Miami Manager Nailed in $3M Commodities Scam
Oscar Hernandez, a Miami investment manager with Midway Trading Company LLC and Conquest Investment Group Incorporated, has been hit with fraud, operating an unregistered commodities investment pool and failing to register as an associated person to solicit and run a commodities pool, according to Investment News. Mr. Hernandez promised investors a 180% return on their investment in futures and overseas markets. According to the Commodity Futures Trading Commission (CFTC), the scam was nothing more than a bogus commodity pool of some $3 million that served to pay prior investors fake returns in a Ponzi like scheme and allow Hernandez to use the investors' money as his own.
The civil enforcement case filed in the Southern District of Florida, named Hernandez and his two companies, Midwest Trading and Conquest Investment, none of whom were registered with the CFTC. According to the court filings, the CFTC alleges that Hernandez received some $3 million from investors. Roughly $1.3 million was lost and $1.8 million was used to provide a luxury lifestyle by paying home loans, huge credit card bills, helping needy family members and to provide fake returns to some investors. Simultaneously with the filing by the CFTC, the U.S. attorney's office for the Southern District of Florida also charged Hernandez and his firms with conspiracy to commit securities and commodities fraud, which could send him to prison for five years.
One example of the fraud perpetrated was an investor that invested $1 million in borrowed money back in 2007. Hernandez sent him monthly payments of around 20% to 30%, according to the CFTC. In return for the fabulous success he was having with the investment, the investor spread the word generating another $1 million or so from eight other investors and then another $1 million or so from ten more. These investors receives "returns" that was really new money coming in from investors in the scheme, some receiving promissory notes guaranteeing returns of 20% to 30% annually. Since 2009, investors have not been paid anything according to the CFTC and, investors' inquiry to Hernandez has only been met with various trumped up stories.