SEC Charges Florida Couple in $135 Million Ponzi Scheme
The SEC recently charged a prominent Miami-based business leader and his wife with fraud for conducting a $135 million Ponzi scheme with real estate investments from hundreds of elderly Cuban-American investors living in South Florida.
The SEC claims that Gaston E. Cantens and Teresita Cantens, the co-owners of a real estate development company named Royal West Properties Inc., sold promissory notes to investors after acquiring properties and financing their sale. The Cantens lured investors by promising the investments in their real estate business were safe and secure with annual returns between 9 and 16 percent.
But when property owners defaulted on their mortgages, Royal West’s financial condition deteriorated and the Cantens used new investor money to repay earlier investors and afford the firm’s operating costs. The Cantens misappropriated more than $20 million from investors to fund unrelated personal business ventures, pay themselves high salaries, and divert money to their children and grandchildren.
“The Cantens used their prominent standing in a close-knit Cuban-American community to ruthlessly exploit vulnerable elderly investors who trusted them with their life savings,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.
The Cantens gained the trust of prospective investors in typical affinity fraud fashion by cultivating an impression within their community that it was a privilege to invest with them. The Cantens emphasized that Jesuit priests and other well-known leaders in the Cuban-American community had invested with Royal West.
The SEC alleges that the Cantens made numerous material misrepresentations and omissions about the safety and security of investors’ principal and returns and the use of investor funds. The SEC further alleges that the Cantens falsely represented that the promissory notes were collateralized by mortgages or mortgage obligations, where Royal West did not record as many as one-third of the assignments of mortgage receivables that served to collateralize investors’ promissory notes. Royal West also assigned the same mortgage receivables to multiple investors at the same time.
The Cantens were not registered with the SEC under the federal securities laws to make securities offerings to investors.