Earlier today, in federal court in Brooklyn, Roberto Gustavo Cortes Ripalda, the co-founder, co-owner, and former CEO of the international investment advisory firm Biscayne Capital, was sentenced by United States District Judge Carol Bagley Amon to 10 years in prison for conspiracy to commit wire fraud.
Cortes pleaded guilty to the charge in September 2023 after being charged with conspiracy to commit wire fraud, conspiracy to commit bank fraud, and conspiracy to commit money laundering.
As part of the sentence, Cortes was also ordered to pay $3.4 million in forfeiture and $103 million in restitution to over 110 victims.
John J. Durham, United States Attorney for the Eastern District of New York; Matthew R. Galeotti, Head of the Justice Department’s Criminal Division; and Kareem A. Carter, Executive Special Agent in Charge, Internal Revenue Service-Criminal Investigation, Washington Field Office (IRS-CI), announced the sentence.
“Today’s sentence reflects the seriousness of Roberto Cortes’s criminal conduct in orchestrating a years-long scheme with his co-conspirators to prop up a failing business while defrauding Biscayne Capital investors and clients around the globe,” stated United States Attorney Durham.
Durham noted that using illegal Ponzi payments to their victims, Cortes and his co-conspirators were able to disguise and perpetuate this scheme for years until Biscayne Capital finally collapsed under the defendants’ lies.
Durham added, “Today’s sentence demonstrates our Office’s commitment to holding accountable investment professionals who abuse the trust of their clients for personal profit.”
Durham thanked the Justice Department’s Office of International Affairs for providing significant assistance in securing the defendant’s arrest and extradition from Spain and obtaining evidence in this case. The Department of Justice also thanks the Governments of Spain and Switzerland for their valuable support.
“For more than five years, Roberto Cortes and his co-conspirators lied to Biscayne Capital investors — including their friends and family members — about how they were using millions of dollars of their investments,” stated Matthew R. Galeotti, head of the Justice Department’s Criminal Division.
According to Galeotti, when Biscayne Capital’s debt spiralled with no hope of paying back its early investors, they concealed the scheme by using new and existing investor funds to pay off other investors, resulting in more than $100 million in losses to investors.
“The sentence will hold Cortes accountable for his years of lies and deception,” stated Galeotti.
According to court filings, in approximately 2001, Cortes and his co-defendant, Ernesto Heraclito Weisson Pazmino (Weisson), founded South Bay as a real estate development business. South Bay would acquire properties, demolish the houses on those properties, and build new luxury homes.
After an initial period in which Cortes and Weisson raised the funds for South Bay’s operations from individual investors and bank loans, they founded Biscayne Capital in 2005 to create a more institutionalised form of financing for South Bay’s operations.
Between 2005 and 2018, Biscayne Capital operated in Miami, Argentina, Ecuador, Uruguay, Bermuda, Switzerland, the Bahamas, and the British Virgin Islands.
After South Bay began to experience financial trouble in 2007, Cortes and Weisson created and marketed to investors a series of private structured investment products (the Proprietary Products) to raise funds for, among other things, South Bay’s operations.
However, rather than using the investor funds raised through the sale of the Proprietary Products to fund South Bay’s real estate development projects, Cortes, Weisson, co-defendant Fernando Haberer, and additional co-conspirators used the bulk of the investor funds to pay outstanding interest and principal debt obligations to other Proprietary Products investors.
By the time the scheme collapsed and Biscayne Capital went into liquidation, Biscayne Capital clients had lost over $130 million.
Cortes and his co-conspirators took calculated steps to perpetuate and conceal the scheme. Cortes directed Biscayne Capital’s financial advisors to raise new investor funds to repay older investors. Cortes was also directly involved in creating and marketing the Proprietary Products, whose investments were misappropriated.
For example, Cortes was instrumental in creating and marketing the Liquidity Note Proprietary Product “as a money market product where clients would have daily access to liquidity.”
Cortes and his co-conspirators then misappropriated all the Liquidity Note funds—over $29.6 million—to perpetuate the scheme. Cortes also directed the co-conspirator to fabricate account statements sent to clients to conceal how Cortes and his co-conspirators had misappropriated the clients’ funds.
In another complex effort to keep the scheme afloat, Cortes’s co-conspirators devised a scheme to obtain short-term credit from banks based on misrepresentations regarding purchases and sales of the Proprietary Products from Biscayne Capital client custody accounts that caused overdrafts in client accounts.
Cortes and his co-conspirators used the short-term credit obtained from the banks to cover payments owed to other clients in the scheme and to pay their own salaries, among other things.
Weisson pleaded guilty in April 2022 to conspiracy to commit wire fraud and is awaiting sentencing. Haberer is not in U.S. custody.
