Property investment scam: Affected investors lost millions, feel “unprotected by the law”
“The only thing that is left for us now is to file a complaint and pray that the money hasn’t been spent on casinos and luxury hotels.” Around 60 people who have been affected by an alleged scam in Mallorca, in which properties that didn’t exist were put on sale, say that they feel “unprotected” under current Spanish law, and are calling for new regulations so that episodes like this one cannot happen again.
- Total number of cases in alleged fraud could be as high as 200, and with losses of around €4 million, it could be the biggest of its kind in the history of the Balearic Islands
The real estate company Mallorca Investment was offering off-plan properties in a number of areas on the Balearic island, at below-market prices. Clients handed over 10% of the sale price as a deposit, and when the future owners had seen that the plans were filed with the local council, the alleged scammers would take advantage of the situation and ask for more money. But time would pass and construction never began. When the clients demanded explanations, no information was forthcoming.
The Civil Guard has so far arrested six people from developer Lujo Casa and the real estate agency Mallorca Investment, who are accused of keeping the deposits handed over by clients. The amount of money swindled from the victims totals more than €4 million, according to sources from the investigation, which could make this the biggest scam ever perpetrated in the history of the Balearic Islands.
The owner of Mallorca Investment, a businessman identified by his initials M. P., and who is of Italian origin, is currently being held in police custody before being brought before a judge. He is suspected of offenses of fraud and money laundering. The Italian businessman posted numerous photos of his luxury lifestyle on Facebook, including trips with his family all over the world, business-class flights to Thailand, vacations in Japan, hotel stays in Dubai and car trips in Cuba.
The owner of the developer Lujo Casa, identified by his initials C. G. R., fled Spain more than four months ago, when the first complaints from fraud victims put him in the spotlight.
Claims began to arrive in the month of March, and in May some of the affected families filed a lawsuit at a court in Palma de Mallorca, demanding all bank accounts be frozen and for an international arrest warrant to be issued for the promoter, who, sources from the investigation report, is currently in a South American country.
“We suspected that we were looking at a case of fraud,” a victims’ statement reads, “after determining that construction had not begun, that a number of the plots of land were not theirs, and that any changes we wanted to the plans were possible and free. We met with a lawyer who confirmed what we already suspected: that this had the look of a pyramid scheme.”
More victims joined the initial dozen or so original claimants, with the total thought to number around 200, many of whom are from outside Spain.
The victims report that the developer first moved to Barcelona, and then to Valencia, which is where they lost all trace of him. The victims also slammed the owner of the real estate firm, who claimed that he had also been conned. “From the first moment Mallorca Investment introduced itself as a partner,” the victims said in their statement.
The average amount that each person has lost is around €30,000, although there are more extreme cases, such as a foreign man who handed over more than €200,000 on the promise of a luxury apartment close to the sea. Among the victims are young couples who were seeking their first home, retirees, and families with young children.
All of the victims say that they feel “unprotected” due to changes made to the law in 2006, ending the right for anyone who had lost money in the purchase of an off-plan property to reclaim the funds from their insurance company or bank.
“We all trusted that, by making a bank transfer to a real estate company account, our money was protected; we thought that this kind of account was controlled by the banks and that it wasn’t so easy to take money out,” the victims’ statement reads. “Although this man was moving it around as he pleased.”
The victims have called on the authorities to take measures to ensure that episodes like this one are not repeated. They argue that “the only law that protected us” was abolished to the benefit of the banks.