws. The industry regulator is seeking a permanent injunction, sworn accounting, disgorgement of ill-gotten gains with prejudgment interest, and a financial penalty against Perez.