Here’s the Biggest Cuban-American Ponzi Scheme in History

Here’s the Biggest Cuban-American Ponzi Scheme in History

On March 3, 2010, the Securities and Exchange Commission charged a prominent Miami-based business leader (dubbed “Miami’s little Madoff”) 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.

In 2012, Gasten E. Cantens plead guilty and was sentenced to five years in prison. Gasten was an advisory board member for the prestigious Belen Jesuit Preparatory School in Miami. The Cantens were not registered with the SEC under the federal securities laws to make securities offerings to investors.

The SEC alleges that Gaston and his wife Teresita, 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. 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.

No formal charges were ever filed against Teresita. One of the couple’s sons, Gaston I. Cantens, is a former prosecutor and onetime influential member of the Florida House of Representatives. Both sons voluntarily returned $650,000 to the bankruptcy estate that were allegedly received as “gifts” during the period when the fraud was ongoing. Investors were able to recover less than five cents on the dollar.

“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. “They portrayed themselves as a pious couple closely involved with educational and religious organizations, while in reality they were living lavishly off money from defrauded investors.”

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  the Belen school. 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 alleged that the Cantens made numerous material misrepresentations and omissions about the safety and security of investors’ principal and returns, the success of Royal West’s business, the source of purported investment returns, and the use of investor funds. The Cantens told potential investors that Royal West generated investors’ returns through the sale of land and its mortgage receivables business, which they claimed was highly successful. These representations were false because Royal West was not generating sufficient income from its real estate business and mortgage receivables to pay its business expenses or investors’ principal and interest payments. By 2002, the Cantens had resorted to using new investor funds to make principal and interest payments to earlier investors. Even after Royal West entered dire financial condition, the Cantens continued to falsely tout their business as financially successful in order to attract new investors and raise additional millions of dollars to continue the Ponzi scheme.

The SEC further alleged that the Cantens falsely represented that the promissory notes were collateralized by mortgages or mortgage obligations. In fact, 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.

Here’s the Biggest Cuban-American Ponzi Scheme in History was last modified: February 26th, 2016 by Cuba Journal

Comments

comments