According to the SEC, developer Jay Belson and five companies he controlled – Smarte Real Estate Investments; Jack Rockman, LLC; John Blackstone, LLC; Residence at St. Ives; and Bellagio Place Residence – falsely promised investors that they would earn a minimum rate of return and share in profits generated by successful property flips. Belson also allegedly promised investors that he and his company would only be paid from the profits of successful sales or specific fees.
Belson raised about $18 million from at least 23 investors with those promises, the SEC said. He then allegedly stole more than $1.8 million in investor funds. He also allegedly comingled investor funds among different projects despite promising to keep them separate.
Belson’s alleged theft was eventually discovered by one of his largest investors, according to the SEC. When the investor confronted Belson about the theft, Belson replied, “You’re 100% right,” and said that he was “not sure how I got my attitude so twisted up on this.”
Belson did not admit or deny the allegations in his settlement agreement. As part of the settlement, Belson and his companies must pay $1.9 million in disgorgement and interest. Each of the five companies must pay $905,000 in penalties, and Belson will pay a penalty of $1.1 million.
The settlement is awaiting court approval, according to the SEC.
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A California real estate developer has agreed to fork over more than $7.5 million to settle allegations by the Securities and Exchange Commission that he bilked investors in a house-flipping scam.