Hi ,
Why am I sending you a roundup of note frauds committed this year (so far)? It’s because most people aren't aware of how many there are and how serious is the problem. THE PAPER SOURCE appears to be the only source of this information in the note industry, and so many people continue to be victimized. I don’t want you to be one of them. Thousands of investors lost over $2.2
billion in the fraudulent note funds below just this year alone. And this is not even a complete list.
Here are some tips to protect yourself against fraud:
- When you buy a note, TAKE POSSESSION OF IT. Own all the original documents, including the assignment from the seller with their actual signature, not copies.
- Service your notes yourself or hire a servicing company not affiliated with the note seller.
- Don’t invest in “note funds” or “joint ventures,” etc. Do not trust others with your money. (Yes, undoubtedly there are some good funds, but even honest people can unknowingly hire crooks.)
- Don't buy notes from those who teach notes: that's an inherent conflict of interest. No honest person would teach you how to buy notes at the best price and then try to sell you notes.
Robert Shapiro pleaded guilty to running a $1.3 billion Ponzi scheme through Woodbridge Group of Companies. Woodbridge's funds promised investors big returns on real estate notes. The scheme defrauded more than 9,000 victims. Shapiro admitted that he misappropriated between $25 million and $95 million of investor funds. Two alleged
co-conspirators, Dane Roseman and Ivan Acevedo, are scheduled for trial next year.
Lynette Robbins and her company Knowles Systems raised about $147 million from investors by advising them that the investments in Woodbridge were “safe and secure.” Floyd Powell was also barred by the SEC from selling securities; he sold Woodbridge notes to 13 investors and consented to a settlement without
admitting or denying the allegations.
Stephen Condon Peters was sentenced to 40 years in prison and ordered to repay investors $15 million for a note Ponzi scheme through VisionQuest Wealth Management.
Shayeh Dov was sentenced to over 7 years in prison and ordered to pay $3 million in restitution to investors in his note fund that did not own any notes. Dov spent the money on lavish indulgences.
Terry Wayne Kelly Jr. and Kelly Management were charged by the SEC in connection with selling notes in a Ponzi scheme fund called Madison Timber Properties.
Vincent P. Falci was sentenced to 15 years in prison for running a $10 million tax lien fund Ponzi scheme. Falci defrauded victims through Saber Funds and Vicor Tax Receivables, providing fake investment gains on every monthly statement. Falci diverted the funds to himself.
Kevin Merrill of Delmarva Capital and his partners Jay Ledford and Cameron Jezierski pleaded guilty to running a $550 million Ponzi, enticing investors to buy into a fund of consumer debt portfolios. But there were no portfolios. Merrill used investors' money to buy 25 super-luxury cars and 6 homes, among many other things. They face decades in prison.
James Nickels collected more than $5 million from investors in his phony note fund The Fiscal Concierge.
McKinley Mortgage note fund officials Tobias, Charles and Caleb Preston agreed to pay over $3 million in fines and repay investors some $30 million after the SEC charged them with misusing funds. The SEC asserts that the company lost money for years and was insolvent by 2012. Still, the SEC says, the fund kept raising money and providing false documents to investors claiming the
fund generated strong annual returns.
Phillip Michael Carter was accused by the SEC of running a note fund Ponzi that raised $45 million. The alleged scheme was run with Bobby Eugene Guess and Richard Tilford and defrauded 270 investors. Carter and Tilford were indicted last year, and Guess is currently serving a 12-year prison sentence after pleading guilty to a similar note fund fraud.
There are many more. These are just some of the most recent ones. This is why we do not permit note funds to advertise with us or to exhibit at our events. Doubtlessly there are some honest funds, but I’m not a fortune teller, and I doubt you are, either. ALWAYS take title to your notes.
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The legendary "Note Professor," Tom Henderson recently wrote:
I frequently get requests for advice on where to find and/or how to buy non-performing notes (NPNs), or where to go for advice.
In the past all I could do is advise what NOT to do -- namely if you are not experienced and do not have the funds necessary to follow all the legal procedures, stay away from them, especially non-performing seconds that have even more of a risk.
Equally important, NEVER buy a NPN from a guru who will take your hard- earned money to “train” you, then push the notes he/she has for sale. This is not only unethical, in my opinion, but a blueprint for disaster.
I now have a recommendation of where to go for information on NPNs, both firsts and seconds. I rarely endorse any guru. Mainly because they usually try to upsell you multi-thousand dollar "boot camps," "coaching" or other expensive products.
I can say without hesitation that my friend Gordon Moss is the exception. I do not consider Gordon a “guru,” but an educator. On October 11-12, Gordon will be teaching a brand-new two day seminar in Las Vegas: https://papersourceseminars.com/gordon-oct-2019/ on real estate and notes. One of his topics is NPNs, on which I understand he will devote half a day.
If you want to learn advanced methods and strategies of buying notes, NPNs, and real estate from a successful investor -- things you won't learn from anyone else -- you need to be there. I cannot say this strongly enough.
Best regards,
Tom Henderson
P.S. This all-new seminar is the only one Gordon has scheduled. He may never do it again, so this could be your one and only chance to learn from a true master with 35 years of experience buying real estate and notes. When you go, send me an email telling me how much you enjoyed it.
The Note Professor, Tom Henderson
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