Dec. 01–The now-defunct Bakersfield Investment Club was one of the city’s biggest financial scams in recent memory. A complex resolution 2 1/2 years in the works is coming to a head this month. More than 200 investors will likely take losses totaling about $8 million. Here’s a synopsis of what happened:
Q: What was the Bakersfield Investment Club?
A: The club was the informal name of Bakersfield-based BIC Real Estate Development Corp., founded in 2012 by former Kern County appraiser Daniel Raymond Nase III. By investing primarily in real estate but also business loans, oil production and solar panels, BIC said it would earn consistent returns of 21 percent or more and that members could double their money every two to four years.
“We’re here to make you money, not take your money,” club materials stated.
The organization’s website said BIC had 20 clubs across the country and that eventually there would be one in every major U.S. city. Court records state the club attracted 549 investors from Hawaii to New York who together contributed $15.9 million between June of 2013 and March of 2016.
Q: Who is Daniel Nase?
A: Nase, a former Kern County staff appraiser now 40 years old, managed the club and its accounts as president and CEO. He touted his Master of Business Administration degrees in finance and human resources, along with years of real estate investment experience, including managing investments for his father and his wife’s family.
Q: How was it supposed to work?
A: Early on, the club — or Nase, personally; it wasn’t always clear where one stopped and the other started — bought two to 10 houses per week purportedly on members’ behalf. For their money, investors were initially given monthly rent payments, or allowed to reinvest the proceeds, and were told they could pull out at any time. The club eventually owned 62 Bakersfield properties and expanded into funding peer-to-peer business loans online. The club also purchased an oil company, called Target Oil and Gas, and a solar company, Tier 1 Solar Power Co.
Q: Why was it closed?
A: Amid an investigation by the U.S. Securities and Exchange Commission dating back to 2015, the club transferred its assets to remaining members and shut down in January 2016. Assets were frozen three months later by U.S. District Judge Lawrence J. O’Neill, who signed a restraining order asserting Nase had misappropriated club money and concluding the organization was a sham.
Court filings accused Nase of taking $484,000 in investor money for his personal LendingClub.com account. They say he improperly awarded himself $1 million after transferring misappropriated assets and then used club money to buy an oil company on behalf of a trust owned by his wife and him. Legal papers in the case say he also credited the couple for giving the club $6.3 million when actually they had contributed only $425,000.
Q: What was Nase’s defense?
A: Nase and his Los Angeles attorney, Scott Vick, have asserted the club was completely transparent and almost all Nase’s actions were made with members’ best interests in mind.
Nase argued in court all club properties were initially held in the name of his wife and him because the club had no credit history to buy real estate and it would have been financially disadvantageous to immediately transfer them to the club. Property transfers were eventually carried out in January 2016 before being reversed by the case’s court-appointed receiver.
Vick contended Nase “in his mind” felt entitled to some financial return in exchange for putting himself at financial risk for 70 percent of club properties’ purchase values (the other 30 percent came from a down payment by the club). This argument was used to help explain why Nase had credited himself for depositing assets and money that actually belonged to the club.
After Nase emptied nine of the club’s 12 bank accounts around the time O’Neill froze its assets in 2016, Vick told the court Nase had been “impulsive, immature and unwise,” not unusual for a military veteran suffering from post-traumatic stress disorder.
Q: How will the case be resolved?
A: Nase was ordered last year to give up $12.6 million in ill-gotten gains related to the club. That sum will be reduced by whatever amount O’Neill decides to distribute later this month.
Nase also was ordered to pay a $12.1 million civil penalty his lawyer argued he’ll never be able to cover. Whatever he is eventually able to pay could go to investors or to the U.S. Treasury Department.
After 2 1/2 years of effort, the court-appointed receiver in the case collected more than $7 million by selling club assets. He reported in October that $3.5 million remains for former club members. He has proposed 236 investors with approved claims share that money in proportion to their contributions, giving them 31 cents for every dollar they invested. A judge is scheduled to rule on the recommendation later this month.
One local claimant against the club’s holdings, Valley Mortgage Investments Inc., has already received payouts totaling nearly $3.7 million. VMI made loans to the club’s petroleum company, Target Oil and Gas.
Q: Where does Nase stand?
A: Nase could not be reached for comment. Online records suggest he may have moved to Phoenix. Any unpaid balance of the combined $24 million he has been ordered to pay is expected to hang over him as a warning to any potential future investors.
Nase stated in an April 13, 2017, court declaration he had been unable to earn income for more than a year because negative publicity surrounding the case left him unable to get a job, even at Starbucks. “I worry every day about being homeless and being a financial drain and burden on those around me,” he stated.
Q: Will Nase face criminal charges?
A: Federal authorities would not say whether Nase will face criminal charges.
John Cox can be reached at 661-395-7404. Follow him on Twitter: @TheThirdGraf.
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