CHICAGO –– The U.S. Securities and Exchange Commission (SEC) accuses an investment firm of running a Ponzi scheme using dilapidated properties on Chicago's South Side.
The SEC filed a complaint on Aug. 15 in the U.S. District Court of the Northern District of Illinois against Equitybuild Inc., Equitybuild Finance LLC, founder Jerome H. Cohen and his son Shaun A. Cohen.
According to the complaint, the defendants took money purportedly for real estate transactions and promised investors up to 20 percent returns. But the firms inflated real estate purchase prices in order to skim off 15-30 percent of the investment for fees, the SEC says.
"This meant that investors were not only overcharged, but the real estate supposedly securing their investments was worth much less than what defendants told investors," the complaint states.
In some cases, the SEC says, the defendants inflated purchase prices by nearly 50 percent.
The SEC claims the real estate also did not produce the promised returns, so the defendants used money from new investors to pay earlier ones.
The agency alleges the defendants took over $135 million from 900 investors since 2010.
The SEC alleges the defendants' internal financial records showed a loss of $12 million for 2015, but they continued to solicit investors.
The U.S. Securities and Exchange Commission is seeking a permanent injunction for their business conduct and asks the court for relief as they see fit.