dfrf-enterprises-logoFollowing the arrest of Daniel Filho earlier this week, the latest from the SEC pegs the DFRF Enterprises Ponzi fraud at $22.8 million dollars.

Prior to this new information, the SEC’s investigation had only uncovered around $15 million in fraud.

Now, as banks around the world slowly co-operate with US authorities and provide requested records, the $22.8 million figure is set to climb as the full extent of the DFRF Enterprises Ponzi scheme revealed.

Seeking a preliminary injunction against Filho, his co-conspirators and DFRF Enterprises itself, the SEC has filed a memorandum of support ahead of next Tuesday’s hearing.

Of the six co-defendants, all except Heriberto Valdes will be represented by attorneys on Tuesday.

Valdes is the only defendant who has not been served and whose location is unknown.

Before his disappearance, Valdes was paid over half a million dollars in stolen investor funds.

In addition to supporting declarations, the main amendment to the SEC’s latest filing is an updated report on how much money was invested in DFRF.

The DFRF fraud is much larger than it first appeared.

The Commission alleged in the Complaint that DFRF received more than $15 million from more than 1,400 investors through May 2015.

The documents obtained to date indicate that DFRF received approximately $22.8 million from more than 1,750 investors through June 2015.

As mentioned earlier, this is a current estimate, with the SEC expecting the figure to rise as more information is obtained through expedited discovery:

Filho took significantly more of the investors’ money than it first appeared.

The Commission alleged in the Complaint that Filho pulled more than $6 million out of DFRF through May 2015.

The documents obtained to date indicate that Filho took more than $8.6 million from DFRF through June 2015.

The $8.6 million figure is almost certainly too low, because the Commission has not yet received back-up documentation for $3.5 million of withdrawals from DFRF accounts in June.

Payouts to DFRF investors and insiders are expected to be adjusted accordingly, once the requested information is provided.

The expedited discovery also reveals Filho was telling porky pies about DFRF, even as late as last Tuesday – hours before his arrest:

The bank documents obtained through expedited discovery confirm that the story which the defendants told prospective investors about DFRF was pure fiction.

The documents we reviewed indicate that none of the investors’ money has been used to conduct gold mining in Brazil and Mali, and that DFRF has received no proceeds from gold mining operations.

The documents we reviewed indicate that DFRF has received no proceeds from a line of credit with Platinum Swiss Trust and has had no banking transactions at all with that company.

The documents we reviewed indicate that DFRF has spent nothing on charitable activities in Africa or anywhere else.

DFRF was not involved in gold mining, had no line of credit or other dealings with Platinum Swiss Trust, spent nothing on charitable projects, and had no independent source of revenue except the money received from investors.

All in all DFRF Enterprises took in over $20 million dollars and paid out $1.9 million.

DFRF paid approximately $1.94 million to approximately 250 likely investors for the return of investor principal or purported monthly payments.

Not surprisingly, Daniel Filho received the largest portion of invested funds, upwards of $8.6 million.

since June 2014, Filho has taken more than $8.6 million from DFRF accounts for himself or his family: He has withdrawn more than $2.7 million in cash.

He has used DFRF funds to pay more than $2.2 million of personal and family expenses.

He has used DFRF funds to pay more than $2.5 million for luxury automobiles (a 2014 Rolls Royce, a 2015 Lamborghini, a 2014 Lamborghini, a 2013 Mercedes, a 2012 Ferrari, a 2006 Ferrari, a 2015 Cadillac, and a 2014 Cadillac) and automotive-related expenses.

He has used DFRF funds to pay nearly $250,000 to members of his extended family. He has used DFRF funds to send more than $1.1 million to the IOLTA account of an attorney in Hollywood, Florida.

On June 30, 2015, he used DFRF funds to wire more than $1.1 million to an entity in the Bahamas that is believed to be a law firm.

Some of these figures are probably too low, because the documents we have received to date are insufficient to classify approximately $3.5 million of withdrawals from DFRF corporate accounts in June 2015.

DFRF investors meanwhile were led to believe they were being paid out via their backoffices, however this was no more than numbers on a screen (monopoly money):

The large majority of investors merely received credits recorded on DFRF’s internal computer system, so that the balance of their “accounts” appeared to be growing steadily.)

With Filho now in custody, it’s expected a clearer picture of the flow of funds throughout DFRF Enterprises will be made clearer over the coming weeks.

Of the 1500+ known DFRF investors who were scammed, reactions thus far have been far and few between.

Of the few investors discussing Filho’s arrest on social media, most seem reluctant to believe they were scammed.

Writes one DFRF investor less than 24 hours ago on Filho’s personal Facebook page (English auto-translation in italics):

Hasta el momento Daniel Fernandes Rojo Filho ES INOCENTE. Yo no he visto ninguna sentencia firme ni ninguna condena……. y algo de leyes entiendo. Lo unico que estan es utilizando todas las estrategias posibles para dañar su imajen.

So Far Daniel Fernandes Rojo Filho is innocent. I have not seen any firm judgment or condemnation……. And some laws I understand. The only thing that you are is using all the possible strategies to damage your wow.

me parece que aqui hay mucho abogado del diablo……

It seems to me that here there is a lot of lawyer of the devil……

Summarizing their position and requests for next Tuesday’s hearing, the SEC conclude:

The latest evidence confirms the pressing need for an asset freeze. The money deposited into DFRF accounts rose by more than $6 million in June 2015.

At least $6.5 million was withdrawn from DFRF accounts in June, and the Commission has not yet been able to determine who received more than $3.5 million of the withdrawals.

More than $1.8 million has been transferred from DFRF accounts in the United States to various individuals or entities outside the country since January 2015.

More than $1.1 million was wired overseas on June 30, 2015 alone – just hours before the Commission was able to serve the asset freeze on the relevant bank.

Given the amount of money that has been moved offshore, the Commission requests that the Court order the defendants to repatriate all funds that have been transferred outside the United States

The sheer size of the defendants’ fraud and the rapid disappearance of the investors’ money makes it imperative that the approximately $2 million currently in accounts of DFRF or the individual defendants remain frozen.

Accordingly, the Commission requests that the Court continue the asset freeze and enjoin the defendants from receiving any more money from investors.

The Commission requests that the Court prohibit the defendants from destroying relevant documents.

At the time of publication the SEC has frozen around $2 million in DFRF Enterprises funds.

As per Filho’s rhetoric over the past few weeks, I suspect the bulk of funds invested have been stashed away offshore somewhere. How much is ultimately recovered remains to be seen.

Stay tuned…

 

Footnote: Our thanks to Don@ASDUpdates for providing a copy of the SEC’s July 23rd Memorandum and supporting declarations.