Ponzi Schemes: Beware of More Mortgage Scams

With the current crisis in the housing market, investing in companies that buy, renovate and sell properties might seem like a moneymaking idea.  There’s no doubt that those return on investment opportunities do exist but it’s an investor beware market.

Someone asking you to invest in buying, renovating and selling properties might seem like a real estate market savvy business person in the current market but then again over 500 victims and $30 million were racked up by what can be really can be called a Ponzi scheme.

Have you received an offer of something like 60% return on investment?  If it sounds to good to be true, it probably is.  Last month Juan Rangel, a California con artist, was convicted of running a Ponzi scheme and was sentenced to 22 years in prison.

He wasn’t targeting the already wealthy with his get rich quicker schemes.  Rangel was targeting people who were already homeowners in distress.  A Mexican national himself, he was targeting mostly Spanish speaking, working class people in Los Angeles.

Although his company, Financial Plus Investments, has never been licensed by the United States Securities and Exchange Commission he was advertising through mostly Spanish language venues including newspapers, television infomercials and radio ads.

As with all Ponzi schemes, Rangel was really collecting money to pay off prior investors in his pyramid scam, in addition to his mansion valued at $2.5 million dollars as well as a luxury sports car.

Sometimes fraudsters are hard to apprehend.  In the case of Juan Rangel, with an investigation that included the FBI with partnership from the United States Postal Service and the Internal Revenue Service’s Criminal Investigation Division, Rangel wasn’t hard to find.  He was already in jail for trying to bribe a bank official.

Think you couldn’t be a victim?

Here’s how Rengel and his Ponzi scheme sniffed out victims.

a) Default on their mortgage

b) Still had equity in their homes

Beginning in 2007, Rengal and the vice president of fraudulent company began seeking out investors by identifying people who were:

Spanish speaking employees were used to visit targeted homeowners with “Latino surnames.”

If there was a bite then Rengal himself or his VP, who was also charged in the scam, would visit the homeowners offering a way to not only avoid foreclosure but to profit with a co-signer with good credit but in other cases could do a “temporary sale” in which they could still live in their home with a sale after which the title to their home would be return them in a year or less.

The Ponzi scheme fell through when there weren’t enough new investors to pay off the previous ones.  Financial Plus shut down in July 2008.

A former employee claimed that if investors showed up complaining, employees were then given a commission to keep them from insisting that they got their money back.

Home is where the heart is, which is makes mortgage frauds both an easy and a heart wrenching scam.  It’s not just homeowners but also apartment hunters that need to beware of scams.

If someone offers to help you solve a default on your mortgage loan beware.  They may not just be robbing Peter to pay Paul.  They may be robbing you to pay themselves.