Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

A Member of the Law Professor Blogs Network

Wednesday, March 3, 2010

SEC Charges Miami Business Leader with Affinity Fraud Directed At Cuban-American Community

The SEC today 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.  It alleges that Gaston E. Cantens and Teresita Cantens, the founders and co-owners of real estate development company Royal West Properties Inc., sold promissory notes to investors after acquiring various properties and later financing their sale. According to the complaint, 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. However, 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 also 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.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of Florida, 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. They targeted investors at charitable and religious gatherings and at social functions in their home. They also recruited investors through their contacts with alumni and others associated with a local private boys' school where Gaston Cantens served on the Board of Advisors. Besides word of mouth, the Cantens also attracted potential investors who learned of Royal West properties through television commercials broadcast on Spanish-language channels nationwide.

The SEC's complaint charges the Cantens with violating the securities registration and antifraud provisions of the federal securities laws. The complaint seeks permanent injunctions, sworn accountings, disgorgement of ill-gotten gains and financial penalties against the Cantens.

http://lawprofessors.typepad.com/securities/2010/03/sec-charges-miami-business-leader-with-affinity-fraud-directed-at-cubanamerican-community.html

SEC Action | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0120a8f5e76b970b

Listed below are links to weblogs that reference SEC Charges Miami Business Leader with Affinity Fraud Directed At Cuban-American Community:

Comments

Post a comment