The U.S. Securities and Exchange Commission filed a complaint against an El Segundo, Calif.-based investment firm and its owner, alleging that they operated a $23 million Ponzi scheme that primarily targeted Hispanics.
The SEC alleges that Clelia A. Flores and Maximum Return Investments (MRI) Inc. solicited funds by promising to invest in risk-free, high-yield programs related to bank trading, real estate, and oil and gold exploration. They promised returns of up to 25 percent within at least a month, the SEC said.
"As we allege in our complaint, Flores violated the trust of her own community by falsely promising high returns and no risk," Rosalind R. Tyson, director of the SEC's Los Angeles regional office, said in a news release. "When she couldn't deliver, she resorted to paying off early investors with money from unsuspecting newcomers."
The SEC statement said: "Flores and MRI used millions of dollars from new investors to pay principal and returns due to earlier investors, and misappropriated investor funds to pay personal expenses for Flores and finance a lavish party for MRI to celebrate the company's alleged financial success."
The complaint, filed in U.S. District Court in Los Angeles on Monday, alleges that the company did business with 150 investors in seven states (California, New York, Georgia, Utah, Nevada, Texas and Illinois) from late 2006 to early 2008. The investors were solicited by the company and Flores in Hispanic communities through word of mouth and referrals, with promotional materials in English and Spanish. The complaint also states that MRI held conferences in hotels to attract new investors.
The complaint also alleges that Flores used more than $3.5 million of investor money for personal expenses, including $443,000 for a down payment on a $1.9 million home, and nearly $1.5 million to finance the company's operations and throw the lavish investor party at the Ritz-Carlton in Marina del Rey.
"The SEC reminds investors to exercise healthy skepticism and thoroughly investigate any promises of unusually high returns that seem to be too good to be true," the SEC news release said.
Investors who would like additional information about the SEC's action against MRI and Flores may call SEC hotline numbers for this case: 323-965-3313 for English or 323-965-3314 for Spanish.
