Want to Invest in Real Estate? Look Out for Influencers and Ponzi Schemes

The U.S. Securities and Exchange Commission (SEC) has caught up with Ohio’s “Cash Flow King” Matt Motil. The online influencer defrauded people out of millions of dollars in what amounts to a Ponzi scheme, officials allege.

He used popular social media sites. He also touted the investment opportunities at issue on Biggerpockets.com. Motil advertised that he was empowering people worldwide to create massive wealth, the SEC alleges.

Motil, who promised people their rental estate investments would pay off hugely, for “a lifestyle you actually love,” filed for bankruptcy last March. But wriggling out of the multi-million dollar case hasn’t been so easy.

More Than 50 Investors Defrauded, Says the SEC.

Federal regulators are looking at unsophisticated fraud that significantly harms people financially. In this case, an alleged $11 million Ponzi scheme misappropriated money from 50 or 60 people over the span of four years.

The targets came from every walk of life, says an SEC lawsuit. They were retirees, soldiers, scientists. Each was taken in by false promises. They believed they’d get returns on their investments once the homes were fixed up, and then sold, refinanced, or used for rental income.

The defendant allegedly told investors that if they’d simply invest the funds, they would be in the role of banks, with ownership stakes in the homes. But no deeds were ever recorded in any of these investors’ names.

Investors were drawn to the opportunity to be a “real estate investing badass,” say regulators. But the SEC filings, and the Ohio bankruptcy papers, suggest a different reality. Noting the tangled, tell-tale signs of misrepresentations, SEC regulators sued, claiming violations of federal securities laws. The case is playing out in the U.S. District Court for the Northern District of Ohio.

The Trustee’s Office opposes the bankruptcy filing, as it would erase debt that Motil owes to the investors.

What Happened to the Money?

The SEC’s lawsuit alleges that Motil lives in North Olmsted, Ohio. It says he claims to have earned a law degree from the University of Akron School of Law. It says he had investors send him millions of dollars for homes — much more than their actual value. Specifically, the complaint alleges that Motil:

Gave dozens of investors questionable promissory notes, representing investments into fixing and flipping homes. These notes falsely appeared to fully cover any potential losses related to the customers’ investment buildings, which existed mostly around Cuyahoga County, Ohio.

Claimed that first mortgages were collateral for those promises, implying falsely that no one had higher priority in the investments than these misled investors had.

Repeatedly sold multiple promissory notes associated with the same property to multiple investors.

Hit up 20 different people for more than $1 million for a home worth just $130,000, for which the defendant had paid only $47,000.

Neglected the properties and did not fix them.

Use new investors’ funds to pay earlier investors, and to pay for personal and business expenses.

Enjoyed perks like a waterfront house, and tickets to sports events. Motil is alleged to have spent $73,000 on seats at Cleveland Cavaliers games alone — as well as tens of thousands of dollars at restaurants and coffee shops. The list goes on.

Paid off his spouse’s credit card debt to the tune of $400,000.

Used a website and various popular video sites and social media platforms to advertise real estate investing to still more potential investors.

These activities, and others, appear in a detailed complaint filed by the SEC in September, as reported by NBC, CNBC and other news outlets. Through this lawsuit, the U.S. government aims to stop Motil’s operations, keep Motil from serving as an officer or director, and pay up the debt, the fines, and interest owed.

Plus: SEC Claims Forgery of a Notary’s Seal

More than 50 investors got caught up in the alleged Ponzi scheme. But that’s not all.

Motil has also been accused of forging signatures on numerous real estate documents. He allegedly affixed forged notary seals to 30 or more mortgages.

All of this, not surprisingly, makes up a criminal act under Ohio law.

But although he was charged with forging notary seals in Cuyahoga County in 2021, those charges were dropped. That was before Motil’s “badass” scheme came crashing down in early 2022.

And so, finally, on the 25^th of September 2023, the federal Securities and Exchange Commission sued Matt Motil in federal court in Cleveland. Also sued are a number of Motil’s businesses: North Shore Equity Management and a string of other LLCs.

“Nearly Everything About His Scheme Was a Lie.”
— The SEC

In the suit against Motil, SEC attorney John Timmer wrote: “Nearly everything about his scheme was a lie.”

The SEC also says Motil is trying to avoid justice, by ignoring administrative subpoenas.

Meanwhile, in New York, Another Lawyer Pleads Guilty to a Real Estate Ponzi Scheme

In a $19 million case brought by the U.S. Attorney’s Office, Attorney Robert Wisnicki has pleaded guilty to paying earlier real estate investors with later investors’ funds.

Attorney Wisnicki also admitted to a conspiracy to commit money laundering.

Wisnicki has been managing real estate investments since 2007. It was a carefully designed setup. Investors were clients of actual real estate law firms: Wisnicki & Associates LLP and Wisnicki Neuhauser LLP. And they trusted this lawyer to facilitate their real estate investments.

Wisnicki chose properties, and represented clients in the transactions. He didn’t tell clients when properties lost money. He used other clients’ funds to cover up losses. He took money from new clients’ trust accounts to pay earlier clients, hiding what was really going on. This tangled web was woven for years.

Wisnicki, in taking the plea, agreed to pay nearly $19 million in restitution. But lives were derailed over the years before it came to this point.

Two Cases, Two Takeaways

It’s tempting to take risks in a frustrating economy. And the internet makes it easier to work with above-board investment companies — or to fund what could be opaque and unsteady schemes.

These two recent cases show that the styles of these schemes can look very different: hyped-up, or buttoned-down. Anyone can be taken in. Proceed with caution.

And one more thing. The time-tested way of investing in real estate is to own your home. You can hold your own deed, and manage your own real estate investment, by buying a home — even if you do it with other people, as tenants in common. And that’s pretty darned badass, if you ask us.

Supporting References

The Securities and Exchange Commission via SEC.gov: Press Release – SEC Charges Cash Flow King Podcast Host with Perpetrating $11 Million Ponzi Scheme (Sep. 25, 2023)

Rohan Goswami for CNBC LLC, a division of NBCUniversal, via CNBC.com: “Cash-Flow” Podcaster Made Off With Millions in Ponzi Scheme, SEC Alleges (Sep. 25, 2023).

Adam Ferrise for Cleveland.com (part of Advance Local Media LLC): North Olmsted House-Flipper Who Called Himself “Cash Flow King” Ran $11 Million Ponzi Scheme, SEC Lawsuit Says (updated Sep. 25, 2023).

The Real Deal^TM: “Cash Flow King” Real Estate Podcaster Accused of $11M Ponzi Scheme (Oct. 1, 2023). See also Ted Glanzer: New York Attorney Pleads Guilty to $19M Real Estate Ponzi Scheme (Sep. 24, 2023). The Real Deal trademark is held by Korangy Publishing Inc. of New York, NY.

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