Largest Real Estate Scam Ever Challenged by the FTC

A federal court in Maryland has issued an order temporarily shutting down the largest overseas real estate investment scam the FTC has ever targeted. According to FTC defense lawyer Richard B. Newman, the Federal Trade Commission, the promoter made promises about a tropical paradise called Sanctuary Belize featuring a championship golf course, a new airport with direct flights to the U.S., and a hospital staffed with American doctors. The FTC reports that U.S. consumers sunk more than $100 million into the purported resort.

How it Worked

According to the Commission, advertisements for Sanctuary Belize frequently ran on Fox News and Bloomberg News. Consumers who expressed an interest received calls from California-based telemarketers who styled themselves as “property consultants” or “investment consultants.”

As set forth in the Complaint, the Sanctuary Belize telemarketers made a host of deceptive claims, including that every dollar from lot sales went directly into development, that the location would be ready for occupancy quickly, and that their “no-debt” business model made it a less risky investment.

The FTC also says prospective buyers were told that the luxury amenities meant the value of their lots would double or even triple in just a few years, making for easy resale.

False Telemarketing Claims

The FTC alleges that telemarketers made six false claims in their pitches to sell lots in the development, including that:

• A “no-debt” business model was used, which makes buying a lot in Sanctuary Belize less-risky than a real estate investment in which the developer must make payments to creditors like banks;
• Every dollar collected from lot sales goes back into the development;
• The continual funding stream means that the development will be finished quickly;
• The development will include impressive amenities, such as a hospital staffed with American doctors, an emergency medical center, a championship-caliber golf course, an airstrip and a new international airport with direct flights to the United States;
• The amenities will ensure that property values will double or even triple in two to three years; and
• It will be easy for buyers to resell their lots.

What the Complaint Alleges

The complaint charges that when consumers visited the area before investing, Sanctuary Belize representatives made the same false promises and assured prospective buyers that construction would be quickly completed.

The regulatory enforcement complaint alleges that consumers also were falsely reassured by prestigious-sounding “awards” Sanctuary Belize supposedly won and by the development’s affiliation with some well-known brand names in the real estate and resort world.

In reliance, according to the Commission, consumers paid between $150,000 and $500,000 to purchase lots and pay monthly HOA fees. According to the lawsuit, the defendants used consumers’ cash to fund their own lavish lifestyles.

Charges include violations of the FTC Act and the Telemarketing Sales Rule. Corporate and individual defendants were named, once of which appears to be a recidivist violator. The FTC has also filed three related contempt actions.

The lawsuit also charges Belize’s Atlantic International Bank, an offshore financial institution, with assisting and facilitating the Sanctuary Belize scam.

See here for more about Atlantic International’s alleged involvement.

“The defendants in this case operated a sophisticated international real estate investment scheme that cheated consumers out of millions of dollars of their hard-earned retirement savings,” said FTC Chairman Joe Simons. “The FTC is committed to stopping this outrageous behavior and compensating the hundreds of victims.”

Takeaways and Tips

Retirees are considered a vulnerable class of consumers by the Federal Trae Commission. “Get in on the ground floor” promotions are attractive and come with inherent risks. Anyone engaging in such promotional activities should consult with experienced and independent FTC defense lawyer about the risks that such transactions can present.

Richard B. Newman is an FTC attorney at Hinch Newman LLP.Contact him via email at rnewman@hinchnewman.com, or follow him on Facebook, LinkedIn and Twitter.

Attorney advertising. Informational purposes only. Not legal advice. Previous case results do not guarantee similar future result.