Former Morgan Stanley Broker's Assets Frozen
A judge clamps down on the accounts of ex-broker Carlos Soto, who is charged with stealing $56 million from his clients.
The Securities and Exchange Commission has obtained an order from a federal district court judge in Puerto Rico freezing the assets of a former Morgan Stanley broker who allegedly diverted about $56 million in investments from clients over the past 10 years.
The complaint against Carlos H. Soto of San Juan, prepared by the SEC's Miami regional office, claims that Soto promised to invest the funds in mortgage-backed securities offering returns of 7 percent to 8 percent. Instead, he deposited the money in various accounts, including those of two companies, Basle Advisers and ICR Corp., which he controlled.
Most of the victims were in Puerto Rico.
Soto, 59, faxed a long narrative to his supervisors at Morgan Stanley, providing a detailed account of how he enticed investors to turn over funds and how he ended up taking some of the money to cover personal expenses. He also used the money for far more speculative and riskier trading than investing mortgage-backed securities.
Soto said his plan was to do ''some sort of arbitrage,'' taking the money from clients who thought they would be investing safe low-return securities and investing the funds higher-return riskier securities instead. He would then return all the money and interest due to investors and pocket the difference.
Soto said that some $32 million of the investors' money is still in various accounts he controls. About $7 million was returned to investors in the form of interest payments. But he has no accounting for another $17 million.
The SEC has asked the U.S. Federal District Court for District of Puerto Rico in San Juan for a permanent injunction against Soto.
The SEC is also demanding that Soto and his companies return the money he stole and pay a civil fine for misconduct.
Fraude de Valores es cuando el inversionista ha sido una víctima de engaños monetarios, mal interpretaciones de valores, exceso de compras y ventas, recomendaciones incorrectas, y otros actos que por razones de incompetencia, negligencia o ambición por parte del corredor de bolsa y Firmas de Inversión, causandole grandes pérdidas monetarias y sufrimiento moral.