When a real estate investment deal looks too good to be true, it probably is.
In the case of a South Florida real estate firm, that was definitely the case. Around 9,000 investors — many of them retirees — were promised 5% to 10 % returns on their investments if they poured their money into luxury homes as far away as Beverly Hills and Aspen.
The owner of the Woodbridge Group of Companies admitted in federal court, however, that he was just running a giant (as in $1.3 billion) Ponzi scheme. Much of the money went to finance his personal obsessions — like his incredible Los Angeles estate, fancy diamond jewelry, a collection of Picassos and Renoirs and some high-priced wines. All together, he diverted somewhere between $25 million and $95 million for himself out of the investor’s money.
Meanwhile, more than 2,600 of his victims lost their entire life savings, totaling around $400 million.
The whole scam started to fall apart the way that most pyramid or Ponzi schemes do. The guy at the top of the pyramid started to run out of new investors, which meant that he no longer had the funds to pay previous investors. Once the money started to run dry, people started to question what was really happening with their funds.
Ultimately, the Securities and Exchange Commission (SEC) stepped in and agreed to take $1 billion in restitution for investors. The company’s assets will have to be liquidated in order to obtain the money.
Don’t get caught in a real estate scam or litigation that can hold your money up in court (or deplete it entirely). Contact a real estate attorney early and do your due diligence before investing.
