The SEC has charged investment adviser Enrique F. Villalba, Jr. with fraud after he used Money Market Alternative LP, his former investment advisory business, to solicit investors in California, Illinois, Ohio, Tennessee and Washington. According to the SEC’s press release, Mr. Villalba raised over $39 million in thirteen years by “lying about his investment strategy, fabricating account statements to hide losses, and using investor money to buy property and pay unrelated business expenses.” While he assured clients that his “conservative” investment strategy would only invest in securities, in reality Mr. Villalba used client funds to trade commodity futures, “made Ponzi-like payments to some investors, and misappropriated client funds to enrich himself and invest in two start-up coffee businesses.”
The SEC alleges that Mr. Villalba deliberately misled clients about his investment strategy, falsely claiming “that he placed stop orders approximately 2 percent above or below the entry price of the investments,” that client funds would be invested only in securities, “including S&P 500 Index contracts, treasury bills or interest-earning money market accounts” and that Mr. Villalba’s management fees would not exceed “between 12 percent and 15 percent of the profits he generated on their behalf.” Mr. Villalba further falsified quarterly account statements for his clients, hiding his misappropriation of funds and the failure of his investments. According to the SEC, Money Market Alternative LP’s statements “always showed that his clients’ accounts had increased in value that quarter.”
Mr. Villanova lost more than $17 million of his clients’ funds to trading losses and earned over $4 million from his salary and management fees. He also used a Ponzi-like strategy to pay off older investors with newer investors’ money. Rosalind R. Tyson, the Director of the SEC’s Regional Office in Los Angeles, commented, “Villalba defrauded his clients and breached his fiduciary duty as an investment adviser in the most egregious way — by stealing client funds and trading in an unauthorized manner.” |
