Stock Broker Sentenced On Wire Fraud Charges For Executing International Investment Fraud Scheme

Earlier today, in federal court in Brooklyn, New York, Hector Gallardo, a registered representative and a holder of Series 7 and 63 licenses issued by the Financial Industry Regulatory Authority, was sentenced to 60 months in prison in connection with his wire fraud conviction. On December 13, 2012, Gallardo pled guilty to wire fraud for stealing investments induced through false promises of exorbitant monthly investment returns. In addition to the prison term, United States District Judge Sandra L. Townes imposed a term of supervised release of three years and fines and forfeiture awards totaling $876,193.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service.

“Hector Gallardo told international investors a tale of safe and lucrative investing through a professional trading corporation. His story was nothing more than a fairy tale, designed to part the investors from their money and to fund his own lavish lifestyle. Ultimately, the truth caught up with Gallardo, and justice has now been served,” stated United States Attorney Lynch. “Protecting investors, foreign and domestic, from fraudulent schemes is a priority of this Office and the Department of Justice. Those who commit these crimes will be aggressively tracked down and prosecuted.”

Between January and October 2007, the defendant, a registered representative employed at the New York office of Orion Trading, LLC, which did business as “Brokerlatino,” 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 invested sums ranging from approximately $100 to $32,000. Lured by the defendant’s promises of monthly returns between nine and fifteen percent, the Bolivian investors wired approximately $1.15 million to Ventel Enterprises Corporation (“Ventel”), a sham corporation the defendant had falsely described as comprising “professional traders” who bought and sold a wide variety of securities for investors. In the course of the fraud, the defendant returned approximately $250,000 of the Bolivian investors’ investment to fraudulently demonstrate illusory returns on the investment, and to maintain the ruse that the investment was performing well.

In fact, the defendant did not invest any of the Bolivian investors’ money as promised. At most, he 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. As for the remaining approximately $685,000 of the investment, the defendant stole that money and used it to pay his and his family’s expenses, including airline tickets and multiple trips to Atlantic City. The defendant’s scheme fell apart 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.

After the defendant’s scheme was brought to the attention of the Securities and Exchange Commission, the defendant fled to Venezuela in September 2009. The defendant later re-entered the United States, where he was tracked by law enforcement to his new home in Long Island City, Queens.

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

This prosecution was the result of efforts by President Obama's Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.

The Defendants

Name: HECTOR GALLARDO
Age: 40