SEC v. Toller Stern Financial LLC; Francisco Javier Malave Hernandez; and Ricardo Javier Guerra Farias, No. LR-26094, Southern District of Florida (Sept. 3, 2024) — Press Release

U.S. Securities and Exchange Commission Litigation Release No. 26094 / September 3, 2024 Securities and Exchange Commission v. Toller Stern Financial LLC, et al., No. 1:24-cv-23370 (S.D. Fla. filed Sept. 3, 2024) SEC Charges Two South Florida Men and Related Entity with Fraud Today, the Securities and Exchange Commission charged Miami-area residents Francisco Javier Malave Hernandez ("Malave") and Ricardo Javier Guerra Farias ("Guerra") and a company Malave controlled with defrauding investors who purchased approximately $5 million in promissory notes. Most of the investors are members of the Venezuelan-American community and this case is part of the Miami Regional Office's Fraud Against Minority Groups Initiative. According to the SEC's complaint, Malave and Guerra used three entities, including Toller Stern Financial LLC, to raise money from retail investors for the purported purpose of investing the money using a Toller Stern automated trading platform. The complaint further alleges Malave, Guerra, and Toller Stern raised this money through the fraudulent and unregistered offer and sale of promissory notes, promising annualized interest rates of 24% to 72%. As alleged in the complaint, Malave and Guerra represented to investors that the promissory notes were safe because they were secured by company assets and that Malave and Guerra had more than $20 million in combined assets under management. In reality, the complaint alleges, among other things, the companies had no real assets other than the money provided by investors and that Malave, Guerra, and Toller Stern diverted new investor money to make interest payments to existing investors and to pay themselves. The SEC's complaint, filed in the United States District Court for the Southern District of Florida, charges Malave, Guerra, and Toller Stern with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further charges Malave and Toller Stern with violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the allegations in the SEC's complaint, Malave, Guerra, and Toller Stern consented to the entry of a final judgment, subject to court approval, which would permanently enjoin each of them from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and would further permanently enjoin Malave and Toller Stern from violating Sections 206(1) and 206(2) of the Advisers Act. The final judgment, if approved by the court, also would impose officer and director bars against Malave and Guerra; order Malave to pay disgorgement of $558,900, prejudgment interest of $158,087 and a civil penalty of $200,000; order Guerra to pay disgorgement of $147,152, prejudgment interest of $29,223 and a civil penalty of $200,000; and order Toller Stern to pay disgorgement of $748,300, prejudgment interest of $211,660 and a civil penalty of $1 million. John T. Houchin and Lina Fernandez conducted the SEC's investigation under the supervision of Eric R. Busto and Glenn S. Gordon, with the assistance of trial counsel Brian Lechich under the supervision of Teresa Verges.

U.S. Securities and Exchange Commission Litigation Release No. 26094 / September 3, 2024 Securities and Exchange Commission v. Toller Stern Financial LLC, et al., No. 1:24-cv-23370 (S.D. Fla. filed Sept. 3, 2024) SEC Charges Two South Florida Men and Related Entity with Fraud Today, the Securities and Exchange Commission charged Miami-area residents Francisco Javier Malave Hernandez ("Malave") and Ricardo Javier Guerra Farias ("Guerra") and a company Malave controlled with defrauding investors who purchased approximately $5 million in promissory notes. Most of the investors are members of the Venezuelan-American community and this case is part of the Miami Regional Office's Fraud Against Minority Groups Initiative. According to the SEC's complaint, Malave and Guerra used three entities, including Toller Stern Financial LLC, to raise money from retail investors for the purported purpose of investing the money using a Toller Stern automated trading platform. The complaint further alleges Malave, Guerra, and Toller Stern raised this money through the fraudulent and unregistered offer and sale of promissory notes, promising annualized interest rates of 24% to 72%. As alleged in the complaint, Malave and Guerra represented to investors that the promissory notes were safe because they were secured by company assets and that Malave and Guerra had more than $20 million in combined assets under management. In reality, the complaint alleges, among other things, the companies had no real assets other than the money provided by investors and that Malave, Guerra, and Toller Stern diverted new investor money to make interest payments to existing investors and to pay themselves. The SEC's complaint, filed in the United States District Court for the Southern District of Florida, charges Malave, Guerra, and Toller Stern with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further charges Malave and Toller Stern with violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the allegations in the SEC's complaint, Malave, Guerra, and Toller Stern consented to the entry of a final judgment, subject to court approval, which would permanently enjoin each of them from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and would further permanently enjoin Malave and Toller Stern from violating Sections 206(1) and 206(2) of the Advisers Act. The final judgment, if approved by the court, also would impose officer and director bars against Malave and Guerra; order Malave to pay disgorgement of $558,900, prejudgment interest of $158,087 and a civil penalty of $200,000; order Guerra to pay disgorgement of $147,152, prejudgment interest of $29,223 and a civil penalty of $200,000; and order Toller Stern to pay disgorgement of $748,300, prejudgment interest of $211,660 and a civil penalty of $1 million. John T. Houchin and Lina Fernandez conducted the SEC's investigation under the supervision of Eric R. Busto and Glenn S. Gordon, with the assistance of trial counsel Brian Lechich under the supervision of Teresa Verges.