SEC Accuses Miami Couple of Running $135M Ponzi Scheme

Gaston E. Cantens and Teresita Cantens are the founders and co-owners of Royal West Properties Inc

Federal authorities on Wednesday charged a prominent Miami businessman and his wife with running a Ponzi scheme that bilked $135 million from elderly Cuban-American investors who were lured by the couple's credibility in the South Florida community and ties to religious and educational institutions.

The federal agency also alleged that the Cantens used $20 million from investors to pay themselves exorbitant salaries, to invest in other projects and to divert some $1 million to their children and grandchildren in the form of alleged ``consulting fees.''

SEC officials said the Cantens were not registered with the federal government to make securities offerings to investors.

According to a statement, the SEC says that the Miami couple, who founded Royal West Properties Inc. in 1982, sold promissory notes to investors after acquiring various properties and later financing their sale. It further alleges that Royal West continued to offer credit schemes and real estate investments, particularly to Cuban and Latin American investors, even after showing operating losses as early as 2002.

``In classic Ponzi scheme fashion, the Cantens used new investor funds to pay principal and interest to earlier investors and to fund Royal West's ongoing business operations,'' stated the complaint filed in Miami federal court.

The couple issued a statement Wednesday denying the SEC charges and attributed their company's downfall to the collapse of the real estate market.

``It is regrettable that the SEC would so grossly mischaracterize the business difficulties of Gaston and Teresita Cantens and Royal West Properties,'' the statement said. ``The use of a term like `ponzi scheme' is a gross mischaracterization and is seemingly being used solely for its headline-grabbing value.''

``The Cantens did everything they could to save Royal West from bankruptcy including the investment of all of their available cash resources in the company,'' the statement said.

The Cantens said the SEC's claims of $135 million in losses were ``far afield,'' saying their company had $48 million in liabilities at the time of its bankruptcy.

The Cantens are well-known in Miami. One son, also named Gastón I. Cantens, is a former state representative (1996-2006) and is vice presdient for the Florida Crystals sugar company. The son is not named in the SEC complaint.

Several investors raised warnings about the crisis at the company last June when they told El Nuevo Herald that they had handed over their savings over to the Cantens. They said the high interest rates and their personal relationship with the couple gave them confidence their investment was sound.

According to the SEC complaint, the Cantens guaranteed investors annual returns of 9 percent to 16 percent, telling them the money would be generated from mortgages on land in southwest Florida sold by Royal West.