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April 08, 2011 |
SEC Alleges Advisors Committed $10.3M Securities Fraud |
The Securities and Exchange Commission has filed a civil suit against two Los Angeles-based advisors, accusing them of fraudulently steering $10.3 million in client funds into risky mortgage loans.
The complaint alleges Alex Martinez and Ralph Sanchez, of MAM Wealth Management LLC and MAMW Real Estate General Partner LLC in Los Angeles, convinced about 50 clients—including retirees with limited means—into the risky investments between July 2007 and March 2009.
The confidential offering memorandum described the investments as highly risky, and only suitable for accredited investors, but Martinez and Sanchez sold them as safe investments with high returns, according to the SEC. As a result, clients with conservative investment goals ended up transferring retirement funds into the loans.
Martinez, Sanchez, and MAMW used the assets primarily to fund second mortgage loans to borrowers who were in financial distress and/or unable to obtain financing from other mortgage lenders, according to the lawsuit.
“The fund’s loans have not performed as borrowers failed to make payments according to the terms of the loans,” the SEC lawsuit states. “Defendants Martinez, Sanchez, and MAMW caused the fund to stop making distributions to investors in January 2010 and refused to honor withdrawal requests.”
Martinez and Sanchez, according to the lawsuit, misrepresented the investment, MAMW Wealth Management Real Estate Fund LLC, as a safe, relatively liquid investment that earned 9% per year and would show a profit in three years.
MAM Wealth Management LLC is a SEC registered broker-dealer and a California registered investment advisor. Martinez is the owner of MAM, member of MAMW and president of the investment fund. Sanchez is a registered representative licensed with MAM.
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SEC Alleges Advisors Committed $10.3M Securities Fraud |
