Here’s a classic ponzi scheme right in our own backyard.
This guy owned this house since 1988, and had been an active contractor in the community. When the market was hot, borrowing money to do remodels and flippers worked out fine for him.
But when the music stopped, he kept borrowing.
Eventually the cross-collateralized mortgage holder foreclosed in 2007, and took back two properties, the one in the video and another on La Veta. After the bankruptcy, the next lender in line, the $800,000 lady, got the third property. The remaining 10-20 individuals who lent money got burned for at least $2 million, and maybe more.
He preyed on people’s trust – he had friends in the community that recommend him to other friends. Because he seemed like a nice guy, more and more people kept lending him money unchecked, and eventually the scheme failed:
What’s up with Olivenhain and swindles?
Remember Monster House Suzy Brown going around town peddling investments in her rehab center?
I Bet he threw a few good parties at that house! I think he needs to relocate out of state!
I wonder if he put at least a million into untraceable gold coins, or whether he blew it all on coastal living.
The guy could be laughing if walks out of bankruptcy with a million or two in gold hidden away.
How do these people sleep at night.
I’m sure he’s got a nice story about how he’s the victim of the bad economy, etc… that it’s not his fault and he’s just a victim of circumstances, not a crook.
I’d love to see guys like this forced to do the perp walk. Unfortunately, with a bankruptcy, his victims get no recourse if he ever comes into money – because it’s all discharged.
Wow! Did you see that 69 Chevelle 396 go by at :45? Niiiiiice!
And best sounding engine ever.
Jim – I think your highlight is a good one as people like that give ‘private equity/money’ a bad name at times.
Private money (both debt/equity)can be very good, and in full disclosure, we use private funds for all of our loans/purchases.
The main lesson for anyone who is interested in Trust Deeds is to ONLY LOAN IN THE 1ST POSITION…PERIOD…NO EXCEPTIONS…NO JUNIOR LIENS!!!!
Second, have someone knowledgable review title to ensure that you are safely recorded in the 1st position.
Third, keep your collective 1st position at a max of 70% of TODAY’S value with a term of 1 year max…lower LTV if longer than 1 year.
This helps mitigate the possible drop in values between lending and maturity. One could feel that 30% over the next 12 months is a fairly safe bet on good property…or not, its the your call, not the borrowers.
If these investors had followed those steps, they would have turned out much better than they did.
W.C.,
Ever since the patriot act you need to show a valid id when purchasing gold coins from businesses. It would be hard to gather up 2mill in krugerrands without leaving a trace. (although not impossible just difficult)
All this corruption makes me sick. I just want to buy a house without funding some scammers retirement.
Thanks clearfund, and this example dramatically illustrates a problem with private money.
In this case and many others, the ‘lenders’ are just innocent bystanders who get caught up in the hype of making a better return than at the bank. Their ego tells them to be a big-shot private money lender, and make the big yields, but their naivete causes them to trust, and act without investigating.
If any of these ‘lenders’ would have spent $500 for title insurance, they would have received a preliminary title report detailing the several liens in front of them – they were all of record!
Locomotive Breath,
I take offense to that, but you’re right, a sweet-sounding 396! I’ll see if I can get the old truck to impress you.
http://www.bcautos.com/musclecars/69chevelless.html
That’s one of my favorites houses in O’hain (but the street is too busy). Gorgeous, gorgeous, gorgeous! 🙂
Too bad people like this are not being punished. Not sure that he “technically” broke any laws, but much like the deadbeat borrowers, one would guess that he knew he’d never be able to pay off all the loans.
I’m floored by the stupidity of the people who loaned this guy money. What could this scammer possibly say to convince someone to loan him $800 large? Sure, I feel bad for them, but it just goes to show you don’t have to be smart to have money.
“He preyed on people’s trust”
No, he preyed on people’s greed, all he had to say is “this will pay 15% or more”
Desmo nailed it.
As the saying goes, if it sounds too good to be true, it probably is.
Everyone is looking to make a buck without having to actually do anything to earn it.
We are in the central valley. 8 million is chump change for our ponzi scheme con artists. Try 83 million for Crisp and Cole.
One of the partners, Cole, was into more than money fraud. He was into young males in his office when he was a principal mind you. R.E board at first denied him his license. Too bad they did not keep that train of thought.
He tried to run all the way to Camarillo to work in RE when they were being investigated. They’ll never find out right? Imagine when he got a phone call from a reporter at his Camarillio RE office?!?
http://www.bakersfield.com/special_sections/crispcole
They kept it all in the family or employees. Bought a property, then sold it to amother team member for thousands more than what it was worth. Had FIL send out verification of employment. Had their own appraiser. SWEET!
I went into town to look at properties at the time. The market was swamped with just their foreclosures alone.
They are going down!! Eventually. FIL and MIL alone at the age of 60 will owe 5 million. Crisp and Cole probably going to do prison time after FIL, MIL and daughter talk.
One other big case I will look up. They were prosecuted much faster.
Awww, those were the days! If you were a snake that is.