Another high-yield real estate investment pitch has transformed into a high-stakes courtroom cleanup.
An Austin-based real estate lender already under court-appointed receivership is facing allegations that its investment operation was a Ponzi scheme “from the very beginning,” according to the receiver’s forensic report, the Austin Business Journal reported.
The receiver, Greg Milligan of Chicago-based Harney Partners, accused CCG Capital Group of using new investor money to pay returns to earlier investors, a Ponzi scheme hallmark. The receiver was appointed to oversee the wind-down of the firm’s Pride of Austin High Yield Fund I LLC.
The fund, which was founded by Robert Buchanan in 2008 to finance real estate deals, was placed into receivership in May last year after allegedly overstating its capital base by tens of millions of dollars. It claimed to have amassed $60 million, a figure investigators have since questioned.
Milligan alleged widespread misrepresentation, self-dealing and misappropriation of investor funds.
He alleged the fund began paying 8 percent returns to early investors before it had even closed a loan, and it distributed $795,000 in accounting profits on loans that had only generated $453,000. The receiver also alleged that investor money was used to fund Buchanan’s personal home construction, including a $463,000 loan that was never repaid and later allegedly reclassified to conceal losses. Another $1.2 million construction loan for a second home between 2018 and 2020 was also allegedly funded by the company.
Investigators discovered two sets of loan schedules, with one omitting insider loans from investor-facing documents, Milligan alleged. The company also allegedly failed to file tax returns from 2016 through 2023. Milligan alleged a drop-off in accounting activity by 2015 despite “stable distributions” to investors.
Thirty-seven creditor claims totaling $10.1 million had been filed as of this month. Milligan said the receivership is in its early stages and that no final decision has been made on the potential recovery for investors.
Buchanan is cooperating with the sale of fund assets, according to his attorney Jennifer Freel, who disputed the findings: “We disagree with many of [the report’s] conclusions and will be making no further comment at this time.”
The court will eventually approve a distribution plan once the fund’s assets are fully monetized.
— Judah Duke
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