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Diamond Dust: Prominent Florida Jeweler Named in Affinity-Fraud Ponzi Scheme

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Jun 7, 2010 12:17 pm

 Diamond Dust: Prominent Florida Jeweler Named in Affinity-Fraud Ponzi Scheme 

This all starts out somewhat mundane. According to Social Affairs Charity Register (January 28, 2009), Luis Felipe Perez was born in Havana, Cuba in 1972 and subsequently lived with his family in Miami, Florida. In 1977, Perez went on to the Gemological Institute of America to learn the study of gems and precious stones after graduating high school in 1990. In 1995, he opened his first retail jewelry store, quickly establishing a large base of private and wholesale clients. Soon after, he followed his success by moving into the business of diamonds and wholesale and the designing of his own collection. The article notes that , "Since that time, Luis Felipe Perez has established himself as one of the most successful independent private jewelers in the country."

Perez became the president and sole owner of Florida's Lucky Star Diamonds, Inc. and Luis Felipe Jewelry Design Corp., which, oddly, neither jewelry company apparently had any employees. While we would have loved to see Perez's life story headed for a happy, inspirational, Hollywood ending -- something like a Cuban-American version of Rudy, such was not to be. Unfortunately, Perez successful independent private jewelry business became a struggling jewelry businessThen things went off the deep end(United States District Court, Southern District of Florida / Miami Division, June 2, 2010, it is alleged that beginning in 2006, in order to finance his struggling jewelry businesses, Perez began offering investors no-risk collateralized promissory notes promising annual returns of 18% to 36% a year, paid in monthly installments. Perez allegedly told prospective investors, all acquaintances of his, that he would pay the interest from the proceeds of his jewelry business.

Perez is accused of bolstering his image with lavish spending, including extensive personal use of limousines, extravagant dinners, and bodyguards. Allegedly, he attracted and befriended new investors through word-of-mouth from previous investors, and exploiting his personal and family relationships, including his ties to local politicians. It is charged that from 2006 until June 2009, Perez raised approximately $40 million from approximately 35 investors, predominately Hispanics living in South Florida.  Yet another likely example of affinity group fraud.  

From 2006 until the scheme collapsed, Perez allegedly used investor funds to pay himself and his family more than $6 million in salaries, bonuses, and lavish expenses. He used the money to: purchase a $3.2 million home and $1 million worth of jewelry for himself and his wife, lease $400,000 worth of luxury cars, take exotic vacations that cost him $200,000 a year, spend $300,000 on clothing for his wife, and spend $200,000 for meals at expensive restaurants.  In addition, Perez gave away more than $1 million to family members, spent close to $300,000 on travel by private jet, and purchased artwork costing $100,000. He paid himself an annual salary of $250,000. Perez’s extravagant spending also extended to $100,000 in political contributions (reportedly to Republican candidates).

In addition to federal criminal charges, the SEC separately filed a three-count civil Complaint alleging securities fraud against 38-year-old Perez, presently a resident of Miami, Florida. The SEC is seekinga permanent injunction; an order directing Perez to submit a sworn accounting; disgorgement of all ill-gotten gains, and an order directing Perez to pay a civil penalty. (United States District Court, Southern District of Florida / Miami Division, June 2, 2010).