The Bottom Line:
After a complaint was filed by the Securities & Exchange Commission (SEC) against an investment fund alleging securities fraud and orchestration of a Ponzi scheme by the key principals of the investment manager, Stapleton located, managed and sold assets to achieve a recovery for the investors. Our process involved an elaborate forensic accounting of the sources and uses of investor contributions. Our conclusions aided the SEC in securing a Motion for Summary Judgment against the defendant and individuals involved with orchestrating the Ponzi scheme.
The Business Issue:
The U.S.-based fund’s Taiwanese investor-base was unable to trace the use of their contributions or the status of the SEC’s investigation into the defendants’ U.S. securities violations.
Genesis of Stapleton’s Engagement:
The U.S. District Court appointed Stapleton as Federal Regulatory Receiver to provide experienced forensic, real estate and claims administration as part of its investigation and recovery efforts.
Obstacles and Stapleton’s Solutions:
- The fund had misappropriated investors’ contributions and the investors wanted their capital returned.
- Stapleton conducted comprehensive forensic due diligence, uncovering several multi-million dollar investments in and transfers to commercial assets, single-purpose real estate entities and entity insiders.
- Stapleton uncovered a list of hundreds of real properties owned or licensed by the receivership entities and performed a title review to determine the status of each. Ultimately, we took control of approximately 50 real properties located throughout California, and their associated loans, and listed them for sale. To-date, Stapleton has sold approximately 30 properties and a portfolio of approximately 10 loans to generate proceeds for investors and victims of the Ponzi scheme.
- Stapleton attained permission from the court to file lis pendens against certain properties owned by these entities and recovered at least $350,000 from one particular disgorgement target.
- Stapleton located income-producing property purchased with the investors’ capital.
- Stapleton’s in-house property management team maximized the value of the assets by collecting rent and handling all property-related repair, maintenance and code-compliance requirements.
- Stapleton managed the process of marketing and selling the homes.
- Stapleton pooled all recoveries and designed a claims process to determine appropriate distributions of funds to investors.