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Too Good to Be True

Monday, April 15, 2019

On August 9, 2019, the SEC brought a civil enforcement action against Gonzalo Ortiz. Ortiz, who has no securities licenses and has never been affiliated with a broker-dealer or investment adviser, allegedly lured in an investor with promises of 50% annual returns and false claims of previous success. His victim took these statements to heart and was induced by Ortiz to give him control of over $500,000 of the investor’s retirement savings.

The fraudulent scheme started in the spring of 2015, when the investor gave Ortiz $200,000 to invest. Ortiz proceeded to spend $56,000 on cars and other personal items, while he lost the rest through trading. Undeterred from his scheme, Ortiz gave a false statement to the investor five months later that showed a 50% return on the investor’s money. Elated, the investor gave Ortiz another $200,000. Ortiz then spent $116,000 on personal expenses and lost $64,000 on trading.

By 2016, Ortiz had convinced the investor to give him control of an additional $114,000 of the investor’s retirement savings. He then falsely claimed that he lost all of the money through trading, but said he could earn all of the money back if the investor just gave him another $50,000, which the investor was free to monitor. He then took funds from the retirement account and placed them in the account holding $50,000, making it appear as though he was making returns on the $50,000. Meanwhile, Ortiz was using most of the remaining retirement funds to live the high life. By the time his scheme had concluded, he misappropriated $224,500 of the investors funds for personal use and lost $290,000 through trading.

The SEC has charged Ortiz with violations of Section 17 (a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and Sections 206(1) and 206(2) of the Investment Advisors act of 1940. What becomes of Ortiz and the investor remains to be seen, but scammers and fraudsters are growing evermore bold in their attacks on unwitting investors. If an offer seems to good to be true, it probably is.

By: Joshua Kelly, Red Oak Senior Compliance Consultant

About Red Oak Compliance Solutions

Red Oak Compliance Solutions is a leading provider of intelligent compliance software, offering a range of AI-powered solutions designed to help firms of all sizes successfully navigate the increasingly complex regulatory landscape. Our suite of 17(a)-4/WORM compliant features offer risk minimization, cost reduction, and process optimization capabilities with features that are designed to evolve with our client’s needs. Our flagship advertising review software enables firms to deliver compliant content to the market with confidence, faster. Our Disclosure Management and Intelligence solution simplifies the management of disclosures, while our Registration Management solution automates and streamlines the licensing and registration process, further enhancing your internal processes. 

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