The ongoing mess that is 1031 Advance has turned into a Chapter 11 reorganization. The Huron Consulting Group and Van Prooyen-Greenfield LLP are heading up the “cleanup” of both the financial mess and public relations train wreck. So what really happened to $151,000,000 of client monies? Where did it go, who took it or “placed it”, and why???
As with my first posts on this saga, I wish to reiterate that rumor, gossip, and innuendo are “unsubstantiated” forms of communication. Are they fact? In some cases they are and in many cases they are not fact.
Pat Kitano in his article “1031 Exchange Companies are not Regulated” succinctly outlines the tragic lack of regulations and enforcement in place in this industry. It is truly a “Buyer Beware” climate.
With this idea in mind, I received a phone call from my original source who tipped me to the 1031 Advance “closing.” My east coast source had some new news; so take it with a grain of salt or follow it up as you see fit. Here it is. . .
According to my attorney friend, the culprits behind the mess are the people who originally left the company–those responsible for running the 1031 Advance San Jose show. The rumor is that these people “placed” the client funds, in question, into non liquid assets. Those assets are rumored to be Real estate.
In laymen terms, the group responsible for holding their clients’ funds used those funds as their own personal investment slush fund. Again the speculation via rumor is that these people felt they could invest client monies in real estate, hold the real estate for a short time, then quickly sell off these holdings for a profit before the money came up missing. It appears to be a lesson in “other people’s money” investing where the “investor” (1031 Advance personnel) risks someone else’s money not their own. Again this is unsubstantiated rumor from a source claiming to be close to the industry and business. . . take from it what you will.
Because of the amount of interest I have received on this case, I am going to do a follow up piece describing the recent Southwest Exchange rip off in Las Vegas, Nevada.
In addition, with the help of industry experts, I will be compiling information and questions potential 1031 exchange clients need to ask when investigating companies to perform their exchange.