Giant Scam Alleged in Turks & Caicos

(CN) - Investors who thought they were buying luxury villas in the Turks and Caicos Islands say the so-called developer fleeced them for $50 million and spent their money on multimillion-dollar homes for himself and his co-conspirators and bribes to public officials to keep the scam going.

The 20 plaintiffs in Manhattan Federal Court say the masterminds of the scam were Cem Kinay, "an Austrian and U.S. national with a history of questionable business practices and associations," and his "partner in the fraud ... Oguz Serim."

The plaintiffs claim Kinay and Serim carried out the scam through "a web of alter-ego entities."

"Of the nearly $100 million that the project took in from sales, less than a third was spent on construction," the complaint states. "And of the approximately $75 million in villa purchaser funds that went into the project, over $50 million of which came from plaintiffs, less than $7 million was spent on constructing the villas. The rest was stolen."

Meanwhile, the plaintiffs say, Kinay and Serim spent their suckers' money on "among other things, an $8 million Miami Beach home, bribes to government officials, unrelated real estate ventures, payments to related entities without consideration and globe-trotting on private planes."

According to the 79-page complaint, Kinay bought 209 acres on Dellis Cay in 2005, and then he and Serim marketed the land as a soon-to-be developed luxury mixed-use property.

"The scheme was simple," the complaint states. "Induce purchasers to pay over $50 million to purchase lots and to have villas developed on those lots, falsely proclaim that Kinay and his alter-ego entities had obtained sufficient construction financing to complete the project - when they secretly knew that they had no such financing; obtain the lending institution's cooperation in fraudulently inducing purchasers to continue to make installment payments towards the development of their respective villas (because it was in both the lender's and Kinay's interest for purchasers to continue to make payments); "make specific misrepresentations as to the status and schedule of development to insure that purchasers' money kept flowing; use purchasers' monies and what money they could siphon from the bank loan to lavish themselves with worldly material possessions including multimillion-dollar homes, private planes, and to (literally) bribe public officials in connection with attempts to expand the project; and when they finished extracting as much money as they could - walk away from the project."

The plaintiffs seek actual damages of at least $50 million, punitive damages, prejudgment interest and court costs for fraud, negligent misrepresentation, breach of fiduciary duty, unjust enrichment, breach of good faith and fair dealing, conversion, negligence, aiding and abetting fraud, and commercial bad faith.

Here are the defendants: O Property Collection USA Inc.; O Property Collection GmbH; O Property Collection TCI Ltd.; Turks Development LP; Turks General Partners Ltd.; Turks (BVI) Holdings Ltd.; Turks Ltd.; Dellis Construction Ltd.; The SUU Hotels; Trinidad and Tobago Unit Trust Corp.; Mandarin Oriental Hotel Group International Ltd.; Avatar Real Estate Services LLC; Cem Kinay; Oguz Serim; William Tacon; Stephen Katz; Marjorie Kinay; Cenk Kinay; Mer Insaat; and Halis Sumer.

The plaintiffs are represented by Todd Soloway of Pryor Cashman LLP in New York.

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