Tuesday, January 27, 2009
Long Island Construction Loan Scam Busted
When the news broke last night that Hauppauge-based Agape World was a Ponzi scheme, many Long Islanders said, "no, duh". Over the course of 8 years, CEO Nick Cosmo and his company convinced thousands of investors, mostly middle class people, to invest with him in bridge loans for construction projects. The payouts promised were usually 14% guaranteed.
Many of our friends and neighbors here in New York that were caught up in the scam were cops, firefighters, municipal workers and in retrospect, that should have been a clue, as anything with a 14% guarantee would have naturally attracted big money investors, not people who could barely afford to put $50,000 in.
Another warning sign that was ignored was the fact that many of the employees of Agape World who were listed as loan analysts and such were nightclub DJ's and bouncers (how idiosyncratically Long Island is that?).
Scams like these usually come along when there is a major demand for the ability to "invest" in a specific craze or bubble that people feel as though they are missing out on, and the Long island construction/ home improvement fever of the early and middle part of this decade was as bubblicious as any we've ever seen.
It seemed as though every town in Nassau and Suffolk Counties were going through a construction renaissance and everyone wanted in. Agape World claimed to be a vehicle for regular people to be involved in loan syndicates that financed these building projects.
The reality, however, was that many of the companies that were listed as loan recipients had addresses in the same building as Agape World. This, in addition to Cosmo's own criminal record for securities fraud, which he did time for in 1999, may have helped people avoid the allure of guaranteed returns.
The good news is that with the atrocious economy, many of these scams and schemes get exposed because the money to keep them going dries up. To paraphrase Warren Buffett, "When the tide goes out, you can see who is swimming naked".
Read the full story: Newsday Agape World