According to reporting from Law360, the Securities and Exchange Commission (SEC) has filed an investment fraud lawsuit against the real estate investment company Equitybuild Inc., a related company Equity Finance, LLC, and the father and son owners Jerome Cohen and Shaun Cohen.
Federal officials allege that Equitybuild is a $135 million Ponzi scheme. While investors were lured with promises of above market returns, the reality is that the investment company was losing an enormous amount of money. The SEC contends that Equitybuild was staying afloat by using new investor capital to pay off the original investors.
SEC Lawsuit: Equitybuild Ponzi Scheme
From 2010 to 2018, Equitybuild raised approximately $135 million from 900 different investors across the country. Equitybuild raised this money by promising investors annual returns between 12 percent and 20 percent. In its marketing materials, the company explained that its business model of developing residential properties in undervalued areas on the South Side of Chicago would allow the company to bring in significant profits.
Sadly, the SEC believes that Equitybuild/Equity Finance defrauded investors in multiple ways. First, the company unlawfully skimmed between 15 percent and 30 percent off of each investment through the taking of undisclosed fees. Jerome and Shaun Cohen made material misrepresentations to investors in regards to the purchase price of properties. The firm’s investors were led to believe that properties cost far more than they actually did. The company pocketed the difference.
The SEC also contends that Equitybuild was actually losing money in its real estate investments. Far from the impressive returns that were promised to investors, the company sustained major losses. As time went on, the business model changed to conceal the underlying fraud. The SEC alleges that Equitybuild and Equity Finance became a classic Ponzi scheme; the investors’ gains existed only on paper, and funds were merely being transferred around to keep the fraud alive.
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At Sonn Law Group, we represent investors in securities litigation and FINRA arbitration. If you sustained significant investment losses in a Ponzi scheme, please do not hesitate to contact our law firm for a free, no obligation consultation.
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