Securities Law Blog

The Securities and Exchange Commission (SEC) charged Enrique F. Villalba on March 29, 2010 for allegedly defrauding his “clients” out of more than $39 million. The unregistered Ohio-based investment adviser is charged with misrepresenting his investment strategy, fabricating account statements, and misappropriating millions of dollars in investor funds.

Villalba allegedly solicited clients from California, Illinois, Ohio, Tennessee and Washington, through his former investment advisory business Money Market Alternative, L.P. and its affiliated entities Money Market Alternative Ltd., Money Market Plus and Hybrid Money Market Management, LLC.

According to the SEC complaint, Villalba lured investors with his seemingly conservative and risk-free investment strategy. He assured clients their money would be invested in securities, including S&P 500 index contracts, treasury bills or interest-earning money market accounts. Investors were allegedly told that their principal would be preserved and they would earn annual returns between 8 and 12 percent. Villalba allegedly boasted about the safety of his investments by claiming that he placed stop orders approximately 2 percent above and below the entry price of the investment.

From 1996 to 2009 Villalba allegedly raised the reported $39 million in client funds, of which he lost over $17 million of client money through bad trades from 1998 to 2009. According to the complaint, he misappropriated more than $1.4 million in client funds for management fees, salary and company overhead, spent $700,000 on real property, $1.2 million was invested in start-up coffee shops, and an unreported amount was used to make Ponzi payments to earlier investors.

Villalba allegedly fabricated and distributed false quarterly account statements to his clients that always showed that their accounts had increased in value. The SEC alleges that Villalba even went so far as to provide one investor with falsified brokerage statements using the letterhead of a brokerage firm.

The SEC is seeking a permanent injunction, disgorgement with prejudgment interest and a financial penalty.