Uncovering the Real Estate Ponzi Scheme in Wisconsin Law Journal

Uncovering the Real Estate Ponzi Scheme in Wisconsin Law Journal

The Alleged EquityBuild Real Estate Ponzi Scheme Case: A Legal Perspective

Introduction

The EquityBuild, Inc. and EquityBuild Finance, LLC (EBF) real estate Ponzi scheme case is an intricate web of fraudulent activities that spanned from 2010 to 2018. The Cohens, Jerome, and Shaun Cohen allegedly orchestrated this scheme through their companies. They marketed promissory notes to investors with each note representing a partial stake in a particular real estate asset. This article offers a professional legal opinion on the case, outlining the court’s decision on an intricate aspect: the priority to the proceeds from the sale of five properties that were part of the receivership.

The Ponzi Scheme

EquityBuild, Inc., and EquityBuild Finance, LLC are alleged to have orchestrated a Ponzi scheme, where they marketed promissory notes to investors, representing partial stakes in specific real estate assets mainly situated in underdeveloped areas of Chicago and backed by mortgages. The scheme later shifted to offering investment opportunities in real estate funds after its unravelling.

The Legal Battle

The Securities and Exchange Commission (SEC) initiated legal action against the Cohens, EquityBuild, and EBF following the collapse of the Ponzi scheme in 2018. Afterward, a court-appointed receiver developed a strategy for recovering and liquidating all remaining recoverable assets under receivership. The receiver sold the five properties for a total of over $3 million, holding the proceeds pending the resolution of the claims process.

The Dispute over Proceeds

Individual investors whose loans BC57’s investment allegedly settled asserted priority to the proceeds generated from the sale of the five properties. They contended that they did not receive payment or relinquished their interests despite releasing the claims, which Shaun Cohen signed. BC57 disputed the claims, claiming precedence.

The Court’s Ruling

The district court ruled in favor of the individual investors, determining that the mortgage releases were flawed facially, and EBF lacked the authority to execute them. The Seventh Circuit upheld the district court’s decision, reasoning that according to the Illinois Mortgage Act, payment alone does not nullify any pre-existing interest without a valid release. Furthermore, the court deemed the releases supposedly executed by EBF as facially invalid, affirming the individual investors’ entitlement to maintain their interests in the five properties.

Conclusion

The EquityBuild Ponzi scheme case is one of the most notable real estate fraud cases in recent times. The court’s decision on the priority of the proceeds from the receivership is undoubtedly a right step towards the goal of upholding the rule of law. It sends a clear message to fraudulent entities and individuals that justice will ultimately hold them accountable for their actions.

Originally Post From https://wislawjournal.com/2024/05/12/real-estate-ponzi-scheme/

Read more about this topic at
Leader of Real Estate Investment Firm Admits Role in $658 …
Real Estate is (almost) a Ponzi Scheme – Thomas Tong

District of North Van Faces $150K Lawsuit for Alleged Flood Fault

Goldman Secures $3.6B for Fresh Real Estate Credit Fund Boost – Bloomberg Law News