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Learn From My Mistake: A 1031 Exchange Gone Wrong.

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I hope as many of you read the following and talk about it as possible. 1031 exchange fraud is costing investors millions! We need to stop this now!


Amid all the financial turmoil of the recent months, you may have missed a front page story in the Wall Street Journal about the scandal surrounding Vesta Strategies, one of several Section 1031 Qualified Intermediaries that has recently gone bust. In Vesta’s case, it has managed to tie up more than $100 million of their client’s money.


A qualified intermediary (in case you don’t know) is a company that is licensed to perform 1031 exchanges. As a third-party that holds onto your money during the 180 days of the 1031 exchange process, they have COMPLETE DISCRETION how to use this money, subject only to the agreement you sign with them. For Vesta, it seems this meant unsound investments.


1031 abuse is a disturbing trend that all real estate investors should be aware of. Staying alert to deception in the market is our best chance to avoid becoming a victim. The next time you consider working with a Qualified Intermediary, please take the effort to find out where your money is really going. And before you give put your money at risk, make sure you are working with a company that deserves your trust.



The post above was edited by Moderator to delete a solicitation for services and contact information.




Moderator comment:


The Wall Street Journal reported that the two principles of the company have sued each other alleging misappropriating and embezzling their client's funds for personal expenditures. The article did not mention that Vesta made any unsound or unsafe investments. The article further mentions that Vesta held between $10 million and $30 million in client money at any one time. Mr Wunsch's claim that Vesta has tied up more than $100 million of client money can not be confirmed from sources available to the Moderator.


If you are a paid subscriber to the WSJ Online, you can view the complete article here Behind the Boom and Bust Of Real-Estate Player Vesta


William Exeter is a contributor to this forum and has offered the following comment on the Wall Street Journal Article.


Real estate investors need to carefully evaluate their prospective Qualified Intermediaries. The three losses that our industry has experienced over the last couple of years resulted from individuals that had recently “jumped” into the 1031 exchange arena. Real estate investors need and should look at the longevity of ownership, management, and employees as well as bonding and insurance and experience

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