British property developers are accused of scamming millions of pounds from investors in a Ponzi scheme in the USA.
Robert Gavin and Daniel Hogan, who run North Dakota Developments based in Milton Keynes, Buckinghamshire, allegedly raised £40 million from investors through a string of property investment companies acting as agents.
The money was for building four camps for workers in the North Dakota oil fields, where homes are in short supply.
More than 1,000 investors piled cash into the scheme on the promise of 25% to 42% returns only to find Gavin and Hogan used their money to pay agent commissions and to finance luxury lifestyles.
The US Securities and Exchange Commission (SEC) has frozen the assets of North Dakota Developments and the two men while seeking an injunction from the courts to stop the pair raising more money.
‘Ill-gotten gains’
The SEC also wants the courts to force the pair to hand back what officials called ‘ill-gotten gains’.
Papers filed with the courts allege that the firm failed to complete any of the projects and that no permission was granted for their construction.
Investigator Michael Cates claims Hogan had £640,000 switched from the firm’s bank account into his own without any business purpose and that he spent more than £120,000 on meals, entertainment and other personal expenses.
“The firm misappropriated more than £16 million of investor funds to pay commissions to sales agents, pay Gavin and Hogan, invest in unrelated projects for their benefit and to make Ponzi-like payments to keep investors happy,” the court papers say.
According to the US investigators, North Dakota Developments has little cash in the bank, but £1.6 million was switched to the UK recently.
Investigation continues
Sales agents picked up £6.5 million in commission without the knowledge of investors. One sale firm was also run by Gavin and Hogan. That firm – Property Horizons Group Ltd – received £1.2 million.
Property Horizons has filed no accounts with Companies House and the firm’s web site is closed.
The investigators believe more lost funds will be revealed and that investors in at least 10 countries have lost at least £77 million.
The UK Financial Conduct Authority investigated Gavin and Hogan’s business activities at least a year ago and ordered them to refund investors for breaking financial regulations in Britain, but investors are allegedly still waiting for their cash.
