The Financial Industry Regulatory Authority filed a complaint Wednesday against a former broker who ignored the regulator’s repeated requests to appear in person to give on-the-record testimony as part of FINRA’s investigation of a broker-dealer he “had dealings” with, according to FINRA.
Gustavo Trujillo Franco, an Ecuadorian citizen who resided in Florida since about May 2018, was already a defendant in a criminal case that started March 12, 2019, in U.S. District Court for the Eastern District of New York in Brooklyn, according to court documents in which his name was listed as Gustavo Trujillo.
As part of a plea agreement in April 2019, he pleaded guilty to conspiracy to commit wire fraud and money laundering.
Franco registered with FINRA as a foreign associate and was, starting in May 2017, associated with broker-dealer Global Strategic Investments, which changed its name to Gentem Capital and then LevelX Capital, according to the FINRA complaint. However, he was terminated by that firm March 15, 2018, FINRA said in the complaint without providing a reason.
No reason for the termination was provided on his profile at FINRA’s BrokerCheck website, either.
LevelX and the attorneys representing Franco — Ashley and Daniel Forman of Miami-based Forman Law Group — did not immediately respond to requests for comment about the FINRA complaint.
FINRA was investigating a BD that Franco was conducting business with over allegedly fraudulent wire transfers of customers’ funds to a shell company that Franco was also affiliated with, according to the FINRA complaint. The BD was also dealing with two advisors affiliated with Franco that were allegedly falsifying customers’ documents and engaging in “suspicious trading activity,” FINRA said.
Although FINRA did not identify the BD or shell company by name, Franco, at his plea hearing before U.S. Magistrate Judge Sanket J. Bulsara on April 4, 2019, identified the financial services firm as Biscayne Capital, where Franco said he worked from 2006 to 2008, and the shell company as Madison Assets, according to a transcript.
Between 2015 and 2017, Franco “agreed with others to defraud clients” of Biscayne Capital, he admitted, adding clients “were told that the funds they were investing would be used for real estate development.” Their funds were instead used for other purposes, he admitted, adding he “created false bank statements to show Biscayne Capital clients in order for them to falsely believe their money was still in their accounts.”
Also, around Nov. 23, 2016, Franco said he “processed wires adding up to $353,000 of Biscayne Capital clients’ funds” from a bank account he controlled on behalf of Biscayne Capital owners to an account in the name of Jose Arrea to pay Ramira Luca. Between 2015 and 2017, Franco agreed with others to transfer money he said he knew came from criminal activity “to hide the ownership of the money and to promote the bribery,” he said. In 2016 and 2017, Franco and the others involved in the scam “caused six wire transfers totaling $974,000 to be sent to an account owned by Jose Arrea,” Franco said, adding he understood those transfers were for Luca “even though we were sending them to an account in someone else’s name to hide the true ownership of those funds.”
Global Strategic Investments was the only BD that Franco was registered with FINRA through up until the time he ceased being a registered broker, according to BrokerCheck.