Source: Securities and Exchange Commission
On December 19, 2019, the Securities and Exchange Commission charged Edward Espinal and his company, Cash Flow Partners, LLC, in connection with an alleged $5 million Ponzi scheme that defrauded at least 90 investors, many of whom were members of the Hispanic community.
The SEC’s complaint alleges that from at least July 2016, Espinal and Cash Flow Partners deceived investors into believing that they were investing in a pooled fund that would purchase and renovate houses, and then flip the houses for profit. Espinal and Cash Flow Partners allegedly guaranteed investors rates of return between 1.25% and 4% per month. The complaint alleges that, in reality, Cash Flow Partners’ purported real estate “fund” owned only two residential properties, neither of which were ever sold. Instead, Espinal allegedly used money from new investors to pay monthly “returns” to other investors, to bankroll his personal living expenses, and to sustain his separate fraudulent bank loan scheme.
The SEC’s complaint, filed in federal court in New Jersey, charges Espinal and Cash Flow Partners 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 seeks permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest, and civil penalties.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey filed criminal charges against Espinal.
The SEC’s investigation was conducted by Kim Han, Brenda Wai Ming Chang, Thomas Feretic, Christopher Dunnigan, and Judith Weinstock, with assistance from Yvette Fuentes, and under the supervision of Lara Shalov Mehraban. An SEC compliance examination that contributed to the investigation was conducted by Stephen Debella and Matthew Chan and supervised by Michael McAuliffe and Ronald Krietzman. The SEC’s litigation is being led by Christopher Dunnigan. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation, and the Federal Deposit Insurance Corporation.