Lenders face fraud charges

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Highlights:

  • Securities Commissioner files civil complaint.
  • Boulder-based hard lending firm charged.
  • Anti-fraud violations alleged.

Two Boulder lenders are their former firm are facing a civil complaint that they violated anti-fraud provisions of the Colorado Securities Act in connection with raising funds for their hard money mortgage lending company.

Lee Weinstein and John Koral are former executives of US Capital Inc., the lender named in the complaint filed in Denver District Court by Gerald Rome, Colorado Securities Commissioner.

In the complaint, the commissioner alleges that US Capital operated as a so-called “hard money lender” that specialized in making loans to commercial borrowers who may not qualify for traditional bank financing to purchase real estate.
In order to fund these loans, Koral and Weinstein obtained funding of more than $7.8 million from investors. When obtaining these investor funds, the complaint alleges that investors believed their investments were secured by the underlying real estate.

The complaint alleges that Koral and Weinstein, rather than securing the investor funds with the real estate, used the real estate to secure bank loans, Koral’s own personal debt, and to secure loans to Koral and Weinstein’s other companies, all to the detriment of the investors.

According to the complaint, US Capital eventually was unable to meet its obligations to the investors and other creditors and went bankrupt, with the investors unable to recover their investments.

The Commissioner’s complaint alleges that US Capital, Koral, and Weinstein violated Section 501(1) of the Colorado Securities Act and seeks a permanent injunction, restitution and disgorgement of ill-gotten gains.

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Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.

 

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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