Home Alts News SEC Charges Convicted Fraudster in Real Estate Ponzi Scheme

SEC Charges Convicted Fraudster in Real Estate Ponzi Scheme

The Securities and Exchange Commission announced that they charged Wilson Baston with defrauding numerous investors in a Ponzi scheme, in which he raised millions of dollars through dozens of transactions purportedly to fund real estate investments, but frequently used the money to instead pay off earlier investors and for personal expenses.

According to the SEC, the Ponzi-like scheme was fully conducted by Baston, a convicted felon who used the alias “Chanon Gordon” to conceal his true identity and criminal history while raising millions of dollars in investments from dozens of victims. Since at least 2018, FINRA says Baston solicited more than $10 million in investments based on the false representation that his purported business, the Gordon Management Group, would use investor funds for real estate-related transactions and repay investors, with substantial interest, using the profits from such transactions. Howeever, Baston did not use investors’ funds as promised and instead used a substantial portion of the funds to pay for unrelated expenses and to make payments to other investors in a Ponzi-like manner.

In many instances, Baston reportedly issued promissory notes to investors that memorialized their investments in GMG. Baston raised at least approximately $4 million through transactions involving notes. Pursuant to these notes and related documents, Baston often represented that he and GMG would use investors’ funds to facilitate real estate transactions through the advancement of closing costs to third party real estate purchasers or the making of a down payment to secure a sales contract on a particular property and resell it to a third-party purchaser. Baston typically promised to repay investors their principal with a high rate of interest equal to up to 25% of the principal within mere weeks of their investments.

In some instances, Baston also purported to pledge collateral to the investors that he either did not own or significantly overvalued. Baston also offered investment contracts in some cases, in which he agreed to pay investors a percentage of net profits (with a guaranteed minimum) on the relevant real estate transaction, in addition to a fixed rate of interest on their principal.

To carry this out, Baston used bank accounts in the name of GMG. For example, Baston directed that investors transmit their funds to GMG accounts and accessed GMG accounts to use such funds for cash withdrawals, personal expenses, and repayments to other investors. More recently, with little cash left in GMG accounts, Baston resisted repaying investors their promised principal, interest, and/or guaranteed share of purported transaction profits. After providing various excuses for delays in repayments, Baston stopped responding to communications from several investors, who have lost large amounts of money as a result of Baston’s fraudulent conduct.

“As we allege in our complaint, Baston deceived investors by using an alias to conceal his criminal history and by initially making payments to create the false appearance of a successful investment strategy,” said Tejal D. Shah, associate regional director of the SEC’s New York Regional Office. “This case is yet another example of the SEC’s constant efforts to stop those who profit from lies at the expense of investors.”

The SEC’s complaint, filed in the Federal District Court for the Southern District of New York, charges Wilson Baston with violating the antifraud provisions of the SEC and seeks permanent injunctive relief; disgorgement plus prejudgment interest; a civil penalty; a conduct-based injunction, which, among other things, would prohibit his future participation in the sale of promissory notes and investment contracts; and an officer and director bar.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Wilson Baston.

Click here to visit The DI Wire directory page.