That was a rough estimate provided
Moewes said 315 Homestead investors and other creditors have filed claims totaling about
Investors have known for years that little, if any, of the money they had entrusted to Wynstra and his company was likely to be repaid.
Many of those investors were elderly people who sunk big portions of their retirement nest eggs into those investments, reassured by Wynstra's reputation and by deeds of trust on real estate parcels that seemed to provide solid security for their money.
But Moewes said that security meant next to nothing, because Wynstra also had turned to
The bank loans, in many cases, were secured by the same real estate that his small lenders had been relying upon to make their own investments safe. And under the terms of the bank loan, Frontier was entitled to have first crack at the properties in the event of a loan default.
"That's kind of when things started going haywire," Moewes said.
When the global real estate financing system ground to a near halt and triggered financial panic, Homestead could no longer sell developed properties or get additional loans to build new ones. That meant there was no source of money to pay back investors, many of whom had hoped to cash out their Homestead investments as other investments dropped in value.
Homestead's financial problems first surfaced in
For many years, Wynstra and his company had used loans from small investors to help finance a variety of real estate developments in
Moewes said it has taken many months to get the claims of Homestead creditors sorted out. Under bankruptcy law, creditors whose claims were secured by real estate are supposed to get priority over other creditors, and many Homestead investors still have their deeds of trust, signed by Wynstra himself. They have claimed status as secured creditors in filing their claims.
But in nearly all cases, they hold no actual equity in properties. Many or most of those parcels have been foreclosed on by
Moewes contends that investors holding those deeds of trust are, as of now, unsecured creditors. Moewes said she must work her way through those claims, one at a time. In each case, she needs a ruling from the bankruptcy judge declaring that the holder of a deed of trust is an unsecured creditor who won't get first crack at the remnants of Homestead's money.
"It's an incredibly time-consuming process," she said.
Moewes acknowledged that Homestead investors are grumbling because they believe some investors managed to get their money out just before the collapse. To them that does not seem fair. But there is likely no legal recourse.
When a totally fraudulent investment scheme collapses, bankruptcy trustees can go back, in some cases, and order repayment of last-minute withdrawals. That makes the money available for distribution to all creditors. That's what happened in the case of
In reality, RDI was nothing but a Ponzi scheme: The perpetrators relied on attracting new investors to get money to pay earlier investors. There was no other strategy for making money, the "international exchange transactions" did not exist, and some of the people behind the scheme went to prison.
Homestead is not that kind of case, Moewes said. Homestead had a real estate portfolio, and the company built golf courses, resorts and subdivisions before its demise, taking in millions of dollars in revenue from sales of developed properties. That means attorneys would have had a difficult time getting a judge to order repayment of withdrawals made by earlier investors. In any event, the amount of money that could have been recovered in that way would have been small, she added.
In early 2013, Wynstra agreed to pay a
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