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Questions About How They Could Have Afforded So Much Valuable Real Estate

A weekend topic starting with Crain’s New York Business. “The alleged masterminds behind a $4 billion international fraud, the investigation of which revealed how easily illicit money from around the world can find its way into major New York City real estate deals, were charged by federal prosecutors on Thursday.”

“The U.S. District Court in the Eastern District of New York indicted the Malaysian playboy financier Jho Low and banker Roger Ng for conspiring in a scheme to embezzle and launder money from a Malaysian state fund.”

“Full of international intrigue from Abu Dhabi to Hollywood, the scandal drew attention in the city for Low’s ostentatious purchases made with the illicit funds, including a $200 million investment in the Park Lane Hotel, and his acquisition of several high-priced apartments in Manhattan, such as a unit at the Time Warner Center.”

“Those assets were seized by the Justice Department as it investigated the massive theft, which was alleged to have been done with the cooperation of Malaysia’s former Prime Minister Najib Razak. Razak was arrested and charged in Kuala Lumpur over the summer.”

The Miami Herald. “After arresting four people — including the owner of a Miami-area realty firm — authorities in Argentina appear to have unraveled the mystery of a $65 million property empire that included luxury condos in South Florida and New York City, as they pursue a major corruption case against ex-president Cristina Fernández de Kirchner.”

“The four people arrested by federal police in Argentina last month are Elizabeth Ortiz Municoy, an Argentine national who runs an international realty business that until recently operated a branch in Surfside; Sergio Todisco, Municoy’s ex-husband and a clothing manufacturer; Carolina Pochetti, the widow of a former top aide to the Kirchner family; and Carlos Cortez, a businessman who travels between Argentina and South Florida.”

“Prosecutors accuse them of investing illicit money on behalf of the Kirchner aide, Héctor Daniel Muñoz, outside the country using a web of shell companies. The money was allegedly delivered to her homes in bags by a driver who kept meticulous notes of his deliveries. The driver is cooperating with prosecutors and has handed over notebooks listing his deliveries. (Lawyers for the Kirchner family have said the charges are politically motivated.)”

“One person listed in the notebooks as accepting bags of cash on behalf of the Kirchners, Muñoz, who for many years worked as the personal secretary of the now-deceased Néstor Kirchner, the late husband of Fernández de Kirchner and also a former president. Muñoz, whom his old boss affectionately called gordito, or ‘fatty,’ died in 2016.”

“But before that, prosecutors believe he used some of that money to invest tens of millions of dollars in properties in the United States, including expensive homes in Miami and Manhattan and commercial properties such as pharmacies and bank branches around South Florida. The properties — among them a CVS pharmacy building in Little Havana — were purchased by Florida companies registered to Todisco and Municoy, leading to questions about how the couple could have afforded so much valuable real estate.”

“Muñoz’s connection to the properties was uncovered when a leak of secret corporate documents called the Panama Papers revealed that he and his wife owned a British Virgins Island company registered in Todisco’s name.”

“The Florida and New York properties were later sold for nearly $73 million, and part of the money was reintroduced into the banking system and transferred to other U.S. states, as well as to Mexico, Hong Kong and Andorra, according to a report by a special financial crimes unit that was cited in press reports.”

From Mortgage Professional America. “A Massachusetts man has admitted to his role in decade-long mortgage fraud conspiracy that resulted in $4.3 million in losses to lenders over at least two dozen loan transactions.”

“Joseph Bates III pleaded guilty before US Senior District Court Judge Douglas Woodlock to one count of conspiracy, three counts of wire fraud affecting a financial institution, and two counts of bank fraud.”

“Bates was alleged to have defrauded banks and other financial institutions by causing false information to be submitted to those institutions on behalf of borrowers who were recruited to purchase properties primarily in Salem. Bates and his co-conspirators ran the scheme from 2006 through 2015.”

“The co-conspirators usually bought multi-family buildings with two-to-four units and then converted into condominiums. They then recruited other borrowers to purchase the individual condominium units and financing the purchases through fraudulent mortgage loans.”

“In many instances, the borrowers defaulted on their payments because they did not have the financial ability to repay the loans, resulting in foreclosures.”

“Bates faces a maximum sentence 30 years in prison, five years of supervised release, and a fine of $1 million for each of the charges of bank fraud and wire fraud affecting a financial institution. He faces up to five years in prison, three years of supervised release, and a fine of $250,000, or twice the gross gain or loss, whichever is greater, for the charge of conspiracy. A sentencing date has not yet been scheduled.”

This Post Has 13 Comments
  1. Note that in the first two reports, these major criminals head straight to US real estate to get away with the loot.

    1. I wonder what percentage of units in the supertall buildings being built in Manhattan is funded by foreigners looking to stash illegal money. Ditto for some of the absurdly overpriced playgrounds of the superwealthy such as the Hamptons. I wonder whether there will ever be a sweeping crackdown and if so, what the effect would be on prices.

      1. “what the effect would be on prices.”

        It may accelerate the price decline. As if prices aren’t falling fast enough as it is.

      2. Ben and other HBB posters have covered this before but I had a hard time finding any of those posts. This is one of the big factors in the RE mania up until now. Locally here in California the foreign investors have disappeared, I have read the same goes for WA. Either they can no longer get there money out (gov regulation) or they realize buying at the peak is not a good investment. Either way it’s better for us that want a home for shelter / family.

  2. Ben,
    Is there any chance we will ever get a system to get notified when someone replies to our posts? With the markets turning, the number of daily posts have gone up, and conversations among ourselves that aren’t at the top quickly get hard to track. We used to often have 80-100 replies to a single post, but that when there was only one post a day.


    1. I’ll look at the plug-ins again tomorrow. I appreciate the feedback on what you want because I don’t see the comments the way you do. I view them through the blog dashboard. What type of notifications are most useful?

      And if I put in a new plug-in, will that change the joshua tree thing?

      1. There are plenty of browser plugins that perform similar functions. If HBB plugins are going to slow or otherwise detract from or change the fundamental nature of the blog, I’d be skeptical.

      2. Ben.. very weird. I have the Joshua tree add-on, but it hasn’t updated since July (updates are on default).

        Let me force it to update and see what it does for me.

        1. Let me force it to update and see what it does for me

          4.7.3 is the latest version and should help.

          Ben, you do you and update the software as needed :). If for some reason it breaks things I’ll fix it on my end!

  3. If you remember “The Big Short” one of the things that got Dr. Burry interested shorting housing was the increase in mortgage fraud. Just another case of history repeating itself again. I may be wrong but it is a concept I subscribe to and will also guide me in investment decisions. Just not credit default swaps. I am not in that league. Time to go back and watch that movie again. In a few years, there will be a “Big Short 2”.


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