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Federal Government Continues to Pursue Cay Club Fraud Executives

Federal regulators and prosecutors have been extremely persistent in their fraud suits against Cay Clubs Resorts and Marinas. The federal government alleges that through the luxurious vacation rental company Cay Clubs Resorts and Marinas, a $300 million Ponzi scheme was conducted for the fraudulent sale of condos in luxurious places such as South Florida and Las Vegas. Previous attempts to try the alleged fraudsters stalled earlier this year when a Miami judge tossed out the U.S. Securities and Exchange (SEC) Commission’s case against Cay Clubs Resorts and Marinas, because their suit for the seven-year investigation against Cay Clubs was presented after the statute of limitations in the suit had expired. However, this month the U.S. Attorney’s Office was able to finally charge the parties with multiple counts of bank fraud and conspiracy in connection with some of the original charges regarding the alleged Ponzi scheme.

The SEC Suit Against Cay Clubs Resorts and Marinas

Though the SEC had conducted a seven-year ongoing investigation about the fraud at Cay Clubs, a Miami federal judge threw the case out because the SEC did not file their case within the five-year statute of limitations. This case would have been brought against five Cay Clubs principles, including Cay Clubs’ chief financial officer and co-founder, a resident of Florida. This case focused on the 1,400 investors nationwide who were duped by Cay Clubs after purchasing condos in an Orlando complex that Cay Clubs no longer owns. This complex along with others owned by Cay Clubs went into foreclosure after the real estate bubble popped, causing many investors to lose all of their life savings. The SEC was given 60 days to appeal the case, and many observers were surprised that given the severity of the crime and amount of money lost, that the case was thrown out.

The U.S. Attorney Office’s Claims Against Cay Clubs Resorts and Marinas

The U.S. district attorney in the Miami federal court is trying two executives of Cay Clubs who marketed vacation rental units throughout Florida, including in Orlando, Miami and the Florida Keys. The two executives are a couple, both of whom were recently expelled from their native countries in Latin America. In the indictment it is alleged that the two executives promised investors leaseback payments in the range of 15 to 20 percent of the sales price of purchased condos. These payments allegedly were not disclosed to financial institutions, and were instead used by the couple for personal use. In fact by 2006, Cay Clubs did not have the capital necessary to improve existing properties or to fulfill their promised leaseback payment obligations. This case is directly related to the earlier suit filed by the SEC against Cay Clubs, and the current indictment also accused the executives of concealing substantial assets from the SEC.

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