Chula Vista resident charged in Ponzi scheme

A Chula Vista resident and two entities he controls were charged in San Diego federal court Wednesday with operating a Ponzi-like scheme through five hedge funds.

According to the U.S. Securities and Exchange Commission complaint, Moises Pacheco, Advanced Money Management Inc. and Business Development & Consulting Co. raised $14.7 million from more than 200 investors over a 3 1/2-year period, acting as investment advisers to the five self-described hedge funds — AP Premium Value Funds I through IV and Capital Partnership Group.

According to the SEC suit, Pacheco told investors he had developed a lucrative investment strategy involving the purchase and sale of covered call options, and that the hedge funds exclusively relied upon that strategy to generate trading profits ranging from 30 to 48 percent per year.

In reality, Pacheco did not generate the returns he claimed and instead used investors’ principal to pay purported returns until the scheme collapsed, according to the SEC.

The SEC alleges that the defendants further misused investor principal by transferring victims’ money to Pacheco, entities under his control, or numerous third parties for reasons having nothing to do with the purported trading.

Neither Pacheco nor his entities were registered with the SEC, according to the complaint.

Most fund investors live in the Chula Vista area, and know either Pacheco, one of his friends or family members, or another investor, according to the SEC.

“Pacheco disseminated monthly statements reflecting purported profits and trading activity, but provided little detail about how those returns were generated,” alleged Rosalind Tyson, director of the SEC’s Los Angeles regional office.

“These investors were principally solicited through word-of-mouth, which serves as a reminder to beware of opaque investment opportunities that promise unusually high payoffs even if it’s a referral coming from family or friends,” she said.

According to the complaint, the actual profits from the hedge funds totaled about $367,000, but investors were promised returns of more than $9.7 million.

The SEC alleges Pacheco, AMM and BD&C violated the securities registration and anti-fraud provisions of federal securities laws and is seeking permanent injunctions,return of alleged ill-gotten gains with pre-judgment interest and financial penalties.

Tags: SDNN

This entry was posted on Wednesday, June 24th, 2009 at 3:21 pm and is filed under Local News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.