Sometimes, one or two unfortunate wrong moves can lead to a bottomless ponzi scheme in order to keep finding funds to cover the mishaps.
A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. (In other words, the money gets misappropriated for their personal use, such as to pay off investors of previous non-existent "investments."
A number of ponzi scandals have recently come to light regarding Brooklyn and Lakewood community members.
One such scandal, which involves a Lakewood based company which - as first reported here on FAA News - is involved in a massive ponzi scheme affecting numerous Lakewood area residents, as well as investors from across New York, New Jersey, and Ohio.
The instant matter involves a residential apartment building located in Fort Lee, New Jersey, known as the Sterling Apartments.
The Lakewood duo purchased the building in June 2022 with a $46 million mortgage. There were a number of investors involved in this deal.
The borrowers failed to make the required monthly payments due on January 9, 2023 and haven't paid the mortgage ever since. (For those keeping score, January 2023 was the very month that their Iowa nursing homes investment also went bust).
After a few months of non-payment, MF1 2022-FL9 LLC, the lender, represented by New York attorneys Baron C. Giddings and John M. Doherty, Esq. filed legal action in New Jersey Superior Court, Chancery Division, in Bergen County, seeking a foreclosure.
In addition to seeking to default on the unpaid mortgage, the lender also alleged that the owners transferred the deed without permission from the lender, in violation of the mortgage agreement. This violation also permits the lender to declares the loan in default and accelerates the loan.
The complaint sought judgment of (i)$46,000,000.00 in principal; (ii) accrued and unpaid interest at the contract and default rates; and (iii) attorneys’ fees, costs and expenses.
One of the property owners retained an attorney, and he successfully slowed down the foreclosure proceeding by assuring the judge that any rent which is collected goes directly to building upkeep expenses and no funds are diverted, yet, somehow there simply isn't sufficient funds to pay the mortgage.
Eventually, Judge Edward A. Jerejian had enough and he granted a foreclosure, ordering that the lender is entitled to judgment in the amount of $46,351,247.38 plus unpaid interest in the amount of $2,109,228.61, as well as attorneys’ fees in the amount of $193,323.51, costs in the amount of $4,315.92 and protected advances for tax payments in the amount of $150,817.97.
Judge Jerejian also directed the county sheriff to sell the property to satisfy this judgment, and to appoint a rent receiver to manage the building until it is sold.
The final judgment in the matter was docketed just recently.
In a stunning upset, the second business partner has just obtained a Temporary Restraining Order staying any enforcement of this judgment pending an additional court hearing next month.
In an emergency application to a New York Supreme Court judge in Manhattan, the second business partner, who has just retained an attorney, argued that he didn't receive proper service of the complaint as the process server purportedly attempted to serve him, 1) at the Lakewood office, however he has not worked there ever since his business partner locked him out of the office; and 2) by handing the important papers to his 12 year-old son at his home, however his son was too young to understand that he needed to give those papers to his father.
Justice Andrea Masley accepted these arguents and granted an immediate temporary restraining order staying enforcement of the judgment pending a hearing to be held on Monday, June 10, 2024.
The scandal highlights how important it is to be very careful prior to investing any money.
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