What next for Rivas investors?

Luis Rivas, the local foreign currencies trader accused of swindling up to $35 million from investors across the nation, pleaded guilty to wire fraud, money laundering and bankruptcy fraud Wednesday in federal court here.

"We hope he will cooperate with us now to recover some of the money," said U.S. Bankruptcy trustee and investigator Grey Steed.

Mr. Steed said he so far has recovered about $3.5 million, and he hopes the guilty pleas now will accelerate bankruptcy investigations and litigations.

"Our problem has been trying to make contact with the about 500 people in 23 states who invested with him," Mr. Steed said. "There are still people out there who don't believe they've been had."

Many investors lost thousands of dollars to Mr. Rivas, who actually invested only $5 million of what he took from unsuspecting customers who believed he could pay them a 60 percent return on their money. Most of the money went to provide Mr. Rivas with an extravagant lifestyle, including gifts for his wife and girlfriends, cars and homes, said Gary Humble, the federal prosecutor.

On Wednesday, Mr. Rivas wore a standard-issue khaki uniform with Silverdale workhouse lettering on the back as he stood before Federal Magistrate Michael Carter with Mary Ellen Coleman, his public defender attorney.

"Do you plead guilty or not guilty?" Judge Carter asked.

"Guilty," Mr. Rivas replied.

Mr. Steed and said Mr. Rivas' earliest investors received dividends for a time -- paid for by newer investors coming onboard. Many, however, received nothing.

Mr. Steed said one grandmother entrusted about $500,000 to Mr. Rivas.

Others, including some who attended his training sessions to begin work for him, lost varying amounts.

"We were duped," said Michelle Spadafina, 47, who, in June 2008 told the Chattanooga Times Free Press she had paid $1,500 to attend one of Mr. Rivas' seminars on how to get rich by trading foreign currencies.

"(Mr. Rivas) promised me I'd be making $350,000 a year as one of his traders," Ms. Spadafina said.

Other local investors included a Chattanooga restaurant owner, a Chickamauga, Ga., farmer, and a Chattanooga woman hoping to earn $10,000 to open a rape crisis center.

None responded to requests for comment Wednesday.

Mr. Steed acknowledged that some investors who received returns may be subject to lawsuits to recover the money. The recovered money would be placed in the bankruptcy fund to be dispersed to all the victims who have filed claims in Mr. Rivas' involuntary bankruptcy filed in May 2008.

Mr. Rivas was forced into the bankruptcy when authorities became convinced he was liquidating his accounts and trying to leave the country. He disappeared from Chattanooga for a time but was arrested in June 2008 in Topeka, Kan. According to court records he also had closed his offices in Spartanburg, S.C.; Orlando, Fla.; and Tulsa, Okla.

Mr. Rivas initially was charged with four counts of wire fraud, five counts of the promotion of money laundering, five counts of criminally derived monetary transactions and five counts of bankruptcy fraud.

On Wednesday he pleaded guilty to three counts of wire fraud -- including two transferred here from South Carolina, one count of money laundering and one county of bankruptcy fraud.

Mr. Rivas' attorney, Ms. Coleman, declined to comment Wednesday.