EquityBuild has been taken into receivership. Anyone with info?

22 Replies

Do we need any representation to negotiate with the equitybuild receivership? Does anyone have experiences with past similar receivership settlements? Where would one go to look at prior real estate receivership cases?

I don’t think there is any negotiation, likely some class action suits....either way, whatever is recovered/clawed back, minus receiver/attorney costs, will get divided up among all investors.  Depending on how much cash is actually left, 10-20 cents on the dollar seems like a likely outcome.

These weren’t just poor performing properties that investor’s money was put into, but much newer investors money went to earlier investors and is gone, like Madoff.

Originally posted by @Steven Picker:

https://www.housingwire.com/articles/46567-sec-shu...

really nothing good

YUP  this is bad news for all involved..  from the documents a few BP folks sent to me a few years ago. it looked like they were investing in multi beneficiary mortgages IE multiple investors in a fractionalized mortgage.. which can be argued is a security .. 

in CA they are quite common but you have a specific disclosure document that must be filled out by a real estate broker .. it lets you know who the co investors are.. which is really the rub here.. none of these folks know each other.. and of course this is always the rub in a pooled syndicated investment that goes south.. 

And of course greed had a big part in this greed on the part of the investors we were in a 1% interest rate or less at banks and these guys were offering 15 to 20% interest on notes..  so the investors do need to look in the mirror here.. I suspect most did not really understand how the transactions were set up and what there risks were.. I suspect many just focused on the return..  

Originally posted by @Wayne Brooks :

I don’t think there is any negotiation, likely some class action suits....either way, whatever is recovered/clawed back, minus receiver/attorney costs, will get divided up among all investors.  Depending on how much cash is actually left, 10-20 cents on the dollar seems like a likely outcome.

These weren’t just poor performing properties that investor’s money was put into, but much newer investors money went to earlier investors and is gone, like Madoff.

 10 to 20 Cents if they are darn lucky.. by the time the receiver and such takes their pound of flesh and knowing these assets and how illiquid they are and what they trade for.. if these were marked up substantially as the article posted above describes this will be bad news..  and will see what kind of money they can get in a disgorgement.. 

Originally posted by @Jay Hinrichs :
Originally posted by @Steven Picker:

https://www.housingwire.com/articles/46567-sec-shu...

really nothing good

YUP  this is bad news for all involved..  from the documents a few BP folks sent to me a few years ago. it looked like they were investing in multi beneficiary mortgages IE multiple investors in a fractionalized mortgage.. which can be argued is a security .. 

in CA they are quite common but you have a specific disclosure document that must be filled out by a real estate broker .. it lets you know who the co investors are.. which is really the rub here.. none of these folks know each other.. and of course this is always the rub in a pooled syndicated investment that goes south.. 

And of course greed had a big part in this greed on the part of the investors we were in a 1% interest rate or less at banks and these guys were offering 15 to 20% interest on notes..  so the investors do need to look in the mirror here.. I suspect most did not really understand how the transactions were set up and what there risks were.. I suspect many just focused on the return..  

 I don't know how many phone calls and emails I got from this company promoting their investments a few years back.  Not that I ever planned on investing with them, but when I questioned how they were setting up their investments and how they were using the funds, could never get a straight answer from anyone.  

I've had a few colleagues actually think it was my company calling them, as our names are very similar.  Just want to clear the air that I have absolutely no association with them, lol!

I want to thank everyone on BP ... a year ago I was drooling at the 15-18% returns but was warned off by several members.  The devil (greed) on my left shoulder was overruled by the angel (BP) on my right.  Thanks again.

https://www.chicagobusiness.com/commercial-real-es...

A court-appointed receiver is taking another big step in his push to sell off a portfolio of local apartment buildings tied to an alleged Ponzi scheme.

A broker has already lined up buyers that have agreed to pay a combined $7.7 million for six South Side multifamily properties owned by affiliates of EquityBuild, a Florida-based real estate firm accused last year by the Securities & Exchange Commission of running the Ponzi scheme, court documents show.

Now, the receiver, Kevin Duff, is asking a judge for permission to put a dozen more EquityBuild properties—11 on the South Side and one in west suburban Maywood—up for sale. Comprising 415 units, the properties offer a big opportunity for investors aiming to bulk up on South Side apartments, probably for less than the $22.4 million EquityBuild paid for them over the past several years.

Duff is selling off EquityBuild’s properties to recover as much money as possible for investors that the SEC says were bilked in the alleged Ponzi scheme. EquityBuild and its leaders, Jerome Cohen and son Shaun Cohen, raised at least $135 million from more than 900 investors starting in 2010, according to a civil fraud lawsuit filed by the SEC last August. With the money, the Cohens amassed a portfolio of 79 apartment buildings and 34 single-family homes, totaling 1,674 units, according to a court document.

But the Chicago investments suffered big losses, and EquityBuild’s fundraising program turned into a Ponzi scheme, the SEC alleges, with money from new investors used to pay off earlier ones. The Cohens have not admitted or denied the allegations, but they agreed to stop fundraising or obstruct the SEC’s push to recover their investors’ money.

In November, a judge approved a plan to sell the first batch of EquityBuild properties, South Side buildings totaling 206 apartments. The outcome shows that EquityBuild, in its enthusiasm for Chicago apartments, overpaid for the buildings, and by a wide margin: Four buyers have agreed to pay a combined $7.7 million for properties, about 33 percent less than the $11.5 million EquityBuild paid for them over the past few years, according to a court document.

Yet the combined price is slightly higher than the $7.4 million that the properties were listed for. More apartment investors have been pursuing South Side buildings in recent years as returns on apartments in other places have shrunk.

“We had interest from all over—numerous groups from New York and California,” said Finley Askin, associate director at SVN Chicago Commercial, the brokerage hired to sell the buildings.

An affiliate of Chicago-based Pangea Real Estate agreed to buy two properties, including a 44-unit building at 8100 S. Essex Ave, while another Chicago apartment investor, WPD Management, agreed to buy two others, a court document shows. A WPD executive declined to comment and a Pangea executive did not return a phone call or email.

Duff, the receiver, filed a motion last month asking a judge to approve the sales. Duff also filed another motion seeking approval to move forward with the next batch of sales. The portfolio includes a 68-unit building at 4520-26 S. Drexel Blvd. that an EquityBuild venture bought for $5.7 million in January 2017, and four buildings with 56 units between 8326 and 8358 S. Ellis Ave. acquired for $2.4 million in February 2017, according to the motion.

Askin said he wouldn’t discuss the sale plan for the second group of properties until Magistrate Judge Young Kim signed off on it. Based on the results of the first sale and the urgency to unload the buildings, it’s likely that EquityBuild investors could face losses on the second wave of sales as well.

But it’s still way too early to estimate how much money the receiver will collect in its effort to pay back EquityBuild’s investors, said Duff’s attorney, Michael Rachlis, of Chicago-based Rachlis Duff Peel & Kaplan.

“We obviously hope to maximize the recovery for every affected victim,” he said. “That’s the goal.”

Originally posted by @Shane Veltri :

Does anyone know who to contact to get on a list of victims to get paid out anything if money is recovered when they sell the apartments?

DEADLINE FOR SUBMITTING CLAIMS: July 1, 2019

The Honorable Young B. Kim of the United States District Court for the Northern District of Illinois has entered an order establishing July 1, 2019 as the deadline by which all proofs of claim by any individual or entity who purports to be owed money by, or otherwise entitled to relief against, EquityBuild, Inc., EquityBuild Finance, LLC, or any of their affiliates, or the affiliate entities of Jerome Cohen and Shaun Cohen.

Here is a link to the Axos Claims Portal where claimants will be prompted to create login information and complete and submit a proof of claim form:

https://dash.axosfs.com/cases/eqy

For a copy of the Notice and General Background & Instructions, and Proof of Claim Form, please click here.

Are they booting residents, or did they appoint a management company?

If they are booting, there is going to be an increase in rental demand in that area.

Hi All. My name is Lindsay Hirsch. My father was EB's attorney over 9 years ago and had committed suicide in 2012, noting Jerry and Shaun Cohen as well as the Ponzi scheme in his suicide notes. I took the suicide notes to the FBI and SEC in 2012, and it took 7 years for any significant progress to be made. In the meantime, I know many investors have lost money. I just got off the phone with a prominent Chicago news station who is looking for any EquityBuild investors who have been affected from 2012-2019 and would like to share their story. Please message me with contact information I can pass along to the investigative team there. Thanks so much!