See how this $600 million New Jersey real estate Ponzi scheme fell apart

Welcome back, GowerCrowders! We’ve got a heck of a newsletter for you this week. We’ll check out a few new deals, including the Marshall Fork Farm from AcreTrader and a New Offering with OZ Tax Benefits by an Award-Winning Architectural Firm and Record-Breaking Sponsor over at CrowdStreet.

In general industry news and platform updates, we’ll look at recent SEC charges against a New Jersey Real Estate Development Firm and Four Executives Charged with $600 Million Ponzi-Like Fraud, and Cadre’s recent moves to lower minimum investments in a proposed REIT fund to reach retail investors for the first time

We will finish off with a podcast, an enlightening discussion with Steve Gesis – COO, Smartland– hosted by our very own Dr. Adam Gower.

Let’s get into it.

New Crowdfunding Platform Deals

First up is the Marshall Fork Farm, a 240-acre soybean, corn, and sugar beet farm in Marshall County, Minnesota. The farm sits in a region of Minnesota with seriously productive, rich, nutrient-dense soils and long-term history of agriculture production- with the infrastructure that comes along with a thriving agriculture scene.

The farm’s total price is $1,250,400, which breaks down to a cost of $5,210 per acre for 240 acres. The deal has a minimum investment of $10,420 and an estimated minimum ownership duration of 5-10 years. See for yourself on AcreTrader, here.

Next is the Copper Flats, a multifamily project in Philadelphia targeted at up-and-coming Millenials and Zoomers. The project is helmed by a tenured, award-winning sponsor based in Philly, the City of Brotherly Love. The sponsor, Urban Intent, is a multifamily affiliate of Scannapieco Development, a tenured sponsor with more than 40 years of experience in Philly real estate. 

Copper Flats has a targeted investor IRR of 12.7%, a targeted equity multiple of 2.5x, a targeted investment period of 10 years, and a targeted average cash yield of 9.1%. Find more detail at CrowdStreet, here.

General Crowdfunding Industry News

Here at the newsletter, we always try to bring you news of the latest scams and scoundrels in the RE crowdfunding space. We do this for two reasons- to keep you informed, so you stay away from them- and to ensure you understand that it is still the wild west out there in many ways. There is plenty of gold, but also proverbial bandits, stagecoach robbers, and highwaymen. 

On October 13th, the SEC announced charges against a New Jersey firm, NRIA, or “National Realty Investment Advisors LLC.” The SEC also brought charges against four executives at the firm, accusing them of running a Ponzi-like scheme that bilked more than $600 million from over 2,000 investors. Executives Rey E. Grabato II, Thomas Nicholas Salzano, and Arthur S. Scutaro- all from New Jersey, and Daniel Coley O’Brien of Southampton, New York- are accused of soliciting investor funds in a nationwide campaign promising investment returns of up to 20%. 

In actuality, investor funds were used to pay back other investors and fund executives’ personal and luxury purchases. In a very modern twist, much of the money was also diverted to pay for reputation management firms to stop investors from performing adequate due diligence on the executives. Read the SEC complaint for yourself on the official SEC site, here.

Crowdfunding Platform Updates

Real estate investing fintech firm Cadre recently announced the launch of their “Cadre Horizon Fund,” targeting smaller investors, with minimum investments as low as $1,000. Cadre plans to register the fund with the SEC as a REIT in 2023, following the “40 Act real estate investment fund” designation. 

The term “40 act” refers to any pooled investment vehicles led by a registered investment firm operating under the rules of the 1940 Investment Companies Act. Cadre’s Horizon Fund is currently only available to accredited investors, but once it is registered with the SEC as a REIT, it will also be available to nonaccredited investors. Learn more at Marketwatch here.

Multimedia Links (Videos, Podcasts, etc.)

Finally, we’re going to look at the latest episode of “The Real Estate Crowdfunding Show,” hosted by our very own Dr. Adam Gower. In this week’s episode, Adam speaks with Steve Gesis, the COO at Smartland, a platform for the tokenization of real economy assets. In the podcast, Gesis discusses how they’re making waves in the B and C class multifamily sector by providing B and C tenants with Class A amenities. 

In addition, they leverage innovative revenue sources and other methods to keep tenants longer and generate higher revenues than the competition. Tune in to get the background behind Smartland’s secret sauce and advice to weather the next storm in the real estate markets. Check it out on Listen Notes here.

That’s it for this week- but we will see you next time with all of your favorite crowdfunding news stories, new deals, platform updates, podcasts, and more!

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