The real estate blog.

Another real estate scam hit the news today. This time mortgage fraud wasn’t involved, but real estate was still the center of the scam.

Promising yearly returns of 18%, Kenneth K.C. Tebbs involved dozens of people for millions of dollars in a scheme he claimed was tied to legitimate real estate investments. The “investment” was backed by title to real estate, but when investors checked up, they found nothing.

KSL reported -

They thought their money would be used to purchase residential lots in booming communities in Salt Lake and Utah counties, and company notes indicate their money was secured by deeds of trust.

We asked Gomez if he has his name on a lot.

“No,” he answered. “It was never secured.” He doesn’t know where the

money went.

This investment opportunity, presented by companies MNK Investments and/or Twin Peaks Financial Services, is a typical Utah based scam, based on the principles of a Ponzi scheme. The investors involved are out hundreds of thousands of dollars. The total amount lost amounts to millions of dollars.The allegations are sweeping through the south end of the Salt Lake Valley. They involve dozens of investors, millions of dollars, and a deal that sounded so good even law enforcement signed up.

Many of those duped used borrowed money, mainly from equity lines, to finance their investment. Now that money’s gone. I wrote extensively about this exact same scam concerning failed real estate investor Casey Serin some months ago. He too came to Salt Lake to investigate one of the dozens of companies that engage in this illegal activity.

This type of scam is nothing new. It was made famous in the 1920’s by a crook named Charles Ponzi who ultimately had this version of malfeasance named after him. Whether it’s wrapped up as real estate investing, stock investing, currency investing or tulip investing the end result is the same, the investor loses their money. The brilliance in the scheme is the fact that early on, the promised returns are actually delivered. The operator of the scheme pays earlier investors with money from newer investors and gets those people to commit even more money to the scheme.

In the end, no new investors are recruited and the scam collapses with only the operator left with any money. In this instance, as with every instance, the operator says they did nothing wrong. Mr. Tebbs is so bold as to ask the judge to let him go -

But in the response to the civil lawsuit, he says he’s unable to repay or refund the investors at this time and asks the judge to dismiss the claims against him.

I suggest the judge throw the book at Mr. Tebbs because he’s had the money to buy nice cars, a nice home, a boat and other luxury items.

In the civil lawsuit filed recently investors did ask a judge to make sure the owner of the company can’t sell his cars, his boat, his motorcycle and other items until they get a shot at getting their money back.

So how does one protect themselves from such a situation? First of all quit believing everything you hear. If it’s too good to be true, it is! Ask questions. My cursory investigation of Mr. Tebbs shows he had an insurance license that lapsed in 2005. Why? I suspect it was because he was raking in “investment” dollars. He also had a mortgage license. It too lapsed. Again I ask why? And why was he conducting a real estate investing business without a license? These are the questions you ask when you invest hundreds of thousands of dollars. If you don’t know to ask them, you shouldn’t be investing, especially not borrowed funds.

The sad thing is there are dozens of these schemes floating around in Utah. If you currently have money in such a scheme, pull it out as fast as you can. Even if you’re making money right now, you need to get it out. Eventually, the pyramid will come crashing down and you’ll have nothing left.