The Coachella Valley Complex Scheme Almost Worked
Through upheavals and pandemics, stock market ups and downs, recession and inflation, I suppose it’s comforting to know that fraud never seems to lose a beat. “Comforting,” I should add, to anyone other than those who lost nearly $22 million in a hotel and condominium complex that was never built.
International Scope
In this case of fraud, citizens of both the U.S. and China were swindled. Ruixue “Serena” Shi, 36, of Arcadia, California asked people for $21.6 million to build a Coachella Valley Complex development. She then turned around, and spoiled herself with extensive travel (she spent $2.2 million on travel), luxury cars (two, high-end, $49,000 Mercedes), designer clothing, jewels and all of the other trappings of success.
Between 2015 and 2018, “Serena” Shi solicited money for a combination conference hotel and luxury condominium. She posed, in both countries, as a success story. In China, she pretended to be president and owner of Global House Buyer (GHB). In the U.S. she claimed she was CEO of the Beverly Hills-based Hyde Morgan (Hyde Development).
The GHB entity was positioned as the prime builder while Hyde Development solicited funds. According to the Department of Justice:
“Shi contacted prospective investors in the Hyde complex – who mostly were based in China – through sales presentations she gave at hotels, radio advertisements, and through the solicitation of investments over forums on WeChat, a Chinese messaging, social media, and mobile payment application, according to the affidavit.”
Investors were told that construction was to start in 2017 and that the condos they were buying, would be selling for between $400,000 to $700,000. As down payment investors needed to come up with only 40 percent of the total purchase price. She promised those investors that GHB would help them finance the balance from U.S. Banks. It was obviously a massive scam.
EB-5
Chinese investors were told that if they invested with “Serena” Shi, Shi would enable them to obtain visas through the EB-5 Immigrant Investor Program. In fact, one unsuspecting investor was promised a visa if she invested a half-million dollars in the venture.
Shi convinced investors that one of her entities had purchased a 47-acre lot of land in Coachella Valley. In truth, she purchased only 20 acres. Shi even sent the investors digital images of the property but the pictures were fake. She further lied by stating that she had secured all of the approvals needed to begin building. In fact, she had no approvals.
Investors began to grow suspicious when they realized the development was nonexistent. They wanted their money back. “Serena” Shi back-pedaled and offered them partial refunds providing they would not tell anyone of the deal. Naturally, no one agreed to that. If found guilty, “Serena” Shi is facing up to 20 years in jail.
The Elements of Fraud
Ruixue “Serena” Shi, all of 36 years old, saw an opportunity to deceive investors on both sides of the Pacific. She was dealing with wealthy, but unsophisticated investors, who did not understand American real estate development, the permit process, EB-5 investment visas or due-diligence for that matter. English was not a first language for any of the investors and she knew that as well.
Shi was apparently an accomplished and convincing speaker. She got up in front of a podium and laid out a vision for the Coachella Valley complex that pulled people in and made them want to invest. It was smoke and mirrors but she was convincing enough to pull it off.
Given her lavish lifestyle, it is apparent she had a need for money – lots of it. She wanted the good life, without the work. It is the trademark of many a fraudster.
How could she rationalize her behavior? Perhaps she realized that those in China she enticed to invest in her scam were ignorant suckers who deserved to get fleeced. It would be hard for them to track her down. Perhaps she even rationalized that she could convince them it was a risky investment and that part of the risk was that they could lose money.
However, given she offered one irate investor half their money back, I think something else was in play: I don’t think she cared. She was prepared to start a Ponzi scheme in the great tradition of Bernie Madoff and many others. She was devoid of a conscience. She saw money and power; “nice things” and prestige. She was prepared to do whatever it took and she realized her investors were too negligent to look for credentials.
Unethical behavior thrives in those conditions.
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