Gonzalo Ortiz, an investment adviser, is facing charges accusing him of defrauding one investor of more than $570K. According to the Securities and Exchange Commission (SEC), Ortiz appropriated about $224,500 of his client’s funds and lost about $290K through trades that he made.
In its complaint, the SEC said from 2015 to 2017, Ortiz persuaded an acquaintance to give him control of nearly $570K, much of which were retirement funds. The investment adviser allegedly did this by promising the investor a 50% yearly return and while falsely touting a successful track record in investing.
At first, said the Commission, the investor gave Ortiz $200K to invest. Although the investment adviser was not authorized to use the money for his own use, he allegedly spent about $56K on cars and other goods while losing the remainder of the funds through trading. Ortiz then gave the investor a bogus account statement showing an over 50% return on the investment, compelling his client to give him another $200K to invest.
This time, Ortiz allegedly spent about $116K on personal expenses and lost about $64K on trades. The investor then gave Ortiz $114K of his retirement money to invest, which the investment adviser later admitted to losing. After asking for another $50K by promising to recover the lost funds and guaranteeing that the principal would remain intact, Ortiz took pains to hide his alleged fraud while causing the investor to think money was being made.
The SEC is accusing Ortiz of violating the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the Investment Advisers Act of 1940. The regulator wants injunctions and penalties imposed, as well as the restoration of ill-gotten gains along with prejudgment interest.
Meantime the U.S. Attorney’s Office for the Eastern District of New York has filed parallel criminal fraud charges against Ortiz.
The SEC is considered the regulator of investment advisers. However, while usually only investment advisers with at least $25M assets under management or those that advise investment company clients are allowed to register with the Commissions—barring certain exemptions, smaller advisers must still register with state securities regulators.
An investment adviser is considered a fiduciary and has a duty to secure the “best execution” for a client when it comes to making transactions. Failure to fulfill that duty can be grounds for an investor claim if losses occur as a result. Unfortunately, investment adviser fraud does happen.
Signs that you may be the victim of investment adviser fraud may include:
- Unusually high returns.
- The promise that your investment returns are guaranteed.
- The promise of no losses.
- Aggressive tactics to persuade you to go along with the investment advice.
- Your adviser’s failure to apprise you of the risks involved.
- Your adviser not taking the time to make sure you understand your investment or the risks involved.
Please contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) if you suspect that investment adviser fraud played a part in causing your investment losses.