A Chattanooga man who authorities say bilked investors across the nation of at least $31 million made his first appearance in court Tuesday on criminal charges of federal mail, wire and securities fraud.
Arrested Friday in Topeka, Kan., during a traffic stop, Luis H. Rivas appeared before a U.S. magistrate judge in that city and requested an “identity hearing,” according to court officials.
The hearing, scheduled for Thursday at 11 a.m., forces the government to prove it indeed has found the man whom hundreds claim stole their money.
With the criminal charges pending in U.S. District Court in Greenville, S.C., Mr. Rivas is expected to be extradited to the Southeast in coming weeks, according to the Federal Bureau of Investigation.
Bob Cheli, a LaFayette, Ga., man who late last year gave property worth $106,000 to Mr. Rivas and was promised a 5 percent monthly return on the investment, still is wondering how he could have fallen into what authorities now call a classic Ponzi scheme. Such a scam takes money from new investors to pay fraudulent returns to earlier investors.
THE PROMISE
According to bankruptcy court testimony, Luis Rivas convinced people to invest money in the foreign currencies market and issued promissory notes stating he would pay them monthly returns of at least 5 percent for 36 months. Mr. Rivas promised to return the full investment amount in the 37th month. While many people initially received their monthly payments, those payments stopped in late February and March, according to testimony, and without a repayment of the initial investments. One Chattanooga couple invested $100,000 in December and received neither monthly payments nor their original investment back, records show. Authorities now say they believe Mr. Rivas stopped investing clients’ money in October.
“I took a risk, and I lost,” Mr. Cheli said.
More than 500 people are believed to be victims like Mr. Cheli, having lost individual investment amounts ranging from a couple of thousand dollars to hundreds of thousands of dollars when promises of monthly returns as high as 10 percent either fizzled or never materialized at all.
Angry creditors from South Carolina filed an involuntary bankruptcy action against Mr. Rivas in early June, weeks before federal investigators filed the details of their criminal case against him.
Creditors at the time already were concerned that Mr. Rivas, who abruptly shuttered his Chattanooga office in mid-May and went missing, was in the process of liquidating his assets and trying to leave the country.
Authorities later said that Mr. Rivas had closed offices in Knoxville; Spartanburg, S.C.; Orlando, Panama City, Fla.; and Tulsa, Okla., as well. He had a collective monthly payroll bill of about $1 million for more than 200 employees, authorities said.
There is evidence that Mr. Rivas actually quit investing money in the foreign currencies market in October while continuing to solicit money from new investors, authorities said. All the while, Mr. Rivas was living an expensive lifestyle and buying lavish gifts for certain employees and relatives at the expense of investors, officials said.
U.S. Bankruptcy Trustee Grey Steed, who is in charge of investigating Mr. Rivas’ finances and identifying whatever assets remain, said he hopes Mr. Rivas will help them trace the missing money.
About $3.5 million in cash and other luxury goods such as real estate, jewelry and furs has been recovered so far, said Mr. Steed, but it’s a far cry from what investors put in.
“We’re doing everything we can to get the money back for these creditors,” Mr. Steed said.
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