Dive Brief:
- The Securities and Exchange Commission (SEC) last week charged a San Antonio-area businessman and his company for running a multimillion-dollar fraudulent scheme victimizing scores of investors, many of whom were retired San Antonio police officers and first responders.
- CEO Victor Lee Farias and his company, Integrity Aviation & Leasing, raised $14 million from investors, promising to use the funds to purchase engines and other aircraft parts for leasing to major airlines, the SEC said.
- "Farias encouraged his victims to invest their hard-earned retirement nest eggs into his fraudulent business," said David Peavler, regional director of the SEC's Fort Worth Office.
Dive Insight:
Farias touted his investment experience and the company's competitive advantages, such as an algorithm that identified profitable leasing opportunities, and claimed all investments would be secured by the company's assets, the SEC said in its complaint.
Many of the investors were retirees who, in order to invest their retirement funds, had to withdraw the funds from their retirement accounts and deposit them in newly created self-directed IRA accounts, the SEC said.
The company did not purchase any engines, and spent only a small portion of investor funds on aircraft parts. Instead, Farias allegedly diverted more than $11.6 million for unauthorized purposes, such as making $6.5 million in Ponzi-like payments to investors, and investing $2.7 million to fund a friend's business. Farias also allegedly misappropriated $2.4 million for personal expenses.
According to the complaint, Farias continued misleading investors after learning of the SEC's investigation, including by using the letterhead from the SEC's investigative subpoena as "proof" for investors that he was working with the SEC to take the company public.
The SEC's complaint charges Farias and IAL with violating antifraud and securities registration provisions of federal securities laws. The agency seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.
