MANHATTAN (CN) – Two executives of FTC Capital Markets defrauded Citgo Petroleum and its parent company – Venezuelan-owned PVD Holding – in a “Ponzi-like scheme” involving tens of millions of dollars, the SEC claims in Federal Court.
The SEC says FTC Capital Markets Chairman Guillermo Clamens and is employee Linda Lopez aka Nazly Cucunuba Lopez, 34, solicited $560 million from Citgo and PVD from April through November 2008 and misappropriated tens of millions of dollars in “unauthorized purchases of securities.”
FTC, a broker-dealer, promised to use the money for short-term, low-risk investments, but the defendants put it into high-risk securities without investors’ knowledge and prepared phony statements to cover it up, according to the complaint.
The scheme unraveled in October when PVD requested $41.5 million from its account, which at the time was entirely invested in the illiquid securities, according to the SEC. The defendants allegedly got Citgo to “buy” $42 million worth of FTC bonds from PVD’s account and used the cash to satisfy the withdrawal request.
Citgo requested a withdrawal of $21.6 million from its account the next day and this time FTC couldn’t pay, the SEC says. Clamens offered several excuses for the failure to remit and then directed Lopez to provide Citgo with a fake wire transfer reference number, but the $21.6 million was never returned, the SEC says.
Clamens, 45, and Lopez also used money from Citgo’s and PVD’s accounts in August to pay off a Venezuelan bank through another Clamens-controlled entity, Emerging Markets, to conceal a prior fraud in which they sold the bank $50 million in nonexistent notes, according to the complaint. They misappropriated the plaintiffs’ money after the fictitious notes became due, the SEC says.
A civil lawsuit filed by Citgo and PVD in March accuses the defendants of creating a “slush fund” they used to “finance self-interested, unauthorized and speculative trading in unregistered, risky, illiquid investments in which they had financial interests, the full extent of which remain unknown.”