March 29, 2010 / 7:17 PM / 10 years ago

UPDATE 1-West Point grad charged in $30 mln US Ponzi scheme

(Adds comment from defendant’s lawyer)

WASHINGTON, March 29 (Reuters) - A West Point graduate who claimed his knowledge of physics allowed him to predict “with an uncanny degree of certainty” trends in the futures market was accused on Monday in Ohio of perpetrating a $30 million Ponzi scheme.

Federal prosecutors charged Cuyahoga Falls, Ohio, resident Enrique Villalba, 47, with one count of wire fraud for allegedly scamming 26 investors out of $29.7 million through the sale and purchase of futures contracts.

Villalba, who also has a law degree, is accused of promising investors returns of 8 to 12 percent by using a “Money Market Plus” methodology and by combining his knowledge of physics with a unique “momentum filter,” prosecutors said.

The complaint also charged that Villalba did not put promised “stop” orders in place to prevent excessive losses and that he diverted millions of dollars in investor money to fund Rico Latte coffee shops in Ohio, to purchase real estate and to make payments to some investors.

A Ponzi scheme is one in which early investors are paid with the money of new clients.

Villalba’s attorney, J. Timothy Bender, said that his client had voluntarily contacted the U.S. Attorney’s office last August and was cooperating with authorities.

Bender said Villalba had sought to recoup investor losses through increased leverage, “but those attempts not only failed but generated significant additional losses,” which he didn’t disclose.

“Mr. Villalba takes full responsibility for his actions and wishes to express how deeply sorry he is for the harm he has caused his clients,” Bender said. “Any resolution of the case will undoubtedly include an order for restitution and Mr. Villalba is resolved to do everything possible to make his clients whole.”

In addition to the criminal complaint, separate civil complaints were filed against Villalba on Monday by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission.

The criminal case is U.S. v. Enrique F. Villalba, U.S. District Court for the Northern District of Ohio, No. 1:10-cr-00133. (Reporting by Dan Margolies, editing by Matthew Lewis and Gerald E. McCormick)

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