Stockbroker Charged for Defrauding Hundreds of Bolivian Investors

Hector Gallardo, a registered representative and a holder of Series 7 and 63 licenses, issued by the Financial Industry Regulatory Authority, was arrested on wire fraud charges.

The defendant was later made to appear before United States Magistrate Judge Andrew L. Carter, Jr., at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Ronald J. Verrochio, Inspector-in-Charge, New York Division, United States Postal Inspection Service (“USPIS”).

According to the complaint, the defendant was a registered representative at the New York office of Orion Trading, LLC. Orion conducted business under the name “Brokerlatino.” Between January and October 2007, the defendant solicited investments from two representatives of an investment firm in Bolivia (“the Bolivian investors”) that had collected and bundled funds from at least 350 Bolivian retail investors, each of whom had invested sums ranging from approximately $100 to $32,000.

Lured by the defendant’s promise that he would obtain monthly returns of between nine and fifteen percent if he managed their money, the Bolivian investors wired approximately $1.15 million to Ventel Enterprises Corporation (“Ventel”), a sham corporation set up by the defendant. The defendant had falsely described Ventel to the Bolivian investors as comprised of “professional traders” who bought and sold a wide variety of securities for investors.

As alleged in the complaint, the defendant did not invest any of the Bolivian investors’ money as he promised. Instead, he used $685,000 of the investors’ money to pay his and his family’s expenses, including airline tickets and trips to Atlantic City. The defendant made approximately $250,000 in “lulling payments” to investors as illusory returns on their investments in order to convince them that their investments were performing well. At most, the defendant invested approximately $190,000 of their money in stocks and bonds through nominee accounts at three brokerages and lost virtually the entire amount – a fact that he did not disclose to the Bolivian investors.

The defendant’s scheme fell apart by September 2007, when the Bolivian investors demanded to see the documentation associated with their purported investments with Ventel. In total, the Bolivian investors lost approximately $900,000 of their investments with the defendant and Ventel.

“Protecting investors, foreign and domestic, from fraudulent schemes is a priority of this Office and the Department of Justice. Through an international web of lies, this defendant allegedly stole money from those who trusted him, using the funds to support his gambling junkets and personal expenses. The defendant will now have to stand and account for his fraudulent scheme,” stated United States Attorney Lynch. Ms. Lynch thanked the U.S. Securities & Exchange Commission for its assistance and cooperation in the case.

USPIS Inspector-in-Charge Verrochio stated, “Postal Inspectors are committed to protecting investors worldwide from schemes to defraud. We will aggressively pursue individuals who knowingly and willfully commit these illegal activities.”

If convicted of wire fraud, the defendant faces a maximum sentence of 20 years’ imprisonment.

The government’s case is being prosecuted by Assistant United States Attorney James G. McGove.

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