Should Bernie Madoff Go Free?
The world watched as Congress prodded Special Counsel Mueller to rehash his report and the DOJ announced massive antitrust investigations into the tech companies. The story many might not have seen is one released by CNBC: Ponzi scheme king Bernie Madoff wants his sentence commuted by President Trump. This would not be exoneration. Rather, it would just terminate his years in prison. Apparently, the man who destroyed countless lives has had enough of prison life – not quite Central Park South.
While Mr. Madoff did not invent the Ponzi scheme he seemed to have perfected it. Since his case numerous others have followed, often with the same results – law enforcement actions are brought, some funds are recovered, numerous investors suffer financial ruin and broken lives. That is undoubtedly the case with the Commission’s most recent case in this area, SEC v. Smith, Civil Action No. 2:19-cv-00519 (D. Utah Filed Jul 23 2019).
Twenty-nine year old Landon Smith is the managing member and owner of J&L Real Estate Group. Over a two year period, beginning in late 2016, his business enterprise took in over $2.6 million. The business was straight forward. He was a real estate “wholesaler.” As such Mr. Smith had the opportunity to earn significant returns on property deals.
As a wholesaler it was Mr. Smith’s job to locate suitable properties, negotiate the price and contract, put up the earnest money and maintain the deal until it closed. The earnest money is where the public got its chance, according to Mr. Smith. He cut them in by letting individual investors put-up the required sum. He would of course be responsible for the deposit the funds on deposit. If things went well the returns would be substantial. If not, then those returns would be nominal.
To support his claims Mr. Smith showed the would-be investor documents pertaining to the properties. Those legal documents mirrored the investment and the real estate deal, giving validity to the transaction.
Not quite. There were no deals. There were no investments. There were no properties. There were no investor profits. There were personal items purchased for Mr. Smith. There were trips for Mr. Smith to places like Hawaii. There was a good time and a good life for Mr. Smith. The complaint alleges violations of Exchange Act Section 10(b) and Securities Act Section 17(a)(1). The case is pending. The Utah U.S. Attorney’s Office announced a parallel criminal action. Perhaps some day Mr. Smith will think he has served enough time. Perhaps by then the investors who paid for the trip to Hawaii will have recouped their lost cash, but probably not. Mr. Madoff . . . what would the investors say?