Diversity Capital Investments, Inc., et al.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21158 / July 29, 2009
SEC v. Diversity Capital Investments, Inc., et al., Civil Action No. CV 09-5449 ODW (RCX) (C.D. Cal.)
SEC CHARGES PROMOTERS AND FUNDS WITH OPERATING A MULTI-MILLION DOLLAR PONZI SCHEME IN THE UNITED STATES AND MEXICO
Washington, D.C., July 28, 2009 â" On July 27, 2009, the Securities and Exchange Commission charged two Southern California individuals, one Mexican citizen, and their four Southern California entities with securities fraud for operating a Ponzi-like investment scheme involving investors in the United States and Mexico and obtained an emergency court order freezing their assets and halting the scheme.
According to the SEC's complaint, which was filed in the Central District of California, Diversity Capital Investments, Inc., Diversity Capital Bancorp de Mexico Ltd. ("DCBM"), Strong's Capital Investments, Inc., the Optimus Fund, Damian Meneses, 37, Edward Lantz Ferguson, 37, and Joel S. Ley, Jr., 31, raised at least $14 million by promising investors guaranteed returns based on profits from foreign currency trading. In fact, defendants used investor funds to pay other investors' returns, for their own personal use, or sent money to other entities or persons related to them. The defendants are alleged to have diverted funds to at least two individuals, Juan Galindo Flores, 48, and Socorro Terlizzi, 41, who are both named as relief defendants in the action.
The Diversity Capital website claims that it is one of the largest private funds in the market and manages over 1.7 billion dollars. According to the complaint, Meneses promised investors in Diversity Capital that they would receive returns of at least 4% each month from the profits made from foreign currency trading. The SEC alleges that Meneses encouraged investors to refinance their homes and to use the proceeds to invest in Diversity Capital. The complaint alleges, however, that Diversity Capital and its New Zealand affiliate, DCBM, did not generate any profits from foreign currency trading and instead used investor funds to pay earlier investors in a Ponzi-like fashion. According to the complaint, investor funds were also used for personal expenses, including car payments, mortgage payments, meals, travel and retail purchases.
According to the complaint, Ferguson, 37, identified himself to investors as the president of Chula Vista-based Strong's Capital. The complaint alleges that Ferguson told investors in Strong's Capital that he would guarantee them monthly profits of 3% to 8.25%. The complaint alleges that although Ferguson told investors that all of their money would be invested in Diversity Capital, Ferguson used over $500,000 of investor funds to pay out earlier investors and for his own personal use. The complaint alleges that Ley, 31, operated the Optimus Fund out of San Diego and identified himself as the president of the Optimus Fund. According to the complaint, Ley promised investors returns of at least 4% each month and sent out monthly statements reflecting these profits. The complaint alleges that although Ley told investors that all of their money would be invested in Diversity Capital, Ley used some of the money from investors to pay out earlier investors and for his own personal use, including for travel, automobile payments and retail purchases. The complaint alleges that neither Strong's Capital nor the Optimus Fund received any significant or regular payments from Diversity Capital.
On July 27, 2009, the SEC obtained an order (1) freezing the assets of Diversity Capital, DCBM, Strong's Capital, the Optimus Fund, Meneses, Ferguson, and Ley; (2) requiring accountings; (3) prohibiting the destruction of documents; (4) granting expedited discovery; and (5) temporarily enjoining defendants from future violations of the registration and antifraud provisions of the federal securities laws. The order also freezes assets belonging to two relief defendants who are alleged to have received money from the scheme, Flores and Terlizzi. The complaint alleges that the defendants have violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties. A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for August 6, 2009 at 4 p.m. PDT.
The SEC acknowledges the assistance of the Federal Bureau of Investigation, the Commodity Futures Trading Commission, and the California Department of Corporations.
