SEC charges MK funds with Ponzi Activity

March 7, 2011

Last week I wrote about the PDVSA Pension Funds and its activities investing in some fund run by Francisco Illaramendi, wondering what the relationship between PDVSA, its pension funds and the Illaramendi funds was and asking aloud whether the Government or PDVSA would ever investigate or answer these questions.

Well, today, the US Securities and Exchange Commission filed an amendment complaint in the case, which increases the need for answers from both PDVSA and the Venezuelan Government in the case.

The SEC now accuses the Funds of misappropiation and misuse of investors assets, saying that Illaramendi and MK Capital Magement have used both Funds as vehicles for Ponzi activity, paying off old investors with new investors money. According to the SEC, the US$ 540 million held in the Short Term Liquidity fund, where PDVSA’s Pension Fund had 90% of its assets, were actually “substantially less” because funds were used to pay off investors in the MK Venezuela Fund.

The SEC further charges that Illaramendi attempted to hide the missing assets by providing the Commission staff with a false letter from an accountant in Venezuela to verify the existence of at least US$ 275 million. According to the SEC, these assets do not exist.

The complaint charges that the liabilities of the funds “vastly exceed the actual assets held by the funds”. The funds had supposedly experienced investment losses and the “gap” is as much as hundreds of million of dollars.

Besides these new accusations, the SEC extends the accusations of investment in private equity transactions, including lending to ventures without documentation.

The SEC also says it interviewed a “Pension Fund” Executive. The Pension fund Excutive said did not know about the loans.

A Pension Fund or a PDVSA Executive? Didn’t Rafael Ramirez say PDVSA had nothing to do with running these Pension Funds in the National Assembly? In the memo below, saying the investments were fine to pensioners, it is signed by none other than PDVDA’s “Internal Director of Finance” who signs here as President of the Pension Funds. Note also the suggestion that this is a “mediatic” campaign in point 8

These charges against the funds and Illaramendi raise the same questions as last week, except magnify the need for PDVSA and the Chavez Government to explain who was involved and who authorized investing pension money in these funds and how was this handled.

Will we hear something this time, or much like the Antonini suitcase, it will  all be buried once again?

Note Added: No sooner (minutes) after posting this, Setty tells us that Illaramendi has pleaded guilty. Will he reveal his PDVSA collaborators?

55 Responses to “SEC charges MK funds with Ponzi Activity”

  1. HalfEmpty Says:

    And here we go… good luck and fasten your seatbelts.

  2. Gordo Says:

    My daughter-in-law’s mother, a retired teacher, has not been receiving her pension payments for almost two years, because she has to prove that she is alive. She hasn’t been able to do so.

  3. Pygmalion Says:

    Wow, this could be another bombshell not only for PDVSA but also the management company. Probably another storm in a water glass.

  4. moctavio Says:

    Yes, we have perjury by Ramirez, pensioners money lost, illegal currency trading, all under the watchful eyes of the pretty revolution.

  5. Pygmalion Says:

    Gordo – you just have to obtain a fé de vida. It’s not that difficult. You do it in a Notaria and even better if you have a decent lawyer.

  6. moctavio Says:

    Mi wife has never gotten her voluntary pension fund money back.

  7. Gordo Says:

    She got the fe de vida and she still hasn’t been able to get her pension.

  8. HalfEmpty Says:

    A good laywer is necessary for a good life. I suggest putting 2 on retainer.

    Sweet Jeus, a laywer to prove you’re alive. Babe that is indeed a revolutionary concept. I expect it’s damn lucrative too. A win-win situation.

  9. Pygmalion Says:

    Well, we will have to wait and see who is charged – if anyone – rather than condenming people out of hand before the full facts have been presented in an arraigment. My bet is that someone will be fined by the SEC just as Goldman Sachs and JP Mprgan were recently. What has to be clarified is whether anyone in PDVSA has been involved in this heist but hey, Ponzo schemes are par for the course in the US. ;)

  10. Glenn Says:

    Pygm read Setty’s peice. The investment manager plead guilty and his two Venezuela partners in crime were wired tapped and had money put in Swiss banks.

  11. Halfempty Says:

    Sadly they are much to common, that is the bad news, good news is if found the perps get to do quality time in the slam. I suspect several jets have already rolled to avoid that particular contingency. Lot of job openings for the right people in Miami, heh. Need good upper body strength for holding the next bag.
    :)

  12. moctavio Says:

    Pygmallion, if you are going to speak, CAN YOU PLEASE READ FIRST, the guy PLEADED GUILTY. What part of PLEAD GUILTY dont you understand? Plead? or Guilty?

    Or how about hundreds of millions lost or misappropiated? (90% owned by PDVSA’s pension funds) You think the SEC is loose on that?

    You are so f… opinionated and you don’t even have the respect and courtesy to read and understand, except the CIA Handbook

  13. A_Antonio Says:

    More difficult will be find the pension Money of 20.000 workers fired in 2.003.

  14. moctavio Says:

    This is part of it. The PDVSA pension funds bought 1.15 billion dollars of the reopening of the PDVSA 2017 in January and “had” 485 million dollars in the Short Term Liquidity Fund that the SEC says is “missing”.

  15. GeorgeS Says:

    Pygmallion, you not only dont read, but talk about concepts foreign to Chavizmo. arraigned? trial? These things dont exist under your beloved Government. Asked the Econoinvest owners. You are an inssuferable fool.

  16. jeffry house Says:

    So why didn’t Chavez fulfill his campaign promise of twelve years ago? If he had opened up the pension funds to scrutiny, thousands of pensioners would not have been cheated.

    Was he too busy doing cadenas?

    This is just as bad as pudreval.

  17. GeorgeS Says:

    It goes against Chavez’ principles to fulfill a promise. He nly wants to be in power. Are you a revisionist.


  18. [...] talking. That won’t be immediate, as I’m traveling. The Devil at DevilsExcrement.com makes good points and adds a document that I hadn’t seen until he sent it my way. Velly intellesting [...]

  19. Eduardo Says:

    The Chavez government is like a financial Attila. Wherever he goes, you won’t find a single penny again…

  20. Alek Boyd Says:

    But didn’t Rafael Ramirez said about problems caused by Eudomario Carruyo’s son in the past: “we’re not going to cover up anything … I don’t care what hat you’re wearing, I don’t care who you are, heads will roll.”?

    http://vcrisis.com/index.php?content=letters/200505020813

  21. Kepler Says:

    Pygmalion, has your daughter in Europe found the camera you want? Did she receive from you the subsidized dollars to buy it? Those dollars could be used to buy quite some books for children in Calabozo or Tocuyito. Hell, the subsidized dollars for her studies could be used to buy a lot of medicine for the medicaturas in Amazonas.
    Never mind.


  22. [...] talking. That won’t be immediate, as I’m traveling. The Devil at DevilsExcrement.com makes good points and adds a document that I hadn’t seen until he sent it my way. Velly intellesting [...]

  23. Pygmalion Says:

    Hmm.. Kepler your post is somewhat off-topic. Cadivi is supr efficient, by the way. Jaja…

  24. An Interested Observer Says:

    A_Antonio, that money was found a long time ago, back when it was rolled into PDVSA’s operating account. Or transferred over to FONDEN, more likely. Regardless, the powers that be don’t think of it any more. I just wonder if, post-Chavez, there will be any records to show how much anyone had.

  25. Roberto N Says:

    “Hmm.. Kepler your post is somewhat off-topic. Cadivi is supr efficient, by the way. Jaja…”

    Yes, super efficient at collecting bsF 1,7 per dollar to “fast track” the solicitud.

  26. Kepler Says:

    Boliburgués,

    No, it was not really off topic. By the way: why don’t you just disappear? You are a troll. Do you get paid for that?

  27. Bloody Mary Says:

    The good news is that it can be predicted that the information will be released and will be made public -You may assume that a person facing 70 years of prison will not plea guilty unless he has been engaged in a previous negotiation with the authorities, and also you may assume that US authorities are quite interested about what is happening with Hugo Chavez´s management and the flow of the Venezuelan money-. Remember……. there are certain issues about the Iran-Venezuela partnership in which the Empire is quite interested.
    The bad news is that we need to look abroad to see some justice….. Hopefully this will change next year :)

  28. Leo Says:

    |

    FINANZAS | Creó un esquema Ponzi con fondos de cobertura
    Illaramendi se declara culpable de fraude en EEUU

    El venezolano Francisco Illaramendi, propietario de la firma MK capital Management, manejaba dinero del fondo de pensiones de trabajadores de Pdvsa.

  29. pol47 Says:

    The so called missing funds are very easy to find. Contact the Banco Nacional de Cuba and Banco Financiero Internacional. Inquire as how much money has been deposited into the accounts of Chevez and Ramirez family members and associates; you have found the money belonging to the people of Venezuela reported missing.

    Only problem is getting the Castro brothers to release it or better question how much they will charge to release the money.

  30. tleon Says:

    Illaramendi pleads guilty. And now the Chevez goverment rats will very shortly start jumping ship.

  31. Gordo Says:

    Theoretically, the pension money has been and still is earning interest? With inflation the way it’s been, the value is has been dwindling away anyway. My sense is that pension funds are small relative to the moneys wasted supporting cheap gasoline. Am I correct?

  32. moctavio Says:

    The PDVSA pension fund has always had a large component managed in US$, they pay pensions from it, but it has been like five years, since people have seen the portfolio, all wee know is that there is 1.15 billion in PDVSA 2017 and 485 million WAS in the Short Term Liquidity Fund.

  33. Bloody Mary Says:

    It call my attention that the SEC post a contact info…. I suppose this helps them to collect information from people how may know something:

    David P. Bergers, Regional Director
    John T. Dugan, Associate Regional Director
    LeeAnn G. Gaunt, Assistant Regional Director
    SEC’s Boston Regional Office
    (617) 573-8900″

  34. Paul Says:

    Well, I must say this is not too surprising. Since the rule of law is non-existent in venezuela, the chavistas and those associated with the government think they can operate with impunity outside venezuela as well. Surprise! Bribing people in the US, ponzi schemes, etc. will eventually be uncovered by the authorities and the culpable parties punished.It would not be even outrageous to speculate that the authorities were investigating the consulate in Miami which is hastening the return of the staff to Ven.

    What does amaze me is the sheer arrogance that these people have to think they can act illegally wherever thay are!

  35. Bruni Says:

    I am missing something fundamental here, Miguel. Why is it that PDVSA’s pension fund was managed in the US?


  36. No, the people who managed the pension fund, invested the money in the US with another fund.

  37. Jose L Marcos Says:

    A google search shows that a Mr Juan Carlos Horna Napolitano is being pursued by Interpol since January 2010.
    I don’t know if it is the same guy that lives in Pembroke Pines.
    The arrest order that you find in Setty Notebook mentions a woman named B.B. living at the same address. Is it Betsy Buenahora?
    She is the registered agent of Jeislo Real Estate Investment LLC and Mk Dreams International Corp among others.

    We will have to wait until the investigation provides more information about who is involved.

    In the meantime say goodbye to the Pension Fund

  38. Ira Says:

    This is all interesting stuff, but compared to the Libyans stripping Chavez’s name off of a stadium?

    NO COMPARISON!

    THIS is what revolutions are made of:

    http://www.bbc.co.uk/news/world-latin-america-12682846

  39. jsb Says:

    Breaking: A stadium in eastern Libya named in honour of Venezuelan President Hugo Chavez has been stripped of its title, opposition groups say.

    The Hugo Chavez stadium outside Benghazi has been renamed “Martyrs of February”, in memory of people killed fighting to overthrow the Libyan leader Muammar Gaddafi.

    (http://www.bbc.co.uk/news/world-latin-america-12682846)

  40. jau Says:

    Illaramendi seems to be trying to pull a Carlos Kaufman trick: pleads guilty, confesses his ass off, spends a couple of years behind bars but at the same time negotiates with the local authorities to keep as much money as possible and then lives in Miami as a fucking magnate for the rest of his life…

    If he pulls it off, then there is no justice…. I want him roting in jail forever

  41. tleon Says:

    Flash: Universidad Simón Bolívar to be renamed “Universidad Lina Ron”

    Makes you wonder if the opposition will strip the title.

  42. Pygmalion Says:

    You know, if this money has been stolen in this pension fund scam, which looks like the case, then it is just another massive theft by Venezuelans in the USA, just as there was massive theft by the stock brokers and real estate promoters in Venezuela last year – also by Venezuelans. And on top of this, the corruption in ther government. There’s no hope as everyone is stealing. Correct Kepler?

  43. moctavio Says:

    No, it was irresponsible to say the least to give so much money to an unknown Venezuelan in the money management business. And it was illegal to invest in a fund that was doing illegal foreign exchange operation, prohibited by law in Venezuela.

    This was all decided by PDVSA people, who live in Venezuela.

    Ramirez, under oath, said that PDVSA had nothing to do with the management of these funds, and later his Director Of Finance, signs a letter DEFENDING Illaramendi and saying there is no problem, the money is safe,

    Stock Brokers did not steal anything. They were doing legal operations, Chavez was just pissed the permuta value was increasing all of the time. Illaramendi, on the other hand, was doing absolutely illegal operations with PDVSA money, illegal since early May, andnothing was done by the same people that went against the brokers who were doing legal operations.

    So, as usual hablas por la tapa de la barriga.

    And I am sure there were commissions involved between the funds and PDVSA, but in yoru innocent pro-Chavez mind that is impossible.

    Funny, you were asking for “innocent until proven guilty” with Illaramendi and now you already found guilty all of the brokers and constructors. In the case of the brokers, “theft” was never an accusation, but if you read everything with the same carelessness and superficiality that you read my blog, I can’t even try to explain it to you. In any case, none of them has been even brought to trial or even given the right to defend themselves.

    Once again you comment to defend the Government. With you defending them, they have no hope, much like the brokers have no hope of being able to defend themselves as long as Chavez is the ruling autocrat and Dictator of Venezuela.

  44. jau Says:

    Illaramendi spent 10 years at Credit Suisse, apparently worked hard on the financial sector all his life. Then a few years ago founded MK Funds and raises a motherload of money and what does he do? A Ponzi Scheme, what a moron!

    I mean, could somebody explain to me why people are so bloody stupid! Why didnt he just manage the money correctly and earn the fees that were pretty good… I will never understand these kinds of vivos bobos who believe that they are way more intelligent than everyone else and end up in jail.

    All he had to do was to follow the covenants of his fund and pick where to invest, but somehow this moron decided to just steal everything.

  45. moctavio Says:

    Because you worked at CS as an adviser, you are not qualified to manage money and it showed, no sooner had he started his funds that he had lost so much money he had to use tricks to recover and do illegal things. But he did have a 20 million dollar jet. To get things done in life you have to work hard, very hard. nobody becomes a multi-millionare overnight. You need very hard work and good luck to do that. These gusys all use graft and no work.

  46. jau Says:

    OK Miguel, but when you start a fund you define the covenants that fit your investment strategy and know how, if you lose money while doing what you said you would do, then tough luck but no harm done.

    The problem with these characters is that they are just plain criminals looking for their opportunity to rob you blind.

    My point was that it was probably easier to run the fund properly than to do what he did

  47. Miguel Octavio Says:

    Yeah, but he was getting rich only, not becoming a multimillionare.

    Ironically, in what he was doing following the covenants, he was doing illegal operations.

  48. Gordo Says:

    Too much greed turns on itself!

  49. Juan Cristobal Says:

    “To get things done in life you have to work hard, very hard. nobody becomes a multi-millionare overnight. ”

    Nobody, except Arné Chacón.

  50. Miguel Octavio Says:

    Or Illaramendi, or Fernandez Barruecos or Franklin Duran or Tobias Nobrega or , so many of them….,

  51. Kepler Says:

    Right answer, Miguel.
    Will we ever know whether Diosdado Cabello does own through different frontmen companies such as EVEBA and others?
    And what about IV-Republic murderer, Rodriguez Chacín, who bought a finca in 2003 for many millions in Barinas, not the first one?
    http://www.spiegel.de/international/world/0,1518,557736,00.html


  52. Because the certification letter from the accounting firm to support $ 275 million of the funds assets was false, then this is the lowest amount the fund has lost.


  53. [...] Directiva in the red square and then in the bigger red square is Mr. Carruyo himself) and according to this letter I published a while back, happens to be at the same time: “President of the Board of retired [...]


  54. [...] Illaramendi and his MK funds, which involved money invested from PDVSA’s pension plans (One, Two, Three). Our friend Setty has also devoted a few posts to it, here is one, there are many others. [...]

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