Ponzitracker

Continuing its aggressive campaign to root out Ponzi schemes, the Securities and Exchange Commission ("SEC") announced the filing of civil fraud charges against a Puerto Rico man in what is alleged to be one of the largest Ponzi schemes to originate out of the U.S. territory. Ricardo Bonilla Rojas ("Rojas") and his firm Shadai Yire ("SY") were charged with multiple violations of federal securities laws after taking in at least $7 million from investors primarily located in Puerto Rico. The SEC is seeking disgorement of ill-gotten proceeds, injunctive relief, and civil monetary penalties. Simultaneously with the SEC's announcement, the Department of Justice also announced the filing of criminal charges against Rojas.

Beginning no later than August 2005, the SEC alleged that Rojas and SY solicited investors, including Evangelical Christian groups and factory workers, for a "risk-free" investment that promised 15% to 50% annual returns derived from commodities trading. Rojas told investors that he had a long history of successful returns in trading commodities, and touted SY as an international enterprise in the business of global private investments. Besides personal solicitations, Rojas also engaged the services of sales agents who solicited potential investors on a commission basis. From the beginning of the scheme until February 2009, Rojas and SY collected at least $7 million from investors based on these representations.

In reality, the SEC claimed that Rojas began misappropriating investor funds as early as October 2005 - two months after the scheme started. Additionally, Rojas alleged failed to invest any of the funds raised from investors, and instead sent out false account statements purporting to show continued growth in investor accounts. Instead, at least $4 million was returned to investors in the form of fictitious trading profits and principal redemptions. Additionally, Rojas used hundreds of thousands of dollars of investor funds for his personal use without the consent or knowledge of investors.

It has been a busy week for the SEC. In the past seven days, the SEC has (1) filed charges against a Utah man accusing him of operating a $27 million Ponzi scheme, (2) charged 2 Denver men with a $16 million Ponzi scheme, (3) charged a former college football coach with a $80 million Ponzi scheme, and (4) busted a $600 million multi-level marketing scheme called ZeekRewards. Whether it represents a shift in department priorities remains to be known, but this recent enforcement spree is easily above average for the SEC.

While the majority of victims are said to be located in Puerto Rico, investors were also located in the mainland U.S., including Florida, North Carolina, and New York.

A copy of the SEC's complaint is here.