Colorado-Based Investment Manager Accused of Misusing Opportunity Zone Funds
By Staff
The Colorado Division of Securities is pursuing legal action against an investment manager whom it claims has defrauded investors and misused the federal qualified opportunity zone program to benefit himself.
On Nov. 7, 2024, Colorado Securities Commissioner Tung Chan filed civil fraud charges, along with a motion for a temporary restraining order and an asset freeze, against Michael Dale Graham, 68, and his companies, including Sebastian Partners LLC, Sebastiane Partners LLC, Gravitas Qualified Opportunity Zone Fund I LLC, or GQOZF, and other entities which were allegedly controlled by Graham in an elaborate investment scheme. The Denver District Court immediately granted the temporary restraining order motion and the asset freeze. Since then, two court dates to review those orders have been canceled. A third is scheduled for mid-January.
“Mr. Graham’s investment scheme to defraud Colorado investors and enrich himself is particularly odious in misusing the promise of federal programs meant to help struggling communities,” said Commissioner Chan.
According to the securities office’s complaint, between May 2019 and December 2021, Graham allegedly raised more than $1.1 million from eight investors for the private GQOZF fund which he claimed was dedicated to long-term property investments in economically distressed communities. Graham also told investors that the fund qualified for the qualified opportunity zone program, which offers potential tax benefits to investors.
The complaint states that Graham, through GQOZF, purchased three homes in Aurora, Colo., and then quickly sold one without notifying investors. He then transferred the titles of the remaining two properties to himself and took out personal loans against them, totaling almost $600,000.
Graham allegedly never informed investors about the loans or the transfer of the properties. He also failed to send investors year-end tax reports, as required by law. The complaint also reports that Graham commingled investor funds with other businesses tied to him and used the money for personal purposes. According to the complaint, “Effectively, Graham used Gravitas as his personal piggy bank, claiming both funds and properties as his own.”
The complaint further states that Graham failed to disclose to investors a recent court order against him for $1 million in damages related to previous real estate projects.
According to the fund’s website, Gravitas Qualified Opportunity Zone Fund I LLC was formed in 2019 with the purported goal of acquiring single-family homes in order to operate as income-producing rentals in targeted opportunity zones.
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