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The head of Pinnacle Development Partners, Gene O’Neal, plead guilty to fraud charges in the bilking of real estate investors over the past 2 years. O’Neal used fancy advertising in national publications to lure in investors to fund his lifestyle. Instead of investing in real estate like the prospectus said, O’Neal created a ponzi scheme where the newer investors paid off the older investors and O’Neal kept the float and a big 2.5 million dollar salary to boot.

I fear that more and more stories like this are going to come out as the growing foreclosure market continues to tantalize potential passive investors. If you are looking to invest with someone else flipping foreclosures I sincerely recommend finding someone you know and can actually see where the money is going.

With this much money floating around and very little regulation the scam artists like Pinnacle Development Partner’s will be very happy to fleece unknowing investors.

The indictment said the firm and O’Neal raised about $69 million (€51 million) from some 2,000 investors throughout the U.S. and several foreign countries, ostensibly for the purchase of distressed, foreclosed or bank-owned real estate that would be sold at a promised return of 25 percent within 45 or 60 days.
Instead, the indictment said, O’Neal used newer investors’ contributions to pay back money owed to older investors, racking up huge debts along the way. A statement from prosecutors Tuesday put the amount of money raised at $62 million (€46 million).
The indictment says O’Neal raised the money for his scheme in 15 months using slick advertising that promised hefty returns in a short period.
Besides big bucks spent on advertising, the indictment says O’Neal used investor assets to pay more than $2.5 million (€1.8 million) in salary and commissions and more than $700,000 (€514,668) to furnish Pinnacle’s offices. The indictment says investors’ money was used to buy a $72,000 (€52,937) Land Rover, a $69,000 (€50,731) Cadillac Escalade, a $117,000 (€86,023) Maserati and $26,000 (€19,116) worth of jewelry. via  International Herald Tribune.

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