SEC Charges: $56 Million South Florida Real Estate Ponzi Scheme

The U.S. Securities and Exchange Commission (SEC) recently filed an emergency action against Wells Real Estate Investment, LLC, its CEO and her husband. The SEC’s swift action, which included an asset freeze, has unveiled what is being described as an alleged $56 million Ponzi scheme, targeting unsuspecting investors across the nation.

Promises of High Returns

Operating out of West Palm Beach, Florida, Wells Real Estate Investment, LLC presented itself as a thriving real estate investment firm with a substantial $450 million portfolio, primarily focused on South Florida properties. Investors were reportedly lured by promises of high returns through Wells’ “Assets-to-Income Program,” which allegedly offered promissory notes supposedly secured by real estate. The advertised returns were purportedly eye-catching, ranging from 12% annually to a staggering 99% after three years.

History of Alleged Financial Fraud

However, the reality behind these promises was allegedly far from the prosperous image projected by Wells and its executives. According to the SEC’s complaint, only a fraction—about $11 million—of the $56 million raised from approximately 660 investors was actually used to purchase real estate. Worse still, these properties were reportedly heavily financed through mortgages and generated insufficient income to cover the promised returns.

The true nature of Wells’ operations allegedly began to unravel as it was revealed that the CEO’s husband, allegedly played a significant, undisclosed role in managing the firm. He reportedly has a history of financial fraud, and he allegedly diverted $28 million of investor funds into speculative futures and options trading, allegedly losing nearly $12 million in the process.

To keep the alleged scheme afloat, they allegedly paid undisclosed commissions to sales agents and purportedly misappropriated about $10 million to make interest payments and redemptions to investors in a what would be, if true, a classic Ponzi fashion.

Lavish Lifestyles and Mismanagement

Further, the couple are accused of stealing nearly $1.8 million for personal use and transferring $1.95 million worth of Wells-financed properties to themselves. While the CEO reportedly boasted about her achievements as an “accomplished real estate investor” with a $100 million personal portfolio, she and her husband purportedly concealed the truth from their investors.

SEC’s Charges

In response to these egregious alleged violations, the SEC has charged the defendants with multiple counts of fraud and broker-dealer registration violations. The U.S. District Court for the Southern District of Florida has granted emergency relief measures to protect investors and preserve their assets, including asset freezes and the appointment of a receiver to oversee Wells and its affiliated companies.

As the SEC continues its investigation, it seeks to impose severe penalties, including permanent injunctions, civil money penalties, and disgorgement of ill-gotten gains from the couple and the associated entities.

Class Action vs. Individual FINRA Arbitration Lawsuit

People often wonder whether a large class action lawsuit is a better litigation option for them than an individual FINRA arbitration case.  The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option.  Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually.

Free Consultation with a Securities Attorney

FINRA provides an arbitration forum for investors to resolve disputes. The White Law Group represents investors in FINRA arbitration claims throughout the country. Visit the firm’s homepage to learn more about the firm’s representation of investors.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.

If you are concerned about your investments, please call the securities attorneys at The White Law Group at 888-637-5510 for a free consultation.