An enterprising scammer looking for an industry in which to make a mark — or find one — could do a lot worse than real estate. In the past year alone, authorities have revealed high-profile cases of money laundering in a never-ending game of Whack-a-Mole.
Real estate moguls make their bones with chutzpah, confidence and persuasion. Perhaps that’s why a business that’s minted more than its fair share of legitimate millionaires tends to attract droves of get-rich-quick schemers too.
The Real Deal sifted through the real estate underworld to identify some of the most audacious real estate scams in recent memory.
The sultan of squat
In March 2017, while living in a rented three-bedroom penthouse on Fisher Island, Prince Khalid bin Al-Saud arranged for his British investment banker to call Jeffrey Soffer, the billionaire chairman of Fontainebleau Development. The two shared a lifestyle of palaces and private jets, and the prince wanted a piece of Soffer’s most-prized asset: the Fontainebleau luxury hotel on Miami Beach.
The iconic property was struggling with debt, and the prince’s banker offered to purchase a 30 percent equity stake for $440 million.
“Jeff thought he found a sucker to buy in for a crazy valuation,” one source told Vanity Fair.
The two began a business courtship, as the prince flaunted his apparent riches. Soon, the royal demanded gifts — supposedly a matter of ritual in Saudi dealmaking — and Soffer responded with $150,000 in art and jewelry, including a $50,000 Cartier bracelet.
Like most great cons, the scheme was undone by a seemingly tiny slip-up. Over dinner one night in Aspen, the prince ordered prosciutto, Vanity Fair reported. Soffer’s security team immediately knew something was amiss — what practicing Muslim orders cured ham? Soffer’s team soon discovered he was no prince at all: His real name was Anthony Enrique Gignac, a Michigander born in Colombia and orphaned by the country’s drug wars.
Posing as the Saudi prince, Gignac had run various schemes since at least 2015, including bilking would-be investors of more than $8 million by claiming to offer pre-IPO shares in Aramco, the Saudi state-owned oil company, federal prosecutors alleged.
In November 2017, after Soffer’s team tipped off the government to Gignac’s scheme, the fraudster was arrested at John F. Kennedy International Airport for using another individual’s passport. Gignac was sentenced to more than 18 years in prison.
The Ukranians who bought Cleveland
Foreign money launderers have used their ill-gotten gains to purchase luxury real estate in high-end markets across the country, but the greatest laundered spending spree didn’t happen in Miami or Malibu. It happened in Ohio.
Ukrainian oligarch Ihor Kolomoisky co-founded PrivatBank in 1992 and soon grew it into one of the country’s largest financial institutions. But according to federal prosecutors, between 2008 and 2016, he embezzled and defrauded the bank to the tune of billions of dollars, writing himself massive loans — which he rarely repaid — through the bank’s subsidiary in Cyprus.
He then allegedly routed the money through a pair of Miami-based associates, Mordechai Korf and Uriel Laber, who invested the funds in real estate across the U.S.
Unlike flashier oligarchs who splurge on mega-mansions and penthouse apartments, Kolomoisky targeted commercial properties in second-tier Midwestern markets. His holdings allegedly included the 550,000-square-foot PNC Plaza building in Louisville and the former CompuCom headquarters in Dallas, but his most impressive work was in Cleveland.
In the downturn after the 2008 recession, as investors bailed on Midwestern markets, Kolomoisky snapped up office buildings and became the city’s biggest commercial property owner. His holdings in Ohio alone reached an estimated 5 million square feet .
A photo illustration of the Fontainebleau Hotel
He even acquired small-town steel plants in Kentucky, West Virginia and Michigan. According to a report by the Financial Transparency Coalition, Kolomoisky’s investments “left a trail of destruction across the U.S. by defaulting on mortgages, mismanaging their office towers and leaving former factory employees jobless after deserting their manufacturing and steel plants.”
The scheme began to unravel in 2014, as an anti-corruption movement swept across Ukraine and regulators began poking around PrivatBank’s books. The Ukrainian government nationalized the bank after authorities discovered a $5.5 billion capital shortfall on its books, and it soon found that 97 percent of all of its loans had gone to businesses controlled by Kolomoisky and his associates.
Last year, U.S. Secretary of State Antony Blinken banned Kolomoisky and his family from entering the country, citing Kolomoisky’s “involvement in significant corruption” and “current and ongoing efforts to undermine Ukraine’s democratic processes and institutions.”
Sweet, sweet revenge
It seems that two things grow on trees in Miami: coconuts and real estate scams.
Carlos Castañeda and Genesis Martusciello are just two of the millions of people who fled Venezuela in the past two decades as crime rates rose and economic conditions deteriorated. (If you think the United States’ current annual inflation rate of roughly 8 percent is bad, note that as of October, Venezuela’s was 210 percent, according to the International Monetary Fund.)
Corrupt Venezuelan leaders have long parked illicit money in South Florida real estate, and as the Trump administration ratcheted up sanctions on the country, Castañeda and Martusciello saw an opportunity, the Wall Street Journal reported.
The two realized that suddenly, sanctioned Venezuelan officials could no longer enter the U.S., so their Miami mansions and penthouses sat empty. In the murky world of South Florida hard money lending, some creditors apparently weren’t paying close attention to the news.
Castañeda and Martusciello first targeted Luis Carlos de Leon-Perez, a Venezuelan oil executive who pleaded guilty to corruption charges in 2018. The scamsters hired Venezuelan immigrants to pose as Leon-Perez’s wife and mother-in-law, who each had Bal Harbor apartments registered in their names. Using fake passports, they took out $4.5 million in loans against the properties.
Castañeda and Martusciello considered the Venezuelan regime to be corrupt, so taking from it felt like retribution, their friends told the Journal.
Their next target was Samark Jose Lopez Bello, a Venezuelan businessman who was nailed in 2017 for a money laundering and narcotics trafficking scheme. The U.S. sanctioned Lopez Bello and froze his assets. However, a Pinecrest mansion owned by a shell company registered in his daughter’s name wasn’t on the list of frozen assets, so its owner — or even its supposed owner — could still take out a mortgage against it.
With a co-conspirator posing as Lopez Bello’s daughter, Castañeda and Martusciello closed on a $2 million mortgage on the home. They soon refinanced that mortgage for $3 million and promptly took the money on a no-holds-barred Las Vegas bacchanal. Court records show that, in addition to blowing a mountain of cash gambling, they bought a Lamborghini and an $8,000 Pomeranian dog.
While running the mortgage schemes, Castañeda occasionally squatted in some of the empty homes, according to the Journal. His temporary addresses included the Four Seasons Residences in Brickell and a mansion tied to a fixer for Venezuelan President Nicolás Maduro’s stepchildren.
As the operation started to unravel, the Secret Service and the Aventura Police Department nabbed Castañeda and Martusciello in a sting operation. The couple and six co-conspirators went to prison, with sentences ranging from 28 months to six and a half years for identity theft and wire and bank fraud. And although the scheme’s perpetrators ended up behind bars, their riches have not all dried up: Castañeda allegedly stashed hundreds of thousands of dollars worth of watches with his mother in the Dominican Republic.
Inbox insurgents
Like so many other pandemic homebuyers, Danny Gonzales had to make one of the biggest purchases of his life in frighteningly little time. For his eighth wedding anniversary, Bloomberg News reported, Gonzales hoped to close on a home outside Austin, Texas. When he and his wife found a four-bedroom house that fit the bill, they moved quickly to lock it in.
Several other homebuyers were touring the property as the Gonzaleses finished their walk-through, so just two hours after seeing the house for the first time, they made an offer. The seller accepted: Cue celebration? (Of course not, this is an article about real estate scams.)
In the tidal wave of emails that flooded Gonzales’ inbox over the following weeks, a seemingly innocuous note from the title agent laid out the closing costs and instructions for where to wire the money. The agent noted that, due to Covid-related delays, some banks were slow to process funds. In order to ensure the money was transferred in time, the email read, Gonzales should wire the $123,500 three days in advance of the closing date.
Gonzales was no easy mark — he called the telephone number in the email, but the title agent was busy and said to email his questions. He sent instructions to his bank to wire the money and verified the Chase Bank account in New Jersey that would be taking it.
That was the last he would ever see of it.
Later that week, Gonzales’ real title agent called to confirm their closing and reminded him to bring a cashier’s check for the down payment.
“My heart dropped,” Gonzales told Bloomberg News. “I felt a sudden rush. It was a weird experience, like, ‘This cannot be happening. It’s not real.’ ”
It was a stealthy scam. The fake title agent’s email address had a letter “c” where there should have been an “e,” and was a Gmail account, but otherwise looked identical. By the time Gonzales was able to get law enforcement to track down his money the following week, it was already gone.
He was a victim of a Business Email Compromise scam, one of the most common forms of cybercrime. These schemes, in which hackers send wire requests from official or seemingly official addresses, particularly target first-time homebuyers, who are often so overwhelmed by the process that they miss small clues that something isn’t right.
A division of the Secret Service that targets cybercrime has recovered more than $244 million in proceeds from BEC scams, about a third of which came from real estate deals. Part of the problem is that the schemes have a low barrier to entry and the possibility of major paydays.
“You could arrest dozens, hundreds of these guys, and frankly, you wouldn’t make much of an impact in the day-to-day BEC volume,” Crane Hassold, a director at email security firm Abnormal Security, told Bloomberg.