SEC fines fraudulent real estate manager

A purported real estate investment manager is paying the Securities and Exchange Commission more than $500,000 after settling charges that he misled investors.

From 2013 to 2014, 18 investors lost about $682,000 out of the $915,000 they invested with James Toner. The Scottsdale, Arizona resident claimed to be a real estate investment manager who was buying three residential properties around Phoenix, Arizona with plans to renovate and sell the assets at a profit.

Toner, who operated under various entities, additionally misappropriated $51,000 of investor funds, “which he attempted to conceal through a series of transfers between numerous bank accounts,” according to the SEC. He stole $20,000 directly from one investor and took $31,000 in undisclosed management fees, though he did not manage the properties.

Toner falsely told investors he was investing in the properties himself, though he and his wife were in out-of-state bankruptcy proceedings for other failed real estate projects at the time. The SEC also said that Toner told some individuals to lie about their lack of status as accredited investors.

In settling with the SEC, Toner neither admitted nor denied the charges.

“Toner defrauded investors with false promises that he would manage their investments and personally invest along with them,” Andrew Calamari, the director of the SEC’s New York office, said. “Instead he siphoned off some investor money as management fees and handed over the rest to a third party without any due diligence.”

That third party, an unnamed broker, was under federal investigation for tax evasion and fraud when she worked with Toner, and has since been sentenced to four years in prison.

Since at least 2008, Toner has built a business marketing real estate investments across the US, hosting in-person seminars and webinars. He also sold instructional materials called “We Do It For You” that instructed individuals on how to invest in real estate for a “few thousand dollars” each, according to the SEC. From these businesses, Toner, a self-described “millionaire investment real estate expert,” built a database of thousands of individuals to whom he then marketed his investments. As of press time, the website for his main entity, “Creating Wealth 101,” was still live.

This is the second real estate-related action the SEC has taken this month. Last week, the SEC permanently barred Scott Landress, a co-founder of real estate secondaries firm Liquid Realty Partners, from the securities industry. He also must pay a $1.25 million penalty to the SEC within 20 days, after being charged with improperly withdrawing £16.25 million ($20.37 million; €19.02 million) in undisclosed fees from two Liquid Realty funds, Liquid Realty Partners III and Liquid Realty Partners III-A.