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Wednesday, July 24, 2024 | Back issues
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Giant Ponzi Scam Alleged in Utah

SALT LAKE CITY (CN) - Three men, including a securities fraud recidivist, ran a $27 million real estate-based Ponzi scam, investors claim in Federal Court. Lead defendants Richard Higgins, Brandon Higgins, Allen Christensen and their Madison Real Estate Group gathered a host of defendant banks, title companies and legal firms to carry out the scheme, according to the complaint.

Richard Higgins "had previously been convicted of securities fraud for his participation in a prime bank Ponzi scheme, and participation in the transactions at issue constituted a violation of the terms of his parole," the complaint states.

The long list of investors claims the even longer list of defendants defrauded them of $27.5 million in a Ponzi scam built on "real estate purchases and/or financings on six apartment properties."

"In all matters, the Madison Group worked with the other defendants, or at least with the defendants' knowledge, purposeful ignorance and/or acquiescence to perpetrate and execute the underlying fraudulent scheme," which included double closings, substantial commissions and false tax returns, the investors say.

"In general, the scheme worked as follows: (1) the Madison Group purchased the properties from related parties with the participation of some or all of the defendants, typically at or above market value; (2) the Madison Group then immediately and often simultaneously resold the various properties for substantially more than it had them under contract for to groups of investors most often organized into limited partnerships with a Madison entity acting as the general partner, the difference in purchase price not having been disclosed to the investors (the 'double closings'); (3) the Madison Group used investor funds, loan proceeds obtained and/or secured by investors, and rents to repay loans on other properties, typically promising, inter alia, to pay investors one percent (1%) per month return and to maintain the properties; (4) but instead of paying the investors with operating profits from the properties, the Madison Group allowed the properties to fall into disrepair, neglected to pay mortgages, and incurred hundreds of thousands of dollars in debt to vendors who provided goods and services to the properties; (5) and in all this, the Madison Group commingled rental revenue or funds received from subsequent investors to pay the 1 percent promised returns to early investors, to pay expenses, or to supplement the purchase of other apartments, and when the scheme was finally exposed, stopped paying on its obligations and left investors with huge losses and liabilities, and insufficient assets and value to cover those losses and liabilities," according to the complaint.

Higgins, Higgins and Christensen "bought and sold more than twenty C-grade apartment complexes as part of the scheme, which benefited the defendants," the investors say. "The Madison Group further orchestrated commercial loans to facilitate the purchase of the properties by investors ... In all matters, the Madison Group worked with the other defendants, or at least with the defendants' knowledge, purposeful ignorance and/or acquiescence to perpetrate and execute the underlying fraudulent scheme."

Defendants in the 58-page complaint include Madison Real Estate Group, Richard and Brandon Higgins, Allan Christensen, Lehman Brothers Bank, Aurora Bank, LaSalle Bank, Bank of America, Trans Lending Corporation, Rye Capital Services, Land America Assessment Corporation, Stroock & Stroock & Lavan, Crowe & Dunlevy, Lynch, Chappell Alsup, Capitol Abstract & Title Company, Buffalo Land Abstract Company, Western Abstract & Title Company, and Service Title Company.

The investors seek punitive damages for fraud, aiding and abetting, and negligence. They are represented by Marcus Mumford.

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