John Bravata Explaining How to Make Money in Real Estate
It looks like we’re going to have to deal with the word “ponzi” for at least a little while longer. While every other arrest that’s been made this year involving someone accused of using a Ponzi scheme against their clients, in the Detroit area last week, two men had their business shut down by the Securities and Exchange Commission after being accused of running a Ponzi real estate scam that bilked more than 400 people out of around $50 million.
Just like there are investment clubs where people pool their money and have someone manage their stock portfolios, there are real estate investment groups that purport to do the same thing. People invest their money with the group and have someone managing all the money and properties. The money is supposed to go into buying property and watching the assessed value of it grow.
The thing these two guys did is reminiscent of what Bernard Madoff did, to a degree. Under the business names of BBC Equities and Bravata Financial Group, they promised investors that they would get a return on their investments of between 8 and 12% on a yearly basis. But, though they did actually buy some property, unlike Madoff who never bought a single share of stock, they would turn around and, on paper, pay people out of the money that new investors paid them. And, again unlike Madoff, many of the people whose money they took were elderly. There supposedly wasn’t even a pretense of turning some people away, which Madoff actually did from time to time to prove that his company was exclusive.
Many of us will sit here reading this and wonder how anyone could believe that they could still be earning 8 to 12% on their investment in this housing market, but it’s obvious that there are some skilled liars in this world. This scheme covered 4 states, all of which have had housing and real estate difficulties, so one would have expected that some of these investors would have been more alert to the fraud, especially after hearing about what happened in New York.
And what does the SEC say these two guys, John Bravata of Brighton and Richard J. Trabulsy of Northville, MI, did with the money? Supposedly they purchased at least $20 million in real estate, paid back around $11 million to new investors to “prove” they were legit, and took at least $8 million themselves to play with. And by play, at least some of it went towards gambling.
Bravata says he can’t believe the SEC action and that he will fight with all his resources; the lawyers aren’t talking. Once again, this is a case of “if it sounds too good to be true, it probably is.”
See more:
Judge: Asset freeze stays put in $53M fraud case
SEC v. John J. Bravata, et al, Case No. 09-CV-12950 (E.D. Mich., filed July 26, 2009)
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Caveat Emptor
Augusta GA Homes
Joe Loomer, USN Ret.
Associate Leadership Council, Growth Chair
Keller Williams Realty Augusta Partners
It is unfortunate that the elderly were apparently targeted exclusively as victims in this case.
If in fact these individuals are found guilty of perpetrating a “ponzi” scheme I hope the suffer Bernard Madoff ‘s fate.
This is about the last thing the real estate industry needed at this point in time.
.-= Mack@Las Vegas Homes´s last blog ..Rhodes Ranch Golf Homes =-.
Aside from the elderly who are often in no condition to realize the scam, sadly it is greed that motivates. It takes two to tangle and I say this as someone who was a victim because I had blinders and thought I could make a quick return. The old adage of “it is to good to be truth, than it probably isn’t” stands the test of time and should be observed more devotedly.
The greed over the past decade seems like it was worse than it’s ever been. The Ponzi schemes are just the tip of the iceberg, but they are particularly despicable, especially when they prey on the elderly. There are even worse stories involving the real estate industry. In San Diego we had a whole neighborhood where a real estate broker, appraiser, lender, and a handful of accomplices worked together to buy and sell properties at inflated values that were 100% financed by the banks. Although that was on a large scale, there were plenty of people taking advantage of the banks during the loose credit days. We’re all paying for it now.
.-= San Diego Homes´s last blog ..Luxury Homes In Rancho Santa Fe =-.
This has going around the whole world the last 5-6 years and it’s still going on. Everyone one knows about the Palm Jumeirah (Dubai Palm Island) and the other fantastic investments project in Dubai. Some of the properties on the Palm Tree has been sold and re-sold up to 12 – 15 times before its has been finished. Everything with fantastic sells talk of huge profit. The problem today is that nobody knows who the real owner is of the properties and if they find them, they don’t want to completed the buying.
“And by play, at least some of it went towards gambling.”
Just playing devil’s advocate here… I wonder if these guys actually had good intentions but poor business skills. Lame skills crippled even further by gambling problems.
Just a thought. I could be way off.
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