A Florida-based investment advisor is facing charges from the Securities and Exchange Commission that he cherry-picked profitable trades for accounts held by close relatives, while leaving other clients to suffer trading losses.
In addition to the filed charges, the SEC obtained an asset freeze and emergency relief against Ramiro Jose Sugranes, as well as UCB Financial Advisers and UCB Financial Services Limited, the two companies he owned and operated. In total, the SEC claimed the scheme left Sugranes’ accounts with about $4.6 million in profitable trades, while other clients were hit with more than $5 million in losses.
Starting in September 2015 through when the SEC sought emergency relief earlier this month, the UCB businesses worked with about 100 clients throughout the country. The two individuals holding what the SEC referred to as the “preferred” accounts in the scheme were a married elderly couple residing in Leon, Nicaragua, who shared Sugranes’ surname, whom the commission said was the advisor’s parents or close relatives.
Since Sept. 2015, Sugranes had allocated about 3,000 stock trades as a part of a scheme to direct profits toward certain accounts. Specifically, the SEC found that preferred accounts had been allocated more than 1,600 stock trades, of which 95% had been profitable. In the same time period, the “nonpreferred” accounts were allocated more than 1,400 stock trades, but only 32% had made first-day profits.
Similarly, Sugranes allocated about 1,500 trades in options during this time, with the preferred accounts getting profitable options allocations 92% of the time, compared with nonpreferred accounts, where only 43% of the options made first-day profits. According to the commission, the disparity between the success and lack thereof for the different accounts could not be explained by trading securities of different issuers, nor could it be explained by luck.
“The odds that random chance could account for this difference in first-day profits and losses between the preferred and nonpreferred accounts is less than one in a billion,” the complaint read.
According to the SEC, Sugranes would use a single account to place trades, but wouldn’t name the recipient of the securities when they placed those trades. During the course of a day, if the price of a given security increased, the advisor would close out that position and allocate those trades into the accounts ostensibly held by his relatives, while if the securities price decreased during the trading day, those trades would be allocated toward other accounts, according to the SEC. During the course of the scheme, of the $4.6 million deposited into the preferred accounts, at least $2.24 million of those profits had been withdrawn, presumably by Sugranes’ relatives (Sugranes could not be reached for comment as of press time).
On June 14, the SEC’s request for emergency relief and an asset freeze was granted in order to stop the allegedly ongoing scheme. The commission is seeking permanent injunctions for Sugranes, as well as disgorgement, prejudgment interest and civil penalties, and is also seeking to recover the “unlawful gains” from Sugranes’ relatives, who benefited from the scheme, according to the SEC.
