The Securities and Exchange Commission has filed civil charges against Matthew Motil, a real estate entrepreneur known for his podcast "The Cash Flow King," accusing him of orchestrating an $11 million Ponzi scheme. Motil, aged 42, stands accused of defrauding over 50 investors by marketing ostensibly low-risk, high-yield promissory notes supposedly backed by first mortgages on Ohio homes. Contrary to his promises, Motil did not secure the promised first-lien positions and routinely sold multiple promissory notes, all supposedly secured by the same property, to multiple investors. This misconduct, as per the SEC's complaint filed on September 25 in federal court, led to significant financial harm.
Key takeaways from Ponzi scheme case
- SEC charges Matthew Motil with $11 million Ponzi scheme, allegedly marketed low-risk, high-yield promissory notes.
- Motil accused of defrauding over 50 investors. Promised first mortgages on Ohio homes not secured. Sold multiple notes on the same property to different investors.
- Misappropriated funds for personal expenses, including NBA tickets and pizzerias
- Used podcasts and social media to enhance reputation as an investment expert
- Targeted investors' retirement assets, including self-directed IRA
- SEC's Mark Cave comments on holding wrongdoers accountable
- Matthew and Amy Motil were named in the complaint, but no response or legal representation was noted
The SEC alleges that Motil misappropriated customer funds to repay earlier investors and indulge in "extravagant personal expenses." These expenditures included over $73,000 for courtside seats at NBA games and more than $13,900 spent at various pizzerias. The regulator's complaint asserts that Motil employed podcasts and social media platforms to enhance his reputation as an investment expert, all while deceitfully targeting investors' hard-earned retirement assets, including one instance where almost an entire self-directed IRA balance was targeted. Mark Cave, associate director of the SEC's Division of Enforcement, commented, "We are committed to holding those who prey on others accountable for their unlawful conduct."
Matthew Motil and his wife, Amy Motil, both named in the SEC's complaint, have not responded for comment, and it remains unclear whether they have legal representation. A lawyer who previously represented Motil in a bankruptcy case stated that he was not representing Motil in the SEC matter.
The SEC contends that despite Motil's active involvement in the bankruptcy case, he ignored multiple SEC administrative subpoenas for testimony and document production.
The agency alleges that Motil, based in North Olmsted, Ohio, executed the Ponzi scheme from as early as October 2017 through May 2021. According to the SEC's complaint, "Nearly everything about his scheme was a lie."
Motil purportedly promoted the scheme on various social media platforms, as well as through his podcast and website, enticing potential customers with invitations to "be a real estate investing badass!" His podcast, comprising 147 episodes, covered topics ranging from real estate investment strategies to financial education for children.
Motil primarily targeted investors who had subscribed to his newsletter, sending them emails pitching "private lending opportunities." According to the SEC, he assured investors that their investments would be used for home renovations, with profits coming from property resale, refinancing, or renting.
Furthermore, the SEC alleges that Motil forged a notary's signature and used a counterfeit version of her notary seal on at least 30 mortgages. When the Ponzi scheme began unraveling, Motil, in a January 13, 2021 email, blamed cash-flow issues stemming from banking and tenant payment matters dating back to August 2020. He reassured investors that he was working to establish a larger cash reserve and apologized for the lack of communication.
According to the SEC's complaint, Motil diverted approximately a third of customer funds to make Ponzi-like payments to investors. The remaining funds were allegedly spent on personal expenses, including over $1 million in personal credit card charges, more than $107,000 for a seven-month rental of a lakeside mansion, over $45,000 to repay student loans, and more than $14,000 at Starbucks. He also purportedly transferred over $400,000 in investor funds to his wife, whom the SEC believes should be compelled to return those funds.
The SEC's complaint seeks the return of investors' funds, civil money penalties, and other forms of relief.
Source: Barrons
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