Boulder-based attorney permanently barred from securities industry following real estate fraud
DENVER (July 13, 2015) – Colorado Securities Commissioner Gerald Rome announced Monday that Boulder-based attorney and US Capital, Inc. officer Lee Weinstein has been permanently barred from the Colorado securities industry via a court-ordered permanent injunction. Weinstein operated US Capital with his business partner, John Koral, from 1996 until 2011, when the company filed for bankruptcy.
Rome stated of the injunction, “The US Capital case is a classic example of a company that engaged in self-dealing, putting their interests ahead of their investors. Then when things fell apart, rather than come clean to its investors, the company attempted to hide the truth and ended up losing a lot of money for a lot of people.”
US Capital, formed by Weinstein who soon partnered with Koral, operated as a so-called “hard-money lender” that specialized in making real estate loans to commercial borrowers who were not eligible for traditional loans for real estate purchases. In order to fund these loans, the company would obtain money from individuals and in return issued promissory notes entitling investors to interest. Investors were made to understand that funds obtained by Weinstein would be secured by the properties, and would have priority over any other loans on the properties.
Contrary to representations made to investors, the investigation conducted by the Division of Securities, part of the Department of Regulatory Agencies (DORA), discovered that a substantial portion of investor funds were used as loans to other companies owned by Weinstein and Koral. Also unbeknownst to investors, the US Capital officers reassigned real estate meant to secure investor monies to instead secure bank loans, giving the banks priority over the investors. In one instance, Koral used the real estate securing the investors’ monies to secure his own personal debt. When the debts became unmanageable, investors were notified that interest payments would be placed on hold for a time, but received no further information, and were never notified that funds from the company had been redirected to Weinstein and Koral’s other business enterprises.
US Capital went bankrupt in late 2010, and in the process individuals holding promissory notes lost more than $10 million.
The order of permanent injunction, signed by District Court Judge Catherine Lemon, prohibits Lee Weinstein from participating in the securities industry in Colorado for life. Weinstein agreed to the entry of the bar order and the permanent injunction. A decision on the commissioner’s request for similar action against John Koral is forthcoming.
Division of Securities