A Good Example of Investment Fraud
As a follow up on my piece about investment fraud, I received the following from the State of Texas Securities Board. I thought I would share it with you because this case had all of the red flags. I also want to make you aware of what fraud looks like.
Austin Real Estate Swindler Sentenced to 15 Years
James Elton “Jim” Warr of Austin, who promised guaranteed returns from investing in real estate, was sentenced to 15 years in state prison on Dec. 1 after his conviction in Travis County on four first-degree felony counts.
Warr, 69, stole $1.1 million from individuals who bought investment contracts in unregistered real estate notes offered by his company, Warr Investment Group (WIG). The notes were supposedly backed by income-producing properties.
Warr promised investors they would earn 8% annual interest compounded monthly –an extraordinary, and unrealistic, return for what Warr said was a "no-risk" investment.
Warr told investors that all their money would be used to purchase property or real estate notes. Warr said he would take his share of the profits only after the investors were paid.
Warr never invested in enough properties to generate the promised returns. Instead, he used investor funds to pay commissions to at least one unregistered sales agent and buy a Mercedes Benz, among other expenses unrelated to the real estate investment program.
Warr was never registered to sell securities, and the WIG investments were not registered for sale.
This case had all of the characteristics of fraud.
`Investment promoter unregistered`
`Guaranteed rate of return that was high`
`Claim of no risk`
I share this with you because these scams are occurring. Investors have a tendency to want to believe the high return risk free investment is out there. Just remember, there is no free lunch.