The SEC has moved to halt an alleged real estate fraud perpetrated by two Michigan men. The advisors allegedly raised more than $50 million from at least 440 investors by offering them membership interests in a real estate fund paying annual returns of 8 to 12 percent. However, less than half of the funds raised were actually spent acquiring real estate. Instead the men spent $7 million on luxury homes, exotic vacations, gambling debts, and a Ferrari. In the meantime, they kept investors at bay by using new funds to pay off earlier investors. After uncovering the fraud, the SEC obtained a court order to stop the scheme and freeze the assets of all individuals and business entities involved.
An Ohio broker has been thrown out of the securities industry for stealing $90,000 from two sisters who had inherited the money from an aunt. The aunt, who had been the broker’s client, died in 2006, leaving money to her two nieces. The broker advised the sisters to invest the proceeds with him. However, instead of having them make out checks payable to his brokerage firm, he had them make them payable to an entity he controlled. The broker never opened the account and instead used the money for personal purposes, covering his tracks by creating a false account number and account statements.
A Texas oil and gas promoter was sentenced to 99 years in prison for stealing $417,000 from investors in various oil and gas exploration projects. Evidence presented at trial showed that he raised money from dozens of investors who paid him as little as $1,000 and as much as $85,000 to gain a share of the projects. Instead of putting the money into the projects, the promoter lived off the funds for four years. He also sold interests in projects he didn’t own. In addition, the promoter was indicted for securities fraud for failing to tell investors of legal problems he had at a previous company.