Equity Build Finance, LLC

Investor · Montello, WI · Member since 2012 · 8 posts · 4 votes

I was just wondering if anyone has had any dealings with this company? They promise 12-15% returns, depending on how much you invest with them. They always seem to be offering properties in bad neighborhoods, mostly in Chicago, and claim to have never had a foreclosure or default in over 600 transactions. When I asked about specifics on one of their offerings in December, I got an e-mail saying that their "finance guy" would get back to me with details. I still haven't heard from him.

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Gregory Vallenari

Investor · Denton, TX · Member since 2012 · 2 posts · 3 votes

11y

Yes, I have two investments with them that are both nail biters.

My opinions only:

My gut feel is that they're above board and not a scam. But operationally they seem to have some challenges. Communication is less than desired as projects progress and especially when they get into trouble. While it does seem like they're working on that aspect, I don't feel that they understand what good communication to their investors should look like. The folks they put in place to communicate to investors are fairly new and don't know a lot of what's going on.

One equity investment i have with them in Chicago has taken some bad turns and I may or may not see all my principal back. They had a conference call to explain what had happened and what the plan was. The explanations seemed reasonable but no communication for a couple of months after the call. Then i pushed for a status and found out that plans laid out in the conference call had fallen apart - yet with no investor update. Ongoing communication (where we are, what's next and what are the milestones) is lacking and only comes partially when i really push for details.

Another lending investment i have with them in Puerto Rico is supposed to complete in few months but has already been delayed twice. The explanations seem reasonable but communication has not been good, though they did finally have a conference call recently.

I understand from the Equity Build Finance (frequent) sales emails that none of their deals have ever lost money but i am obviously a little skeptical (but hopeful).

I would love to hear of other's experiences - successful or otherwise.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Bob Floss II:

I'd like to take this moment to beg all of you to take the time and hire an attorney before you make any real estate investments. I see far too many posts on this site from investors that say they either don't use an attorney, don't need one, or don't want to waste the money on one. Please take the time and spend the small amount of money to have an attorney review the documents for a deal and protect your money from these companies.
I talked to my clients yesterday that I steered away from Equity Build and I can't tell you how happy they are to have avoided this loss.
these were investments as a fractionalized beneficiary .. now to be fair this is how we did mortgages for decades in CA.. multi bene loans. And there were problems just like this with them.. IE a bunch of investors in one loan who don't know each other..
CA came out with a nice disclosure document.. for investors for these types of transactions.. Now that would not have helped the underlying viability .. but it sure would have let people communicate early on when weakness appeared in the model.. From what I saw from some other investors in CA who reached out to me because of my CA brokers license and being a mortgage banker personally. It was clear to me what they were doing or how the company was setting these up.. but if there was no disclosure document these investors really had no clue what they were investing in or how their money was secured..
One of the investors shared with me their assignment docs and there literally was one investor scratched out and another added in handwriting :) so clearly paying off old money for new.. since the properties were not being sold.. Also from what that investor told me to get bought out they had to take a cram down.. which again on its face is not a crime or that uncommon.. early exits it can be common just like cashing in your CD early.. but what I saw was notes were due and they were still getting asked to make concessions.. My advice at the time was take your money even if its just your principal and redeploy..
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
8y
Originally posted by @Jay Hinrichs:

True (about the post-maturity concessions).
And the problem was that taking even your principal might not have been an option. As the SEC has pointed out (and as even EB/EBF said- depending on how much you can now believe).. they could neither refinance nor sell the properties.. not individually, not as a portfolio. So there was no "principal" to give back. Whatever existed still sits in the properties...
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Bob Floss II
Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes
8y
@Mark Whittlesey The properties cannot be sold or refinanced because the City of Chicago will record a lien or lis pendens on the property to make all parties aware that there are building code violations. A large number of their buildings have pending violation cases in the circuit court and the case and lien will remain open indefinitely. Unless you are borrowing funds for the purpose of rehabbing the property and clearing off the violations, underwriters will kick out the file. If you take money from investors to fix the property and clear the violations, and then don't use the funds for actual repairs, which is what I believe happened, you create a downward spiral. Any buyer is going to want a steep discount for inheriting a property with a pending violation case, putting them at a loss. Although based on the information released, they probably could not sell any properties or risk exposing the over leveraged debt on each building.
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Johannes Gilbertson
Winchester, MA · Member since 2012 · 8 posts · 4 votes
8y
@Bob Floss II
Unfortunately I am an investor with EquityBuild Finance and am hoping for the best possible outcome. In your experience, what do you think will happen? Can the SEC seize and liquidate personal assets the Cohens have fraudulently obtained and use those funds to rehab the properties, lift the code violations and then refinance or sell them? What about earlier investors who received their principal and are no longer invested with EquityBuild? Can the SEC clawback their interest and return it to those of us still invested? Thank you for your responses in advance.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Johannes Gilbertson:

@Bob Floss II
Unfortunately I am an investor with EquityBuild Finance and am hoping for the best possible outcome. In your experience, what do you think will happen? Can the SEC seize and liquidate personal assets the Cohens have fraudulently obtained and use those funds to rehab the properties, lift the code violations and then refinance or sell them? What about earlier investors who received their principal and are no longer invested with EquityBuild? Can the SEC clawback their interest and return it to those of us still invested? Thank you for your responses in advance.
they sure clawed back the Madoff investors.. but not sure this is the same in scope and high profile.
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Johannes Gilbertson
Winchester, MA · Member since 2012 · 8 posts · 4 votes
8y
@Jay Hinrichs Good to know. Hopefully our losses can be minimized. Where does wisdom come from? Suffering pain and loss!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Johannes Gilbertson:

@Jay Hinrichs Good to know. Hopefully our losses can be
minimized. Where does wisdom come from? Suffering pain and loss!
Keep in mind I think Madoff filed BK and it was the BK court that did the claw back I could be wrong there.. and maybe the SEC can do the same thing.. Although those that got there money out probably don't want to hear that..
I know I have had tenants file BK on me and I had to fork over 3 to 4 months of rent to the BK court.. that was a stunner.
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Johannes Gilbertson
Winchester, MA · Member since 2012 · 8 posts · 4 votes
8y
@Jay Hinrichs I'm glad the SEC sued the Cohens before they could file for bankruptcy.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Johannes Gilbertson:

@Jay Hinrichs I'm glad the SEC sued the Cohens before they could file for bankruptcy.
Bk is usually the next step.. although keep in mind Florida residents can have all their assets in their spouses name and they are immune from attachment.. its one of the red flags that comes up dealing with folks .. be sure to google that..
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Bob Floss II
Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes
8y
@Jay Hinrichs @Johannes Gilbertson Florida has a strange bankruptcy code that allows several exemptions. It allows for a person filing bankruptcy to exempt their personal residence regardless of its value.
However, even if he does file bankruptcy, it won't make a huge difference. Bankruptcy doesn't allow protections for illegal or fraudulent activity. If convicted, all of his assets will be available if there are not sufficient assets to cover investors. The issue with Madoff was allowing enough assets to flow into the different cases. They needed to allow some money to go through the bankruptcy proceedings, some to be made available for criminal penalties, and some available for civil penalties. I don't know if the trustee will try to use capital to finish the properties to get maximum value. Their job is to come in a liquidate as much as they can so they can put money back in investors pockets.
In reviewing the Madoff case, it also took 10 years before payoffs were made to investors because the case was so complicated. I don't expect that here, but investors should be aware that any settlements and payouts may require a long wait.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Bob Floss II:

@Jay Hinrichs @Johannes Gilbertson Florida has a strange bankruptcy code that allows several exemptions. It allows for a person filing bankruptcy to exempt their personal residence regardless of its value.
However, even if he does file bankruptcy, it won't make a huge difference. Bankruptcy doesn't allow protections for illegal or fraudulent activity. If convicted, all of his assets will be available if there are not sufficient assets to cover investors. The issue with Madoff was allowing enough assets to flow into the different cases. They needed to allow some money to go through the bankruptcy proceedings, some to be made available for criminal penalties, and some available for civil penalties. I don't know if the trustee will try to use capital to finish the properties to get maximum value. Their job is to come in a liquidate as much as they can so they can put money back in investors pockets.
In reviewing the Madoff case, it also took 10 years before payoffs were made to investors because the case was so complicated. I don't expect that here, but investors should be aware that any settlements and payouts may require a long wait.
and knowing south Chicago like a do the values of those assets are not going to recoup a lot of money if the properties are in need of major renovations.. so I suspect like most of these deals were you have pooled monies the return to the investors is a fraction of what they put in.
I was under the impression in florida if properly set up a spouse ( normally a wife) can have assets that are sole and separate and not attachable from the actions of the other spouse.. Could just be internet gossip as well.
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Ed B.
Real Estate Investor · Sacramento, CA · Member since 2010 · 292 posts · 103 votes
8y
The SEC's complaint is accurate. It was apparent to me that the aggressive pitching of high interest notes by EB in the past year was only done to pay off earlier investors and to try to keep the ship afloat. Shuan Cohen, the one who claimed to have an MBA in Economics and working on his Phd. Bull puckey! I "only" have a bachelor's degree but I've never given back a property, like I was told you had to do on your first investment. I've never paid 15% for borrowed funds either, because I was smart enough to realize I'd never make a profit paying that much interest. All the "expertise" and experience you claimed EB had in real estate investment somehow didn't prevent them from negligently failing to supervise the G.Slow contractor, causing some $12 million in losses. Nice going, Shaun.
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Johannes Gilbertson
Winchester, MA · Member since 2012 · 8 posts · 4 votes
8y
@Bob Floss II @Jay Hinrichs
Thank you for your input guys, I appreciate it. We will all hope for the best while waiting patiently for the SEC receiver to do his job.
@Ed B. I made a huge mistake trusting the Cohens. As bad as it is to be in my position now, I'm grateful I am not them. Karma will keep the universe in balance I'm quite certain.
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Account Closed
Member since 2018 · 3 posts · 1 vote
8y
Is it true that Shaun and Jerome Cohen fled the country to Turkey and Israel?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Account Closed:

Is it true that Shaun and Jerome Cohen fled the country to Turkey and Israel?
I highly doubt Turkey :)
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Johannes Gilbertson
Winchester, MA · Member since 2012 · 8 posts · 4 votes
8y
@Joseph P McCarthy
Where did you learn that information? The EquityBuild receiver never mentioned that in his emails to investors.
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Michelle Grimes
Member since 2018 · 2 posts · 1 vote
8y
I am a Dorchester invester and I just received my first email from the receiver. It came from Elizabeth Kammerer email but was signed Sincerely, Kevin
I received no previous letter as it mentions and who is the receiver? Elizabeth? Kevin? Kevin who?
Michelle
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
8y
The receiver is not going to be an individual....but a large law firm.
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James Eng
Seattle, WA · Member since 2012 · 2 posts · 0 votes
8y
The court-appointed receiver is Kevin B. Duff with Chicago law firm Rachlis Duff Adler Peel & Kaplan. Elizabeth Kammerer is/was an employee with EB Finance, I believe in the documents department.
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Michael Gansberg
Investor · New York City, NY · Member since 2015 · 388 posts · 563 votes
8y
Any EquityBuild investors should check out this earlier thread. It’s eerie.
https://www.biggerpockets.com/forums/311/topics/300843-has-anyone-invested-in-any-of-the-equitybuild-properties
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Johannes Gilbertson
Winchester, MA · Member since 2012 · 8 posts · 4 votes
8y
SEC Obtains Partial Judgment in $135 Million Real Estate Investment Scheme
Litigation Release No. 24247 / August 28, 2018
Securities and Exchange Commission v. Equitybuild, Inc. et al., Civil Action No. 18-cv-5587 (N.D. Ill.)
The SEC announced today that on August 28, 2018, the Honorable John Z. Lee of the United States District Court for the Northern District of Illinois entered a partial judgment against defendants Jerome Cohen and Shaun Cohen.
The partial judgment imposes a permanent injunction against future violations by Jerome Cohen and Shaun Cohen of the antifraud provisions of Section 17(a) of the Securities Act of 1933, and Section 10(b)(5) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the registration provisions of Sections 5(a) and 5(c) of the Securities Act. The partial judgment also prohibits Jerome and Shaun Cohen from soliciting any new investors for the remaining duration of the litigation.
Jerome and Shaun Cohen also consented to the previously entered order appointing a receiver to continue until the final disposition of the case. Kevin B. Duff, of the law firm Rachlis Duff Adler Peel & Kaplan, LLC, has been appointed as a receiver over defendants Equitybuild, Inc., Equitybuild Finance, LLC as well as a number of other related entities. He has been directed by the Court to secure real estate and other assets obtained with investor funds for the benefit of defrauded investors.
Under the partial judgment, the amount of disgorgement, prejudgment interest, and civil penalties to be imposed against the defendants will be decided by the Court at a later time. For the purposes of determining the amount of disgorgement, prejudgment interest, and civil penalties, Jerome and Shaun Cohen will not contest the facts alleged in the SEC's complaint.
The SEC's complaint, which was filed on August 15, 2018, alleged that the defendants sold at least $135 million in unregistered promissory notes to at least 900 investors throughout the country.
The SEC's investigation, which is continuing, was conducted by Timothy Stockwell, Ariella Guardi, and Ann Tushaus and supervised by C.J. Kerstetter. The SEC's litigation is being led by Benjamin Hanauer.
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
8y
Originally posted by @Michael Gansberg:

Any EquityBuild investors should check out this earlier thread. It’s eerie.
https://www.biggerpockets.com/forums/311/topics/300843-has-anyone-invested-in-any-of-the-equitybuild-properties
Oh. Wow. I have followed EB/EBF threads for a couple of years now. Thank you for posting this link. Im speechless.
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John J.
Member since 2018 · 5 posts · 0 votes
7y
I signed up here to find out more information about the case. There's a rip off report that accused them of basically the same thing. Not to mention the other threads on here questioning the company years ago. Too bad I didn't read them before.
Here's a comment from ripoff report:
"How dare you come on here and defend your company while defrauding your investors with an admitted ponzi scheme. The C.E.O. and President, Jerry Cohen and Shaun Cohen, and the C.O.O. Ron Bol could not answer simple direct questions for months without a bunch of double talk and nonsense. Where is my money? Where and when will I get my money?
I was warned early on to be careful but fell for the entire act regardless.
The C.E.O. Shaun Cohen claims to have a propriatery model and system that chooses the ideal properties for value and return, but testified to the SEC that this "propriatery" system is in reality some numbers scratched on the back of an envelope.
The C.O.O. Ronald Bol claims to be the "co-developer of the proprietary Asset Management program used to monitor the performance of each building" yet the buildings I was supposed to me invested in cannot even be sold due to poor or fraudulent construction, poor or fradulent managament, and hundreds of thousands of dollars in unpaid fines from the city of Chicago for code violations.
The warning signs were there and many of use refused to pay attention. Just doing a search for Equitybuild now brings story after story of other investors much worse off than me. There are complaints and accusations against Equitybuild going back years that should have been a deal breaker had I bothered to look.
Please do yourself a favor and learn from my mistakes. If it looks to good to be true move on."
Good luck to everyone else involved.
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Equity Build Finance, LLC

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Litigation Release No. 24247 / August 28, 2018

Securities and Exchange Commission v. Equitybuild, Inc. et al., Civil Action No. 18-cv-5587 (N.D. Ill.)