Offering Fraud Targets Venezuela-American Community

Periodically the Commission initiates an investigation centered on a particular issue such as a new rule. For example, an investigation may focus on how a certain rule is applied in practice. While these initiatives are not typically announced, the Miami Regional Office recently stated that it is conducting an inquiry focused on Fraud Against Minority Groups. The initiative was announced in connections with the filing of an offering fraud action which at least in part targeted the Venezuelan-American community, SEC v. Toller Stern Financial, LLC, Civil Action No. 1:24-cv-23370 (S.D. Fla. Filed Sept. 3, 2024).

Named as defendants in the action are: the company, Toller Stern Financial, LLC, which claims that it is an investment adviser; Francisco Javier Malave Hernandez, a Venezuelan citizen residing in Florida; and Richard Javier Guerra Farias, also a Venezuelan citizen residing in Florida who, during the offerings involved here, was a manager, member and key executive controlling JDVP Financial Services LLC.

Beginning in April 2019, and continuing for the next several years, Defendant Malave, through JDVP Financial Services Group, LLC, and Defendant Toller Stern, marketed about $5 million in promissory notes. Most of the investors were members of the Venezuelan-American community.

To market the notes Defendants used a combination of sales approaches. Those include an in-person pitch, e-mails, text messages and written marketing materials, as well as a website.

Potential investors were assured that their funds would be used solely for the day-to-day operations of the company and for working capital. Potential investors were also told that their funds would be invested in notes that would pay them annual returns of 24% to 72%.

The securities purchased by investors were represented to be safe — Defendants Malave and Guerra supposedly had other companies with substantial assets. Those investments and assets were claimed to have a value of more than $20 million other than the investment funds contributed by the solicited investors. In fact, the representations made to investors were false. The complaint alleges violations of Securities Act Sections 5(a) 5(c) and 17(a), Exchange Act Section 10(b) and Rule 10b-5 and Advisors Act Sections 206(1) and 206(2).

Defendants Malave, Guerra and Toller Stern each resolved the action, consenting to the entry of permanent injunctions based on the Sections cited in the complaint and to the entry of an officer/director bar as to Defendants Malave and Guerra. Mr. Malave will also pay disgorgement of $558,900, prejudgment interest of $158,078 and a penalty of $200,000. Mr. Guerra will pay disgorgement of $147, 152, prejudgment interest of $29,223 and a penalty of $200,000. Defendant Toller Stern will pay disgorgement of $748,300, prejudgment interest of $211,660 and a penalty of $1 million. See Lit. Rel. No. 26094 (Sept. 3, 2024).