The SEC alleges that Clelia A. Flores and Maximum Return Investments Inc. (MRI) primarily targeted California's Hispanic-American community and promised returns of up to 25 percent within 30 to 45 days. 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 SEC's complaint, filed in U.S. District Court in Los Angeles, alleges that Flores and MRI attracted more than 150 investors in seven states between late 2006 and early 2008. Flores and MRI solicited investors in the Hispanic-American community through word of mouth and referrals, and promotional documents were produced in Spanish and English. Flores paid a 10 percent commission to "referral partners" who solicited new investors, and she relied heavily upon testimonials by other investors in the Hispanic-American community. Throughout 2007, MRI also hosted conferences in hotels to attract new investors.
According to the SEC's complaint, Flores claimed all investor funds would be used to invest in MRI's risk-free, high-yield investment programs, and she touted to investors that their principal would be "guaranteed safe." Promotional materials falsely represented that an investor's principal would be fully secured by a bank-endorsed guarantee and MRI's promissory notes claimed the investment was insured. However, the SEC alleges that Flores and MRI neither guaranteed nor insured the $23 million raised from investors, and only used $5.6 million of this amount to invest in high-risk ventures and start-up companies that had never paid MRI any returns.
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