Man Behind 1031 Exchange Scam Indicted for Fraud

The long awaited indictment of Edward H. Okun took place yesterday. 

Okun is alleged to be behind the 1031 exchange qualifed intermediary (QI) scam run by The 1031 Tax Group (1031TG) that defrauded thousands of people out of millions of dollars.

Okun was arrested last week in Miami, Florida, and charged yesterday by a federal grand jury in Richmond, Virginia, with one count of mail fraud, one count of bulk cash smuggling, and one count of false statements and forfeiture.

According to the indictment, from August 2005 through April 2007, Okun used 1031TG and its subsidiaries, all owned by Okun, in a scheme to defraud clients of millions of dollars through false pretenses.

The indictment alleges that 1031TG promised clients that their money would be used solely to effect 1031 exchange as outlined in the exchange agreements. Instead, Okun is alleged to have misappropriated approximately $132 million in client funds to support his lavish lifestyle, pay operating expenses for his various companies, invest in commercial real estate, and purchase additional qualified intermediary companies to obtain access to additional client funds.

The indictment also alleges that Okun instructed employees to withdraw $15,000 in cash from Investment Properties of America’s (IPofA) bank account, a company owned by Okun, and smuggle the cash to his personal yacht on Paradise Island in the Bahamas to avoid federal currency reporting requirements; and that Okun made material false statements under oath before the U.S. District Court for the Eastern District of Virginia relating to conversations he had with the chief legal officer of IPofA.

Federal prosecutors are seeking the forfeiture of all funds and assets owned by Okun that were derived from or connected to the misappropriation of approximately $132 million in funds held by 1031TG and of all funds and assets traceable to the $15,000 in cash he instructed to be smuggled to his yacht in the Bahamas.

If convicted of all the charges in the indictment, Okun will face a maximum of 30 years in prison and fines.

1031TG is only one of several QIs that have been in legal trouble in the past year, leaving investors with millions of dollars of losses.

The Federation of Exchange Accommodators, the qualified intermediaries’ industry-trade group, requires background checks of all members except those that are subsidiaries of publicly traded parent corporations. The FEA says it is working with the states and may reach out to federal regulators about enhancing oversight of the business. 

Especially in light of the erosion of investor confidence in the credit, banking, and mortgage industries, we think that oversight of 1031 exchange QIs is long overdue.

UPDATE:

For our post on the sale by a bankruptcy trustee of Okun’s West Oaks Mall in Houston, Texas, and Salina Central Mall in Salina, Kansas, click here.

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6 responses to “Man Behind 1031 Exchange Scam Indicted for Fraud

  1. Hopefully Okun will get to spend some quality time at the taxpayers expense. All to often these “white collar” criminals get off with paying some fine, usually with the money they have taken from unsuspecting investors.

  2. I worked for this man and saw the damage he did to so many of his employees. I hope that he gets the entire 30 years that he justly deserves.

  3. Not only investors were hurt by this man. He is guilty of damaging many lives all over this country and should pay accordingly. Several companies and individuals in our small city are still waiting to see payment for services provided through legal and binding contracts. Okun has no respect for the law and no fear of consequences. Yes, 30 years is exactly what he deserves.

  4. This is true , he has hurt lots of people , including myself and family . But a man like this can not make money to pay anbody back if he is locked up . They should give him X amount of time to pay everbody back say 10years and if this doesnt happen them lock him . At least give him the chance to repay all his victims , keeping him in jail will do nobody any good at all

  5. And I also have heard that these 1031 Trustee have found money but are using it to pay themselves, God forbid they work and dont get payed .

  6. former emp of 1031 tax group

    Ed Okun has a lot of assets in his personal name as well as many company names that are worth more than he has taken. I feel that those assets need to be taken from him and liquidated so that all of those people including myself can be paid back with interest.

    He should also get all the jail they can possibly give him.

    I heard that man say “it was the cheapest money I ever bought”.

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