The Securities and Exchange Commission (SEC) recently announced charges were being filed against one investment adviser and settled with another for both their roles in a scheme to misappropriate funds. Jorge Gomez, who formerly operated in Dallas and Mexico, is now facing charges for allegedly funneling millions of dollars from an investment advisory client. The client in this case was a Mexican national. The SEC agreed to settle its charges against Roberto Aleph Espinosa, who helped Gomez to provide fraudulent investment advisory and brokerage services.
Allegations of Securities Fraud Against Gomez
According to the allegations contained within the SEC compliant, Gomez served as president of Atlantic International Capital LLC. During 2007, Gomez fraudulently lured an investment advisory client to invest $10.8 million with his company. Gomez allegedly made false statements and representations to the client, claiming he had a close relationship with two large financial institutions, Bank of New York Mellon and Pershing LLC, in an effort to convince him the investment deal would be lucrative. The SEC alleged that, from September 2007 through December 2010, Gomez was able to misappropriate at least $4.3 million from his client.
In an effort to conceal the misappropriation of funds, Gomez provided his client with bogus accounting statements and securities certificates. Once the client became suspicious about the securities fraud scheme, Gomez began to send the client multiple pieces of correspondence containing misleading and false information. Gomez even sent the client false correspondence letters, threatening to take legal action under Internal Revenue Service (IRS) regulations and the Patriot Act. The SEC alleged that Gomez was simply trying to prolong his misappropriation scheme and prevent his client from withdrawing any money from his account with Atlantic International.
After fraudulently obtaining investor funds from his unsuspecting Mexican client, Gomez enlisted Roberto Espinosa’s help in the securities fraud scheme. Espinosa ran the unregistered Miami-based investment advisory and brokerage firm, Aleph Consulting Group LLC.
Espinosa helped Gomez to invest approximately $3 million of the client’s funds in ACG Global Fund, Ltd. Not surprisingly, ACG Global was a hedge fund started by Espinosa and managed by his consulting firm, Aleph. The hedge fund was incorporated in the Cayman Islands during 2007 and was only available to United States tax-exempt entities and non-U.S. citizens or entities. When certain securities were purchased, Aleph received retrocession fees that were not disclosed to any of its hedge fund investors, including Gomez’ client.
According to the SEC, Espinosa was privy to Gomez depleting the client’s account, but did nothing to stop the securities fraud. In addition, Espinosa forwarded multiple withdrawal requests to the foreign financial services firm that held the client’s brokerage account. Each of these withdrawal requests were signed by Gomez and directed the client’s funds be transferred into accounts which were under Gomez’ control. The SEC alleged that Espinosa was in breach of his fiduciary duty for failure to come forward with information of securities fraud, while also failing to inform the client that Gomez was draining his account behind closed doors.
The Official Charges
For his role in the securities fraud scheme, Gomez was charged with multiple violations of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The SEC is seeking to obtain a permanent injunction against Gomez for violating provisions of the securities laws, disgorgement of all fraudulently obtained funds, pre-judgment interest fees and civil penalties.
Espinosa, on the other hand, chose to settle the securities fraud charges with the SEC. According to the terms of his settlement, Espinosa agreed to a permanent injunction, disgorgement of $855,000, pre-judgment interest fees of $34,822.15 and a civil penalty of $130,000.