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Ponzi Scheme Suspect Sentenced
11/19/09 - 03:04 PM

United States Attorney District of South Carolina

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Columbia, South Carolina——United States Attorney W. Walter Wilkins of South Carolina and United States Attorney James R. Dedrick of the Eastern District of Tennessee announced today that Luis Hiram Rivas, age 56, of Chattanooga, Tennessee, was sentenced to 24 years and four months in federal prison and ordered to pay $18,011,312 in restitution following his guilty plea to wire fraud, bankruptcy fraud, and money laundering involving an $18 million dollar Ponzi scheme.  The sentence was imposed today in Chattanooga by United States District Judge Curtis L. Collier. 

Rivas was indicted in Tennessee and South Carolina for defrauding investors by operating a Ponzi scheme between March 2007 and May 2008.  His operation was headquartered in Chattanooga, but spread with the opening of offices, called trading centers, in Knoxville, Tennessee, Spartanburg, South Carolina, Panama City, Florida, and Tulsa, Oklahoma.  He represented himself as an experienced and successful foreign currency trader, guaranteeing investors up to a 96% annual return for three years, paid monthly, on investments.

The defendant successfully defrauded hundreds of individuals and obtained in excess of $18 million.  Early investors received monthly payments made from the investments of subsequent investors, making this a classic Ponzi scheme.  Much of the investors’ money was never invested, but instead was used to purchase luxury items for Rivas and his girlfriends, including houses, cars, furs, jewelry, limousine service, clothing, home improvements and furnishings, hotel suites, and cash for shopping sprees.  Rivas also used proceeds of the fraud to promote the scheme by giving gifts and bonuses to some of his investors to encourage them to recruit others.

In addition to admitting to the Ponzi scheme, Rivas also pled guilty to bankruptcy fraud.  When investors attempted to force Rivas into bankruptcy proceedings in 2008 to freeze his accounts, Rivas illegally moved funds to hide them from the U.S. Trustee.

This investigation was conducted by IRS Criminal Investigation, the United States Secret Service, the Office of the U.S. Trustee, Assistant U.S. Trustee William Sonnenburg, and the Federal Bureau of Investigation.  Assistant U.S. Attorney Gary S. Humble of Tennessee represented the United States.  Assistant U.S. Attorney Max Cauthen of South Carolina assisted in the prosecution.

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