Preventing Check, Wire, & Crypto Fraud in Real Estate Syndications & Investment Funds

Learn essential strategies to prevent wire and cryptocurrency fraud in real estate syndications and investment funds, including key legal precautions. To get started with your syndication or fund, visit https://www.moschettilaw.com

Preventing wire and cryptocurrency fraud is a critical concern for real estate syndicators, fund managers, and business leaders involved in private securities offerings. Understanding the risks and implementing safeguards is crucial to protect both your investments and your investors. This video covers the essential steps to mitigate the risks associated with wire transfers and cryptocurrency transactions in the context of real estate syndications and investment funds. From secure communication protocols to verifying transaction details, you’ll learn practical strategies that can help you avoid costly mistakes. Whether you’re just starting out or have an established operation, staying ahead of potential fraud threats is key to maintaining trust and credibility in your financial dealings.

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Moschetti Syndication Law Group is a boutique syndication law firm, serving small and growth-bound syndicators, as well as private equity firms. Our attorney, Tilden Moschetti, is determined to keep the firm’s ‘boutique’ size so we can tailor the services to each client’s unique needs without turning the firm into a faceless factory churning out private placement memorandums or passing unnecessary overhead expenses onto our clients. (As our client, you’ll only pay a fixed fee, so no surprises.) As for the client experience, we give real-time answers with Tilden Moschetti without making you book an official appointment or get passed along to associates or paralegals. We’ll work with your ambitions and overall vision to help you close the current deal and fill in that ‘missing’ piece – whatever you need – to keep adding more syndications to your portfolio. We keep syndicators syndicating (TM).

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Episode Transcript

Tilden Moschetti (00:00):
So that investor is ready. They're going

(00:02):
to make a deposit into youraccount. You're excited to have
them, because it's going to behuge. Your Investment Fund is
almost full. But how do we makesure that there isn't wire fraud
or check fraud or somethinggoing on that ultimately, at the
end of the day is going to hurtyou? You

Unknown (00:20):
this day

Tilden Moschetti (00:31):
and age, wire fraud, check fraud, crypto
currency fraud, are allcommonplace. Unfortunately, it's
very challenging in today'sworld to be able to just take
the money that you need to takeright when an investor wants to
invest most of the time, itworks out great, but not every
single time. And when itdoesn't, when there's fraud

(00:53):
going on, that can cost you,personally, a lot of money and a
lot of heartache, or it couldcost your investors, which is
probably even worse than itcosting you. So let's go through
some of the things to thinkabout when we're thinking about
all these kinds of fraud. Soobviously there's all sorts of
different kinds of fraud that'sgoing on. So let's just take a

(01:16):
general overview about what'sgoing on in those common
schemes, basically to defraudyou out of your money. Now,
simple ones that we can thinkabout are those email phishing
scams where it's like, clickhere and give us your account
number. It's Wells Fargo, it'sChase Bank, and you your
account's been hacked orsomething bad like that, right?

(01:36):
That people unintentionallymisread these they believe it's
from an authentic source, andthey put in that information.
Now that's not really the commonsituation here, but what does
happen from time to time, theone, certainly the one that I
have seen personally, not to meor to one of my clients, but
actually to one of my peers.What happened was somebody had

(01:59):
intercepted an email, hadaltered the wiring instructions
on that email, and that moneynever came in. That is wire
fraud, and it could certainlyhappen to you if steps aren't
taken to prevent it. So in thiscase, what had happened is
somebody from overseas wassending in a large sum of money.

(02:21):
In this case, it was over $2million that was being sent and
the to, you know, a friend ofmine, to appear. So he never got
it. He knew the wire had takenplace because the clients said
they had placed it, but theynever received anything. Now,
what happens in a situation likethat? Well, fortunately for my

(02:43):
friend, what had happened is onthe wiring instructions on the
very bottom, it said, pleasecall to verify the all the
information to make sure that itis going to the right bank
account first, and we willverify it on the phone for you
to make sure that there isn'twire fraud. This is to prevent
fraud. Do this first that wasboldly there, and it was in

(03:06):
there on the same copy that thethat the person who was wiring
the money had, who's to blame atthe end of the day? Well, it's
the guy who sent the money,because it said right there,
please call and verify. And theynever did. So they lost $2
million just based on wirefraud. Doubtful that they will

(03:27):
ever invest with this guy, butyou know that certainly can
happen. So that's a very commontype of scheme. The other kind
of scheme I've seen is this sortof fake. Well, we transferred
the money by Bitcoin to you,here's the wallet that you need
to log into. Oh, looks like youneed to pay an upfront fee in

(03:48):
order to get access to thatwallet. And then there's some
sort of scheme that takes placethere. I've seen that happen too
as well. The third kind of thingthat I've actually seen as well,
Boy, I've seen a lot of these,is check fraud, where somebody
writes a check, sends the checkfor deposit, except it wasn't a
real check. Sometimes banks cantake a long time, like up to 30

(04:13):
days, in order to process acheck. It looked like a real
check. It had the name of a kindof a real bank on it. It
certainly was a bank thatsounded real, except it wasn't
real. At the end of the day, thecheck gets cashed. It's still
pending. And then the pressurecomes from the scammer to say,
give me the money back. Give methe money back. Give me the

(04:34):
money back. I'm going to file alawsuit. I'm going to complain
to the SEC you're going to jail.What you do is you can't you
give them the money only to findout that check wasn't real. The
money never actually hits yourbank account and you've just now
made that scam, or whateveramount of money you've just sent
him. So that's the real kind offraud that can take place, and

(04:55):
it can affect syndications andinvestment funds. You. So what
can you do to prevent wire fraudand check fraud from hurting
your investment fund orsyndication Well, first off,
like I said before, make surethat on your wiring
instructions, it's gotverification instructions. So
make sure that it says veryclearly, hey, if you if you're

(05:20):
wiring money, call our office,talk to this person and make
sure that the funds are there.Make sure that this is the
correct account number. You haveour phone number. Verify that
the phone number is correctbetween what you see on the
wiring instructions and what yousee here, just to prevent that

(05:41):
issue from changing thoseinstructions as well. But that
verification is very important.So always, always, always do
that. If you're a client of mineand you've wired money to me,
you've seen it there, eithercall Tilden or call Christian
and verify those, those wiringinstructions. It's there for a
very good reason. The other ideais secure communications. Make

(06:05):
sure that your email is lockeddown if you're going to send
those by email, make sure thatthat happens that way, or make
some sort of mechanism in orderto secure that transmission to
it. Make sure that it's eithertakes place through, you know, a
DocuSign agreement so it'sencrypted in that there can't be
any alteration of it, orsomething like that, in order to

(06:27):
ensure that the rightinformation gets sent. And then
third, just make sure you'reaware. Make sure that you are up
on different ways that checkfraud, wire fraud, takes place,
that you can be on the lookoutto do that, to protect yourself.
Now to another way to predict,prevent wire fraud and check

(06:49):
fraud and crypto fraud, that isalso just good for the whole
world is educate your investors.It's something worth talking to
them about. I mean, I'm talkingto you about it right now,
because it's useful information,and you need it, and you should
be talking to your investors tooabout it, because why you're
putting it there, it's really toprotect them. Ultimately, just

(07:12):
like I'm talking to you about itnow, is really to protect you
ultimately. So have an awarenesscampaign make sure that they
know that this is, this isreality, and that you, because
you're a professional, becauseyou've got their best interests
at heart, you're making surethat they have this information
in order to protect themselves.You also want to have some

(07:32):
verification process built in,and that can be by verification
on the wire, as we talked about,or if they're paying by check,
verify that it's a real checkand something like that.
Certainly if it's certifiedfunds from a huge new US Bank, I
probably wouldn't be too worriedif the if everything on it looks
proper, and if the routingnumber is the same, it's

(07:55):
probably pretty good that it's anot a fake check. If it's a
cryptocurrency, God, help you.You've got some challenges here.
It's very difficult to prevent,prevent fraud in the crypto
space, just by its very nature.And third, what you want to do
is report any suspiciousactivity, any suspicious

(08:17):
behavior, to the authorities,and make sure that you know it
gets stopped. It may not be yourinvestors that are doing it. It
probably is somebody that's abad actor somewhere in the
middle, and you want to put astop to that, to protect your
investor and to protectyourself. Now, if you, as an
investment fund manager or asyndicator, do suspect wire

(08:39):
fraud, what do you need to do?Well, you got to act fast. So
these people move thesescammers, they move super fast.
You want to protect yourselfearly, as quickly as you can. If
you notice anything suspicious,you find out, you do research
and make sure that it's on thelevel. I've had conversations
with my clients, making surethat when they're transferring

(08:59):
money back, or these thingshappen, making sure that it's
going to be taking place in amechanism that's going to
ultimately protect the investor.Paper. It make sure that the
anything bad happens, it's noton you make sure it's on
somebody else. If it's theinvestor that you're returning
money, to have them say, Yes, Iwant the money back. I want the

(09:21):
money back by wire. These arethe wiring instructions. You
verify the wiring instructionsat the bank. Make sure that
everybody knows okay, this hasall been verified, and that's
just to protect you. So takeimmediate action. Now also
report anything that's bad tothe FBI? Yes, the FBI, Internet

(09:43):
Crime Complaint Center, is thereto help you prevent wire fraud.
That's their role. So obviously,wire fraud is international, is
national and international, butas far as the US is concerned,
that is handled by the FBI,they've got a whole. Division
that takes care of this toprevent this from happening, and

(10:04):
then make sure that you've gotprocedures in place, make sure
you've got instructions aboutwire fraud and things like that
to make sure that you'reprotecting yourself. Wire fraud,
crypto fraud, check fraud, those
are all things that actually doface that syndicators and
investment fund managers do faceand you should be working
actively to prevent it, not onlyfor you, but for your investors

(10:27):
as well. It is good for theworld to make sure that those
people who are trying to stealthat money get punished in the
way that they deserve, which isthey don't get punished in the
way they actually deserve, butthey get punished a little bit.
Ultimately, they really shouldbe. You know, locked up, thrown
away the key. And those peopleare the scum of the earth, the

(10:49):
absolute scum. They do notbelong anywhere near us. So wire
Frau, obviously, I care a lotabout that. So, check fraud,
wire fraud, crypto fraud, be onthe lookout. Be safe. Make sure
that your client's money issafe, that your money is safe by

(11:11):
preventing these types of thingsfrom happening. My name is
Tilden moschetti. I'm asyndication attorney for the
moschetti syndication Law Group.Now, if I can help you put a
syndication together or aninvestment fund together, I'd be
happy to talk with you more ifyou're interested in knowing how
to do prevent wire fraud orcheck fraud or crypto fraud, or

(11:32):
you've got a case specifically.I'm actually not the guy. I care
a lot about it. I want you tohave the information, but if
it's specifically related tothat that you need information
on. You definitely do need helpfind an attorney who specializes
in that area. But if you need anattorney that specializes in
forming the syndication or theinvestment fund, that's me. I

(11:53):
specialize in reg D offersspecifically Rule 506 B and Rule
506 C, if we can help you puttogether that investment fund or
syndication, give us a call,we'd be happy to help you.