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Folsom Man Sentenced for Ponzi Scheme

United States Attorney Benjamin B. Wagner, FBI Special Agent in Charge Herbert M. Brown, and IRS Special Agent in Charge Scott O’Briant announced that today Senior United States District Judge Lawrence K. Karlton sentenced Luis Fernandez, 37, of Folsom, to four years and nine months in prison, to be followed by three years of supervised release, for running a Ponzi scheme that resulted in losses to approximately 50 victims and their families. Fernandez was also ordered to pay restitution in an amount to be determined at a subsequent hearing.


This case was the product of an extensive investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation. Assistant United States Attorney R. Steven Lapham prosecuted the case.

According to court documents, Fernandez was the owner and president of Fernandez Financial Inc. (FFI) in Folsom. Between September 2004 and March 2009, Fernandez collected approximately $7.4 million from investors by promising them a three percent monthly return on their money. Fernandez actually invested only about half the money he received, reserving the rest for Ponzi payments to the investors and withdrawals to himself. Of the money that Fernandez did invest he sustained losses in five of the six calendar years that the scheme operated. After subtracting monthly payments to investors totaling approximately $5.3 million, Fernandez caused a total loss to investors of approximately $2.1 million.

According to court documents, Fernandez and most of the victims of the fraud were natives of the Dominican Republic. To lure investors into the scheme, Fernandez falsely represented to investors that FFI was profitable in both good markets and bad, and that it was consistently generating a return that was sufficient to pay the promised 3 percent rate of return. To lull existing investors into keeping their money with FFI, Fernandez, and others, acting at Fernandez’s direction, concealed the losses and falsely represented that FFI continued to do well, going so far as to provide investors with false documentation purporting to show stock market gains.

Despite sustaining losses in the market, Fernandez paid himself nearly $1 million. This included a home in Folsom and a late model Corvette, both of which were purchased with investor money.

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