The short-term, high interest rate loan business has made everyone from loan sharks to registered businesses a great deal of profit. Perhaps that’s the backdrop hatching Gina Champion-Cain’s scheme that separated 50 investors from $300 million. See SEC Press Release, SEC v. Gina Champion-Cain, ANI Development, LLC and American National Investment, Inc.
The Start of a Scam–Loans for Liquor Licenses
When a company seeks a liquor license in California, business law dictates the license seeker place the amount of license fee in escrow. Enter Gina and ANI to help business owners. Gina supposedly developed a relationship with an escrow company providing an investment vehicle for third party investors to make short-term loans for businesses seeking liquor licenses, charging interest rates of 15 to 25%. Investors placed money in what they thought was an escrow account where their principal would be safe. When liquor licenses became final, investors would get their principal and interest. In a second scheme, investors executed promissory notes which Gina personally guaranteed. The second investors were guaranteed to receive interest payments within one year of their investment.
Details to Make Fraudulent Investment Look Legitimate
To make the business look legitimate, escrow documents were executed. Unfortunately, Gina purportedly forged the escrow company’s signatures on contracts. The Defendant presented investors with lists of business owners seeking licenses so investors could select which licenses they wanted to fund. Unfortunately, the real escrow documents between ANI and the escrow company gave defendants complete control over investor funds.
Greed Through Email
Even after receiving hundreds of millions of dollars from unsuspecting investors, the defendant wanted more. Gina wasn’t running a “you’ve been hacked” email scheme. Nor was she running a phishing scheme. Instead, Gina sought more money from people she’d already scammed. She allegedly penned an email under the escrow company’s name and email address stating the escrow balance had $140 million with 554 open files. Feeling good about this supposedly on-going business, investors sunk another $2.2 million into the deal. The email was neither written nor sent by the escrow company, and the account balance was actually only $11 million. SEC Complaint
Warning – Investment Fraud is often Difficult to Detect
Think you’d never fall victim to securities fraud or fraudulent investment scheme? Careful! Investment fraud comes in new forms every year. How much risk could there be when loaning relatively small amounts of money to businesses with terms less than a year? Gina hatched a very lucrative scheme that duped very wealthy investors. Here are some facts from the SEC Complaint that will make investors nervous.
- Alleged scammer, Gina Champion-Cain, CEO of California parent corporation, American National Investments, Inc., owned 42 businesses including restaurants, rental properties, coffee shops, and a surfing supply store. SEC Complaint
- “First Investor,” a successful real estate investor, had previously done business with the defendant.
- The “First Investor” invested $250 million, including rollover principal and interest.
- “First Investor” brought his friends into the deal to the tune of another $50 million.
- In a 2017 round of investments, none of investors’ over $87 million landed in escrow accounts. Some of the money went directly to defendants, while another portion paid investors to continue the Ponzi scheme.
- Not one single dollar was ever loaned to a business owner or company seeking a liquor license.
- Investment fraud continued for seven years.
A business investment fraud lasting seven years should be a flashing sign reminding investors to stay vigilant. We hope your investments are safe and yield high rewards. However, if you find yourself in need of a commercial lawyer or a breach of contract attorney, we are ready to put our decades of winning business law experience to work for you.
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