A former Chattanooga securities trader has been indicted in federal court here on allegations he swindled investors out of more than $31 million.
Luis H. Rivas is charged with 19 counts of wire fraud, money laundering, criminal monetary transactions and bankruptcy fraud, documents show.
Mr. Rivas, who also is charged in U.S. District Court in South Carolina with two counts of wire fraud and is being held in a jail there, is scheduled to be arraigned today in Greenville, S.C., on those separate charges.
The indictment filed in Chattanooga, however, outlines in much more detail a series of crimes that, if he is convicted of them, could land Mr. Rivas a $6 million fine and 255 years in a federal prison.
Calls to Mr. Rivas’ defense attorney in South Carolina, who has been appointed by the government because the defendant cannot afford to hire private counsel, were not immediately returned Wednesday.
Assistant U.S. Attorney Gary Humble, who is prosecuting Mr. Rivas in U.S. District Court in Chattanooga, declined comment on the case.
Mr. Rivas’ alleged scam first gained attention in May, when angry investors filed their own action against him in U.S. Bankruptcy Court in Chattanooga amid fears he was in the process of liquidating his assets and trying to leave the country.
A bankruptcy judge immediately forced Mr. Rivas into involuntary bankruptcy and appointed a trustee to try to recover the millions of dollars that authorities claim Mr. Rivas took within the last year from close to 500 investors all over the nation.
Authorities eventually nabbed the suspect in Topeka, Kan., in June after a routine traffic stop in which police found him to be traveling with $100,000 in cash.
Shawn Casadevall, a Chattanoogan whose family members lost close to $100,000 in investment money, said he has mixed feelings about possibly seeing the suspect in court.
“I had thought I would absolutely enjoy sitting in court and smiling at him, but maybe that’s evil,” Mr. Casadevall said.
According to the indictment filed in Chattanooga, Mr. Rivas operated a trading office locally as well as four others in Knoxville, Tulsa, Okla., Panama City, Fla., and Spartanburg, S.C., and lied to investors when he told them he had eight years of experience as a foreign currencies trader.
In order to hook investors, Mr. Rivas told them he had $50 million in the bank “in order to give himself and his scheme credibility,” the indictment states.
He would tell his clients that he could pay them returns on their investments as high as 96 percent a year, signing promissory notes he knew to be false, according to the indictment.
All the while, the government claims, Mr. Rivas actually was running a classic “Ponzi scheme” in which he would pay alleged returns to earlier investors with the investments made by later ones.
There is evidence Mr. Rivas didn’t even invest a large portion of the money, according to the indictment, but instead used it to buy various items for himself and others, including “houses, cars, furs, jewelry, limousine service, clothing, home improvements and furnishings, hotel suites and cash for shopping sprees.”
According to the bankruptcy trustee, only about $3 million in cash and other assets have been recovered since the investigation into Mr. Rivas’ finances began in May.
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