According to the Complaint, the Defendant offered and sold securities in the form of “Guaranteed Investment Contracts” (“GICs”) to investors in unregistered and fraudulent transactions that violate federal securities law. The Defendant told investors that GICs were an investment in his successful financial services company, NextStep Financial, and that investors would earn a high, guaranteed rate of return of 10% to 16% per month with no risk. The Defendant’s sale of GICs raised more than $11 million dollars from investors in at least 12 states.
In connection with his offer and sale of GICs, the Defendant made numerous materially false and misleading statements to the Plaintiffs and the class about himself, about NextStep Financial, and about the investment he wanted the investors to buy.
Specifically, the Defendant told Plaintiffs and all other investors and the Class: (a.) That he had an extensive background in banking and business, including having business and law degrees from specific universities, when in fact, he did not have these degrees and his “banking experience” included a prior federal conviction for wire fraud arising out of the defendant’s employment at a bank; (b.) That NextStep Financial was a successful Chicago financial services firm for which he was “President and CEO,” when in fact, NextStep Financial was a defunct corporation since 2001 that conducted no financial services operations at all, other than running the fraudulent scheme alleged herein; (c.) That NextStep Financial had a highly profitable business funding loans made by Check ‘N Go stores and that NextStep Financial owned a number of Check ‘N Go stores. In fact, the Defendant and NextStep Financial have no business relationship with Check ‘N Go at all; (d.) That their investments in GICs were completely safe because they were covered by two levels of insurance, one provided by Check ‘N Go for the loans it made to its customers, and another purchased by NextStep from certain specified insurance companies. This was also false, as Check ‘N Go has nothing to do with the Defendant or NextStep Financial and therefore, does not insure the GICs. In addition, the Security and Exchange Commission’s (“SEC:”) review of the known Defendant related bank accounts shows no payments to purchase insurance from the companies the Defendant identified as providing insurance to NextStep Financial’s investors.
After obtaining funds from Plaintiffs and the Class, the Defendant deposited investors’ funds into bank accounts of other companies that he created and controlled, including Defendants NextStep Medical Staffing IL, Inc. (“NextStep Medical”) and NextStep Holdings, Inc. (“NextStep Holdings”).
From those accounts, the Defendant operated a classic Ponzi scheme, using Plaintiffs and the Class investor funds to pay Plaintiffs and the Class investors their promised returns, and diverting and misappropriating the rest for himself, his family, and other business ventures that were unrelated to the stated purpose of the GIC investment program. Hernandez diverted investor funds to himself, to his wife, to pay off the mortgage on their home, to purchase cars, jewelry, a piano, and for other non-investment related purposes. The Defendant also transferred investor funds to the bank accounts of two other companies he created and controlled, Defendants Spectrum Entertainment Group, Inc. (“Spectrum”) and The Ilumina Group, Inc. (“Ilumina”). The Spectrum and Ilumina accounts funded, among other things, a Chicago sports-talk website associated with the Defendant called “Chicago Sports Webio” (“CSW”).
On September 15, 2009, the Plaintiff filed a motion for entry of default. On September 24, 2009, the Plaintiff filed a motion for default judgment as to one of the individual Defendants. On September 29, 2009, Honorable Joan H. Lefkow signed the order granting the Plaintiffs' motion for entry of default. On November 9, 2009, the Plaintiff filed a motion for entry of default against two individual Defendants. On January 21, 2010, a Defendant filed a motion to dismiss the Complaint. According to the Minute Entry filed on February 25, 2010, pending motions 43 and 50 are moot upon the representation that Plaintiff will voluntarily dismiss this case. On March 26, 2010, the Plaintiff filed a Notice of Voluntary Dismissal and the case was dismissed with prejudice. The civil case is now terminated.
