The Securities and Exchange Commission charged Edward Espinal and his company Cash Flow Partners LLC with allegedly operating a $5 million Ponzi scheme that defrauded at least 90 investors.
The regulator alleged that from at least July 2016, Espinal and Cash Flow Partners told investors, many of whom were members of the Hispanic community, that they were investing in a pooled fund that would purchase and renovate houses and then flip the houses for profit. However, the SEC alleged that the company's real estate "fund" owned only two residential properties, neither of which was ever sold. Espinal and Cash Flow Partners also allegedly guaranteed investors a monthly return of between 1.25% and 4%.
Espinal, according to the complaint, allegedly used the money from new investors to pay monthly returns to other investors, to pay for his living expenses, and to sustain a separate fraudulent bank loan scheme.
Espinal is charged with violating the antifraud provisions of federal securities laws. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties in its complaint filed in the U.S. District Court for the District of New Jersey. The court separately filed criminal charges against Espinal on one count of securities fraud related to the alleged Ponzi scheme and one count of conspiracy to commit bank fraud.
According to the criminal charges, Espinal allegedly led and directed a bank fraud conspiracy designed to get millions of dollars in loans from banks based on false representations. Cash Flow released advertising on the Internet, which featured Espinal and a former telenovela actor, and held seminars to assist customers with low-paying salaries in getting loans. Cash Flow allegedly used false information and fraudulent documents to obtain loans for its customers for which those customers otherwise would not have qualified and posed as the customers in communications with the banks.
Raymundo Torres and Jennie Frias have previously been charged over their alleged roles in the bank fraud conspiracy. Torres has pleaded guilty.
The securities fraud charge carries a maximum potential penalty of 20 years in prison and a $5 million fine, while the conspiracy to commit bank fraud charge carries a maximum penalty of 30 years in prison and a $1 million fine.