BOISE (CN) - Douglas Swenson defrauded investors of millions of dollars through dozens of companies he misrepresented as real estate investments, but which actually were unregistered securities, the State of Idaho claims in Federal Court.
The state claims Swenson, of Eagle, Idaho, took $19.5 million through various of his companies, including DBSI and 1031 Quorum. He claimed Swenson knew that he was pushing unregistered securities, "but preferred to market them as real estate products for reasons set forth" in this lawsuit. Swenson allegedly misrepresented his securities as real estate investments and/or 1031 exchanges.
"In order to understand how Defendants violated Idaho securities law in regards to the Quorum property transactions described below, it is necessary to understand how these transactions relate to a larger enterprise," the complaint states.
"Defendants, and related entities not named in this complaint, raised hundreds of millions of dollar by issuing securities in the form of investment contracts to thousands of investors in every state and numerous foreign countries involving hundreds of real estate properties. Defendants conducted an enterprise that identified properties and investors, purchased the properties, and then sold the properties at an inflated price to the investors. Defendants kept a small interest in the properties and managed the properties on behalf of the investors. Defendants typically set up a limited liability company for each property, eventually organizing hundreds of companies. Integral to the enterprise was defendants' ability to use the profits from new sales, as well as revenue generated by managing the properties, to purchase new properties. The Quorum property transactions described below are similar to those related to hundreds of other properties involved in this enterprise. The Quorum property involved seventeen investors and an aggregate investment of $19.5 million."
The state demands restitution of $9.75 million, penalties for fraud and sale of unregistered securities, and an injunction.
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