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EquityBuild, Issuer of Purported Secured Notes, is a Ponzi Scheme, SEC Alleges

An issuer of purported secured notes backed by real estate has been sued by the Securities and Exchange Commission alleging that amid losses, it “devolved into a Ponzi scheme.”  The group of companies, known as EquityBuild, solicited investors via Internet advertising, social media, and other methods, the SEC alleges.  According to the SEC suit, EquityBuild and its leaders  defrauded investors that invested in notes backed by South Side of Chicago real estate and other assets.   EquityBuild affiliates “sustained heavy losses and the properties they pitched to investors failed to earn anywhere near enough to pay the promised double-digit returns,” the SEC complaint says. “As a result, (the EquityBuild) investment program devolved into a Ponzi scheme: Defendants could only pay earlier investors by raising funds from unwitting new investors.”

Jerome and Shaun Cohen, father and son, run EquityBuild and a subsidiary, EquityBuild Finance.  EquityBuild allegedly  has raised at least $135 million from more than 900 investors since 2010, according to the SEC suit, filed in federal court in Chicago.  EquityBuild allegedly solicited investors to invest in debt used to finance properties.  EquityBuild allegedly touted outsize returns of 12 to 20 percent with minimal risk of loss of principal. and downplayed the risks, according to the SEC complaint.  The SEC alleges that EquityBuild, based in Marco Island, Florida,  skimmed 15 to 30 percent off each investment through fees that the company and the Cohens didn’t disclose.  EquityBuild also allegedly paid returns to older investors with the proceeds of newer investments, paying investors about $14.5 million in interest payments  between January 2015 through February 2017 although income and fees from EquityBuild properties totaled only $3.8 million, according to the SEC suit.

It is unclear from publicly available information whether EquityBuild investments were sold by FINRA or SEC-registered financial advisors.  Investors in EquityBuild may wish to consider claims against professionals such as stockbrokers, financial advisors, or insurance agents who sold them the investments, or any professional services firms (law firms, accounting firms, etc.) that may have materially participated in EquityBuild’s unregistered securities offering.  As the SEC has alleged that the EquityBuild investments were securities that were not registered or exempt from registration, investors may be able to pursue claims against various third-parties that materially participated in these transactions.

EquityBuild investors may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or for a no-cost, confidential consultation.

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