Federal authorities have charged a Chattanooga foreign currencies trader with wire fraud, mail fraud and securities fraud in connection with allegations he bilked investors across the country out of at least $31 million.
A criminal complaint against Luis H. Rivas was filed Tuesday in U.S. District Court in Greenville, S.C. The evidence is expected to be sent to a federal grand jury, authorities said.
The complaint describes an investment scheme Mr. Rivas ran that was “based on false pretenses” in order to obtain millions of dollars from those who trusted him.
The criminal allegations were preceded by Mr. Rivas’ involuntary bankruptcy earlier this month, which a federal bankruptcy judge in Chattanooga granted, based on the belief that he was in the process of liquidating his bank accounts and trying to leave the country before authorities could find him.
Mr. Rivas — who spent 10 years in state prison in the 1980s and ’90s for fraud involving rare coins — has not been seen or heard from since mid-May when he abruptly shuttered his office in Chattanooga where he employed at least 40 people as foreign currency traders. Mr. Rivas maintained offices in Spartanburg, S.C., Orlando, Fla., and Tulsa, Okla., as well, which also have been closed down.
Investors said Mr. Rivas promised sky-high returns of as much as 10 percent a month on their investments, bankruptcy court documents show. Mr. Rivas stopped paying those returns in the spring, and in some instances, simply took people’s money and paid no returns at all, the documents state.
Close to 500 investors are currently trying to get their money back as U.S. Bankruptcy Trustee Grey Steed continues to search for Mr. Rivas’ assets.
Believing that Mr. Rivas used investors’ money to pay for lavish gifts for his employees, wife and two girlfriends, Mr. Steed said he is “firmly convinced people are out there holding onto assets.”
Mr. Steed cautioned all could be criminally prosecuted under U.S. bankruptcy law if they do not forfeit what they received from Mr. Rivas.
About $2 million in cash has been recovered do far, Mr. Steed said, and an investors’ meeting will be held in U.S. Bankruptcy Court in Chattanooga on July 10.
According to the criminal complaint, the investigation began in February when Steve Fulmer of the Securities Division of the South Carolina Office of the Attorney General alerted FBI agent James R. Lannamann to a “Ponzi scheme” he suspected Mr. Rivas was operating from his trading center in Spartanburg.
Agent Lannamann declined to comment on the case.
But as the investigation unfolded, Agent Lannamann talked to many people, all of whom claimed to have been duped by the suspect and whose experiences are outlined in the complaint.
Bjorn Kvammen of Landrum, S.C., for example, told the FBI he gave $500,000 to Mr. Rivas in February based on the promise he would receive $25,000 payments for each of the next 36 months.
Mr. Kvammen never received any payments or his investment back, the complaint states.
Mr. Rivas, however, did voluntarily appear at the FBI office in Spartanburg in March, the complaint states, to explain his business.
At the time, Mr. Rivas told Agent Lannamann that he had 222 clients with a total of $25 million in 15 different accounts at the Interbank FX in Salt Lake City. He said he had promised to pay 5 percent monthly returns to each of those clients for three years and assured Agent Lannamann that all equity checks paid to clients came from profits he earned while trading the money in the foreign currencies market.
Mr. Rivas also admitted he was not a licensed securities trader and had been in prison for 10 years on other fraud charges, the complaint states.
Agent Lannamann later determined that Mr. Rivas could not make the promised payments with the amount of money he said he had on hand, the complaint states. Mr. Rivas, in fact, told one of his employees after the FBI interview that he was a “few million short” in his promised payments to investors.
All the while, the complaint states, Mr. Rivas had hooked other investors and had many other bank accounts. He was also paying several employees’ mortgages and handing out expensive gifts such a furs, diamonds and luxury cars.
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