California Man Sentenced to Prison for Running Ponzi Scheme

A California man was sentenced to almost five years in federal prison for operating a Ponzi scheme that authorities say bilked investors out of over $2 million.  Luis Fernandez, 37, of Folsom, California, received a prison sentence of four years and nine months, to be followed by three years of supervised release.  Fernandez had previously pled guilty in June 2010 to a charge of wire fraud, which carries a maximum prison sentence of twenty years in prison and criminal monetary penalties.

According to his guilty plea, Fernandez owned and operated Fernandez Financial Inc. in Folsom.  From September 2004 to March 2009, Fernandez solicited investors by promising monthly returns of up to three percent and falsely representing that Fernandez Financial was profitable in both good and bad markets.  In total, approximately $7.4 million was collected from investors, who were primarily natives of the Dominican Republic.  During that period, roughly $4.6 million of that amount was invested in the stock market, and Fernandez incurred trading losses in five of the six years the fraud was ongoing.  Yet investors were provided with false documentation showing positive performance in their investments, and Fernandez used money from new investors to make monthly interest payments to existing investors.  In total, authorities allege that Fernandez caused a total loss to investors of $2.1 million. 

Fernandez was also ordered to pay restitution to defrauded investors, although the exact amount will be set at a later hearing.  

A Department of Justice Press Release announcing the indictment is here.