Belize Infrastructure Fund Linked to Multiple Alleged Frauds
Did you invest in the Belize Infrastructure Fund? If so, you may be entitled to damages. Like so many investments that promise a high rate of return, it allegedly served only to line the pockets of brokers rather than to further the financial goals of its investors.
The SEC charged the creator of the Belize Infrastructure Fund, Brent Borland, with fraud in 2018, after he had received over $21 million from 40 investors. Borland told investors that he was using their investments to construct an airport in Placencia, Belize. Borland converted around 30% of that $21 million to purchase a Mercedes-Benz SUV, make payments on a Florida mansion, and pay for beach club memberships. A number of investors were allegedly defrauded, and in 2019, Borland pled guilty to securities fraud and wire fraud.
Borland’s Belize Fund endeavor lasted from 2014 to 2018, but the ghost of Belize Infrastructure Fund I, LLC, continues to haunt the securities industry. The SEC has discovered evidence of other brokers working with Borland to sell Belize Fund securities, and attorneys are looking for potentially defrauded clients to come forward.
Kevin Graetz and Minish “Joe” Hede are two of Borland’s alleged co-conspirators. In 2014, broker Graetz allegedly introduced Borland to executives at his firm, Paulson Investment Company, LLC, in hopes that the firm would approve the sale of Belize Fund promissory notes. The firm did not receive enough information to approve their sale and declined to offer Belize Fund notes in 2014.
In 2015, Graetz and Hede allegedly began secretly working with Borland to circumvent their firm and sell Belize Fund securities to their clients. This would violate SEC rules and regulations — brokers are supposed to have their sales approved by their firms. Selling securities without the firm’s approval is called “selling away,” as described by FINRA Rule 3280.
The SEC complaint alleges that Graetz and Hede sold approximately $9.6 million worth of Belize Fund notes. Their clients lost their investments, while Graetz and Hede allegedly raked in hundreds of thousands of dollars in commissions from Borland.
The SEC also alleges that Graetz and Hede used private, non-firm email addresses and cell phones to communicate with customers about the Belize Fund. They then allegedly instructed their clients not to contact their firm about the investments. Finally, in 2016, one of these clients allegedly disobeyed their instructions and reached out to Paulson Investment Company about the Belize Fund securities they had purchased.
When confronted by their firm, Graetz and Hede allegedly lied, saying that Borland was using their names to sell the Belize Fund securities. That explanation didn’t seem to hold much water, and after an investigation, Paulson Investment fired both Graetz and Hede in 2017.
After their own investigation, the Financial Industry Regulatory Authority (FINRA) barred Hede and Graetz in 2018. In addition to this regulatory action, the brokers also face civil charges from the SEC. The SEC complaint requests that the New York District Court order the brokers to disgorge their allegedly ill-gotten gains, as well as pay money in civil penalties. “Disgorgement” refers to the repayment of money obtained in an illegal manner.
How can investors avoid brokers who don’t have their best interests at heart?
There are a couple of preliminary steps any potential investor should take — steps that can they can complete from the comfort of a home computer.
Check Your Broker’s Record for Customer Complaints
Investors should research their broker’s background before handing over their portfolio. Even a simple Google search will often reveal essential information about a broker with an especially checkered record. For a more thorough look at a broker’s history, enter their name into BrokerCheck. BrokerCheck is a public record of a broker’s client complaints, regulatory actions, tax liens, criminal charges, and civil actions. These entries in a broker’s record are called “disclosures.” Only a small percentage of brokers have a large number of disclosures — one paper found that 7% of brokers have at least one disclosure, and that only one-third of that 7% are repeat offenders.
As of 2014, Graetz already had multiple client complaints in his BrokerCheck record that should have kept investors away. Dating back to 2001, his record reveals a long list of tax liens and multiple customer disputes with settlements. Hede had multiple disclosures as well, starting in 1999. That said, BrokerCheck doesn’t always have the full story, since brokers can request to have disclosures removed.
Verify the Details of Your New Investment
Investors should also perform their due diligence and investigate the details of any new investment. All of the allegedly defrauded Belize Fund clients were promised high returns, which should always prompt thorough research. High returns also come with high risk, even in the case of sound speculative investments.
On top of that, overseas investments should come under an especially high level of scrutiny, since it’s always more difficult to perform due diligence with securities based in another country. For instance, Borland told clients that their investment would be secured by properties in Belize. Many of these properties, the SEC later alleged, did not exist. It’s unclear whether the investors double-checked any of the information about the properties, but even if they did, it would probably be more difficult to navigate property records in a different country. When considering a high-risk investment, investors should stick close to home so they can see for themselves if the facts check out.
What Can I Do If I’ve Lost Money?
The Belize Infrastructure Fund I, LLC still exists. The government moves slowly, especially in the midst of a pandemic. In fact, as of publishing, Borland still has not received his sentence. If you think the facts of this case sound familiar, it’s not too late to try to recoup your losses. Call (877) 238-4175 or email firstname.lastname@example.org to contact the securities attorneys at Fitapelli Kurta.