Randy King, his son Matthew King, and Andrea Trout founded and ran The Legacy Group, Inc. a real estate investment firm based in Colorado Springs. The firm’s business model was to provide mezzanine loans to real estate projects. These Legacy mezzanine loans would be junior to the secured mortgage loans on the project.
Legacy raised its capital to make these mezzanine loans from over 200 investors in dozens of states. The investors would purchase notes that were tied to a specific project.
Unfortunately, as some projects would run into financial difficulty, Legacy would use the proceeds from selling the notes to help fund those projects, in addition to the projects the notes were intended to fund.
In some instances, Legacy mislead investor about the status of the projects. In one case, Legacy failed to tell incoming investors that project was in the middle of foreclosure proceeding with the senior lender. There are other instances where Legacy failed disclosed that there were other investors and loans in the ownership structure of an investment that would affect the investment.
The notes did not say that funds from the notes could be used to make payments to the Kings and Trout, but Legacy paid hundreds of thousands of dollars to them. The firm also paid over $400 thousand in undisclosed origination fees to King and Trout when closing on an investment.
The case shows the importance of (1) only putting investor funds into items allowed by the investment documents and (2) not paying fees to affiliates that are not permitted by the investment documents.
The defendants have consented to the judgements.
- SEC Charges Real Estate Investment Entity and Principals with Securities Fraud and Registration Violations: https://www.sec.gov/litigation/litreleases/2021/lr25097.htm
- SEC Complaint
I know these fraudsters personally. They lost my 6 figure retirement investment with them in one of their real estate projects. They were found guilty of SEC violations and had to pay judgements. The sad thing is they won’t spend a day in prison after losing 10 million of investor money from over 200 investors as stated by the SEC findings.
Now they own an IV hydration office in Delray Beach. It is called Prime IV. They told me they have rights to the entire region and are trying to get other people to invest in other offices. I wonder if the money came from their previous bad acts. I am a former employee that found them suspicious so I decided to look them up and found all this information. I quit immediately after. I couldn’t stomach the idea of supporting these horrible people.