The United States’ Securities and Exchange Commission (SEC) has issued North Dakota Developments LLC (NDD) with a temporary restraining order and had its assets frozen in the U.S. and elsewhere in the world.
The company had been selling its hotel room investments in the U.S. state of North Dakota throughout Southeast Asia, including in Singapore and in Malaysia where it had opened offices to service its investors, on the back of an oil boom in the Bakken area of the state.
Overseas property investors were targeted with marketing for the cash-only investment that included assured returns of 56.66 percent in three years, funds held in an Escrow account, a three-year buy-back plus 10 percent uplift on the original purchase price, full title deeds and income paid monthly.
In recent weeks PropertyGuru had been contacted by worried NDD property investors from around the world, including from Singapore, Malaysia, Thailand, Hong Kong, Spain, the United Kingdom, Canada and the United States. It is thought many hundreds of investors of Southeast Asia risk losing their investment.
When PropertyGuru spoke to Robert Gavin in late March and early April he admitted there had been some delays to several projects, but was adamant that: “In terms of the U.S. Securities laws violations and anti-fraud provisions, we refute these allegations that have been made against us, and will cooperate fully with any regulators’ enquiries.”
No further comment has yet been forthcoming when PropertyGuru asked for a statement in light of Tuesday’s 11-page court order.
That order, issued on May 5 by Judge Daniel Hovland, also covers company assets in the United Kingdom and Malaysia, and requires the company to provide details of its accounts, agents who sold the product and other related material within two weeks.
Lawyer Brenda Hamilton has been acting for some of the concerned investors from around the world.
A story published on her website said: “The SEC charges allege that the defendants misappropriated the funds entrusted to them.
“Investors were told to deposit their money into an Escrow account in the U.S. The funds were transferred to a NDD account in a North Dakota bank. Those accounts, and others, were solely controlled by Hogan and Gavin (NDD’s directors). Until recently, even the company’s accountants had no access to it,” she alleged.
She also alleged that the main NDD account received approximately US$62 million from investors, and that as of February 2015 US$100,000 remained despite the fact that very little work had been completed on the four projects.
“They also spent more than US$10 million on undisclosed sales commissions to unlicensed intermediaries, and over US$2.4 million received from later stage investors which was used to pay promised returns to early stage investors.
“That last is the classic hallmark of a Ponzi scheme.”
She added that foreign investors were at a particular disadvantage as they were unfamiliar with U.S. laws and practices, and unlikely to make telephone inquiries, let alone visit North Dakota to see whether the projects were proceeding as described.
Additional information: https://www.securitieslawyer101.com/2015/north-dakota-developments