The Securities and Exchange Commission (SEC) has charged Mexico-based investment firm, Aras Investment Business Group S.A.P.I. de C.V (Aras) for fraudulently raising $15million from 450 retail investors in the US. Of these, the majority are a part of the Mexican-American communities.
The investigation was conducted by Stephen T. Kaiser, with assistance from Margaret Vizzi. Melissa Armstrong and Kaiser now look to not only lead the SEC’s litigation against the company, but its CEO, Armando Gutierrez Rosas, too. Between March 2020 and November 2021, Gutierrez did not use investor funds to improve the company. Instead, he used them to pay for personal expenses and operate a Ponzi scheme.
“Our investigation uncovered this egregious fraud that cost the investors involved more than $6million,” said Melissa R. Hodgman, associate director in the SEC’s Division of Enforcement. “We are committed to holding promoters of these types of affinity frauds accountable.”
An example of fund misusage was Gutierrez’s purchase of a $2.5million mansion in Texas.
The company’s CEO is not the only one in the SEC firing line. Efren Quiroz, Luis Quiroz, Maria Tolentino, and Diayanira Rendon have also been charged for their roles in the alleged fraud.
The SEC’s complaint charges Gutierrez and Aras with violating the antifraud and registration provisions of the federal securities laws. Efren and Luis Quiroz have been charged with acting as unregistered brokers and, along with Tolentino, for violating the registration provisions and aiding and abetting Gutierrez’s and Aras’s violations of the antifraud provisions.
It also charges Rendon with aiding and abetting Gutierrez’ and Aras’ violations of the antifraud provisions. The SEC’s complaint seeks permanent injunctions, civil penalties, and disgorgement with prejudgment interest.
Not the first run-in with the law
In November 2021, Aras had its first run-in with regulators – however, this was not the SEC. The Mexican regulator, the National Banking and Securities Commission (CNBV) ordered Aras to suspend its funding in Mexico. This was a result of the CNBV not having any files or procedures for requesting registration to be a financial entity in the country. As a result, it was banned from raising capital as an investment fund, fintech or authorised fund raiser.
Lastly, the regulator clearly states that the company was not allowed to request resources from an undetermined person.
Now in 2023, Efren and Luis Quiroz, Tolentino, and Rendon have consented to the entry of judgments against them as to all claims without admitting or denying the allegations in the complaint.
This includes full injunctive relief against future violations, with disgorgement and penalties to be determined by the court upon motion by the Commission.
The settlements are subject to court approval. Efren and Luis Quiroz also consented to settled Commission orders barring each of them from association with a registered entity or participation in a penny stock offering.