Fla. Crowdfunding Firm Pleads Guilty to Fraud
The newest type of real estate investing still carries risk: A Jacksonville crowdfunding firm owner pleaded guilty to mail fraud when some projects didn’t fully fund.
JACKSONVILLE, Fla. – Crowdfunding has become a popular real estate tool that connects individual investors directly to specific projects, but like any other commercial venture, it carries a risk of fraud.
In a recent Jacksonville case, the owner of a company that oversees crowdfunding – a middle man that accepts investor money to be used toward a specific project – failed to return that money after it didn’t reach the total amount needed to proceed with the project.
According to the U.S. Attorney’s Office for the Middle District of Florida, Daniel Summers of St. Augustine pleaded guilty to mail fraud and now faces a maximum penalty of 20 years in federal prison. A sentencing date has not been set, and the United States is seeking forfeiture in the amount of $744,910 – the proceeds Summers obtained as a result of the fraud. The amount of restitution due to victims will be determined later.
According to court documents, Summers owned a Jacksonville-based company called Realty E Vest, which also did business as IHT Realty Group, an internet crowdfunding investment platform for real estate development projects. Summers also owned E Vest Technology, which sought to develop and license the Realty E Vest crowdfunding platform to other companies that also wanted to manage crowdfunding efforts.
Under that business model, individual invested in projects by wiring funds to Realty E Vest, where the funds were supposed to be held in escrow until the project met its crowdfunding goal. If a project failed to meet its goal, Summers promised to return the investors’ funds.
However, after several Realty E Vest crowdfunding projects failed to fully fund, Summers intentionally kept investors’ money and misappropriated it to fund the ongoing operations of his companies, including paying employee salaries.
Summers then acted as if the failed projects were fully funded, giving “victims the illusion that they had successfully invested in these projects,” according to the court. He paid investors “investment returns” for the failed projects via mailed checks or wire transfers. He also repaid some victims’ investments if they complained after discovering their crowdfunding projects failed to fund.
However, the money to pay these people wasn’t from the real estate developers or any legitimate investment activity; instead, it came out of victims’ principal investments in other crowdfunding ventures and equity investments that Summers solicited in E Vest Technology.
This case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney David B. Mesrobian.
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