U.S. investigators criminally charged two executives of FTC Capital Markets Inc in a suspected investment fraud possibly involving hundreds of millions of dollars, according to a court document released on Wednesday.
FTC Capital Chairman Guillermo Clamens and Nazly Cucunuba Lopez, also known as Lina Lopez, were charged with conspiracy, securities fraud and wire fraud.
Lopez was arrested in Miami on Tuesday and the New York offices of the firm were searched on Tuesday by investigators of the U.S. Postal Inspection Service, sources familiar with the probe said.
The sources, who asked not to be identified because of the ongoing investigation, said U.S. prosecutors and the U.S. Postal Inspection Service were looking into whether the two misled companies over purported investments.
The case stems from a civil lawsuit by Citgo Petroleum Corp and PDV Holding Inc in March that accused FTC, several related entities and the two executives of fraud.
Representatives of FTC, which is a registered broker-dealer that also has an investment advisory business, did not answer telephone calls seeking comment on Wednesday.
The criminal complaint unsealed on Wednesday and dated May 18, said Clamens, Lopez and others solicited money from investors between April 2008 and November 2008. They invested in high-risk securities without the knowledge of those investors, instead of in low-risk securities, the complaint said.
Investors entrusted hundreds of millions with the firm, according to the complaint.
In a civil lawsuit on March 9 in Manhattan federal court, Citgo and PDVH alleged that FTC executives Lopez and Clamens diverted and misused the plaintiffs' investment funds. Houston-based Citgo is a subsidiary of PDVH, which is owned by Venezuelan state oil company PDVSA.
The lawsuit charges the two with creating a slush fund to finance self-interested, unauthorized and speculative trading in unregistered, risky, illiquid investments in which they had financial interests, the full extent of which remain unknown.
Clamens and Lopez made undisclosed and unauthorized purchases into the Citgo account of $10 million worth of bonds issued by Venezuela, the complaint said. It said they diverted $19.3 million of Citgo's $100 million investment to self-dealing, risky and unauthorized note and bond purchases.
It said that in April 2008, FTC opened accounts at BNP Paribas bank in the name of Citgo and PDVH. The complaint said that instead of investing $200 million into 7-day BNP CD's for Citgo, Clamens and Lopez deposited the money into a daily income money market fund.
The case is USA v Guillermo A. Clamens and Nazly Cucunuba Lopez 09-mag-1223 in U.S. District Court for the Southern District of New York (Manhattan)
The lawsuit is Citgo Petroleum Corp and PDV Holding Inc v FTC Capital Markets Inc, et al 09-2116.
(Reporting by Grant McCool; Editing by Lisa Von Ahn, Richard Chang)