South Florida Firm Charged By SEC With Running $50M-Plus Ponzi Scheme
A South Florida couple, one of whom is a convicted felon, is being accused of bilking more than 600 investors out of $56M as part of a real estate Ponzi scheme that promised to as much as double returns in three years.
The U.S. Securities and Exchange Commission charged Janalie Bingham, also known as Janalie Joseph, her husband Jean Joseph and their company, Wells Real Estate Investment, in the alleged scheme, in which they sold promissory notes backed by South Florida commercial and residential properties with interest payments of 12% to 99% annually, according to the lawsuit filed Aug. 12 in the U.S. District Court Southern District of Florida.
The lawsuit also names 23 properties tied up in Wells-affiliated limited liability companies as relief defendants that were valued at $46M at the time of purchase but were “heavily financed through mortgages and generate insufficient income to pay the debt financing, operating expenses and promised investor returns,” according to the SEC.
The SEC also accused Bingham, who acted as CEO of Wells, of failing to disclose a number of other facts to investors in the firm’s marketing materials, including that her husband was the co-head of Wells and was convicted of wire fraud in 2019 for misappropriating $3M while running Evergreen United Investments, The Real Deal reported. Joseph was sentenced to 15 months in prison in 2019, ordered to pay restitution and placed on supervised release in 2021, a year after Wells was established, the TRD reported.
While Wells did spend $11M of investor funds on real estate, most of the money was allegedly misappropriated for other purposes, including $6.9M on paying undisclosed commissions to sales agents and $10M to repay investors' interest and redemptions. Bingham and Joseph also reportedly spent $1.8M on personal expenses and nearly $2M to buy a six-bedroom, 6K SF home at 980 Parkside Circle in Boca Raton. Bingham later filed a quit claim deed on the property and transferred the title to herself for $10, the SEC alleges.
Some $28M, the biggest chunk of investor money, was allegedly used by Joseph to trade in securities despite telling investors the capital would go toward real estate. Wells set up 42 brokerage accounts, with Joseph telling employees he could double investor money investing in speculative futures and options trading versus investing in the properties, which he said “did not generate enough property rental income to support its business operations,” according to the lawsuit.
Joseph told one former employee that “there is no reason to invest in real estate. Zero,” according to the suit. He is accused of losing nearly $12M in those trades.
In February, Best Meridian Insurance Co. of Florida, a subsidiary of Miami-based BMI Financial Group, filed to foreclose on a $7.2M mortgage attached to an office property at 3361 W. Oakland Park Blvd. in Broward County, which was owned by a Wells affiliate. Bingham, going by the last name Joseph, acquired the property in March but ceased making debt service payments in May. The property continues to be subject to the SEC lawsuit.
A U.S. District Court judge ordered asset freezes on Wells and its holdings, appointed a receiver for the investors and is seeking a permanent injunction against Bingham and Joseph as well as repayment of money to investors, according to the SEC.
Bingham has not responded to requests for comment.
