Jay Belson, a Beverly Hills broker and developer who specializes in luxury real estate, will pay more than $7.5 million in a settlement with the Securities and Exchange Commission, which accused Belson of defrauding investors in a series of house flips in Southern California.
The SEC complaint alleged that Belson and five companies he controlled, Smarte Real Estate Investments; Jack Rockman; John Blackstone; Residence at St. Ives; and Bellagio Place Residence; made false promises to a number of investors, including telling the investors that they would earn a minimum rate of return and be able to share in the profits from successful house flips.
According to the SEC, Belson also allegedly told his investors that he and his companies would only make money from the profits on successful flips or through “specifically identified development and management fees.”
Via these “false promises,” Belson raised approximately $18 million from at least 23 investors, the SEC said.
The SEC complaint states that instead of only taking money in those specific circumstances, Belson allegedly stole more than $1.8 million in investor funds.
According to the SEC, Belson pocketed some of the money and used some of the money to cover certain operating costs, including office rent, utilities and salaries.
Belson’s alleged malfeasance was discovered by one of his largest investors after Belson failed to pay the appropriate returns back to the investor.
According to the SEC complaint, the investor in question demanded and received access to the companies’ bank and accounting records. The investor then analyzed some of the bank records and discovered that Belson had allegedly been misappropriating funds.
The investor then confronted Belson about the alleged theft, accusing Belson of “taking other people’s money to support your life in hopes that we made a profit to make people whole, while putting everything in jeopardy.”
According to the SEC, Belson then admitted to the theft, stating (via the complaint) “You’re 100% right [….] i’m [sic] not sure how I got my attitude so twisted up on this.”
As part of the settlement, Belson neither admitted to nor denied the SEC allegations, but chose to settle nonetheless.
Under the terms of the settlement, Belson and the companies he controlled agreed to the entry of final judgments “permanently enjoining them from violating the charged provisions of the federal securities laws, ordering Belson and the entity defendants to pay, jointly and severally, $1.9 million in disgorgement and interest, ordering each of the entity defendants to pay approximately $905,000 in penalties, and ordering Belson to pay a penalty of approximately $1.1 million,” the SEC said.
The settlement is pending court approval.