The US Securities and Exchange Commission is accusing Equitybuild Inc., a real estate investment firm that is based in Florida, and its owners of operating a $135M Ponzi scam that defrauded approximately 900 investors. The regulator contends that the company, its President/CEO Jerome Cohen, and Vice President Shaun Cohen, who are father and son, promised investors double-digit returns of 12-20%, even as their business was incurring massive losses. Meantime, investors were paid returns using earlier investors’ money in Ponzi-like fashion.
Equitybuild investors were mostly unsophisticated, non-accredited investors without much experience in investing in real estate. The Cohens allegedly touted a purportedly original strategy for identifying an undervalued property in Chicago, Illinois’ South Side that they claimed would render huge returns. Investors were promised promissory notes that named a specific property. Third parties were supposed to buy the properties with mortgages that the investors had funded and this would generate returns.
Unfortunately, there don’t appear to have been many third-party buyers. Equitybuild was the one that owned most of the properties and the real estate investment company purportedly stopped searching for third-party buyers a few years ago.