When federal regulators charged John Kralik with securities fraud last month, the allegations boiled down to one blunder: The sponsor pitched investors on one thing and did another.The head of JKV Capital sold investors on plans to fix and flip foreclosed homes, pulling in $17 million through a mix of online advertising and social networking.
He then spent the money on a Mercedes-Benz, a vacation in Cabo San Lucas and swimming lessons for his kid, a lawsuit filed by the Securities and Exchange Commission claims.
Fraud happens every day. But Kralik’s alleged wrongdoing is unique to this cycle.
Kralik raised money by tapping Regulation D — a securities rule that lets investors fundraise out from under the prying eyes of regulators.
It has a few versions. Kralik used the latest addition: legislation passed in 2012 that allowed crowdfunders to advertise investment opportunities online. It became a hit with the multifamily syndicator crowd — groups that pool funds to buy properties...
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RSK: If you put partnerships together remember to disclose, disclose, disclose....and make sure your investors are not putting money in that they cannot afford to lose....i.e. retirement account, kids tuition etc. But above all, make sure it is a good property that not only works on paper but in real life.
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- - Volume: 24 - WEEK: 32 Date: 8/6/2024 3:59:59 PM -