On July 30, 2020, David Peavler, Regional Director of the SEC’s Fort Worth Office announced charges against San Antonio-area businessman, Victor Lee Farias and his company Integrity Aviation & Leasing (IAL).
Peavler is accused of running a multimillion-dollar fraud scheme, which victimized hundreds of investors, many of them retired San Antonio police officers and other first responders.
The SEC’s complaint alleges that Farias and his company raised over $14 million from investors, who were promised that the funds would be used to purchase engines and other aircraft parts for leasing to major airlines.
The SEC charge says that “Farias and IAL falsely touted Farias’s supposed investment experience and IAL’s purported competitive advantages, such as an algorithm that supposedly identified profitable leasing opportunities, and represented that all investments would be secured by IAL’s assets.”
Many of the investors were retirees who, in order to invest their retirement funds, had to withdraw the funds from their retirement accounts and deposit them in newly created self-directed IRA accounts.
Fraud and misappropriation
Farias and IAL are accused of diverting more than $11.6 million for unauthorized purposes. They made $6.5 million in Ponzi-like payments to investors. They also invested $2.7 million to fund a friend’s business. The SEC says that IAL never purchased any engines and spent only a small amount of investor funds on aircraft parts.
Farias is also accused of misappropriating $2.4 million for his own personal expenses.
According to the complaint, Farias continued to mislead investors after he learned of the SEC’s investigation. It is alleged that he used letterhead from the SEC’s investigative subpoena as “proof” for investors that he was working with the SEC to take the IAL public.
“As we allege, Farias encouraged his victims to invest their hard-earned retirement nest eggs into his fraudulent business,” said David Peavler “Investors should always proceed cautiously whenever someone suggests moving funds from traditional retirement accounts to self-directed IRAs in order to make an investment.”
The SEC’s Office of Investor Education and Advocacy issued an investor alert on the risks associated with the use of self-directed IRAs in August of 2018.
The SEC’s complaint charges Farias and IAL with violating antifraud and securities registration provisions of the federal securities laws. The complaint seeks an injunction, as well, disgorgement plus prejudgment interest, and civil penalties.
The SEC’s investigation was conducted by Rebecca Fike, Kendrea Tannis, Melvin Warren, and Ty Martinez under the supervision of Scott Mascianica and Eric Werner of the Fort Worth Regional Office. The SEC’s litigation is being led by Janie Frank and supervised by B. David Fraser.
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