Holmdel Resident Admits Laundering $7.5M in Ponzi Scheme
Over 40 homeowners victimized by fraudulent mortgage refinance loan.
A Holmdel resident pleaded guilty to laundering $7.5 million in a Ponzi scheme involving fraudulent mortgage refinance loans, the Monmouth County Prosecutor’s Office (MCPO) announced Friday.
Frederick Tropeano, 46, and several associates from Hawthorne Capital Corporation, formerly of Manalapan, victimized 40 homeowners in New York and New Jersey, according to a press release issued by MCPO.
When homeowners would refinance with Hawthorne, banks would issue funds at settlement, which Tropeano and others diverted to themselves rather than pay off the owner’s original mortgage, prosecutors said. Title companies operated by Tropeano and his associates intentionally failed to conduct proper records checks typically used to determine whether prior mortgages were paid in full, according to the press release.
The investigation began in May 2010 after a homeowner told prosecutors a check from Hawthorne intended to pay off her original mortgage had bounced from insufficient funds. Investigators found more than 40 homeowners had been caught up in the refinance scam. In some cases, funds intended to pay off original mortgages were significantly delayed, resulting in negative reports on credit scores and the need to hire legal counsel. In other instances, payoffs never occurred and homeowners were left with two mortgages attached to their properties. Prosecutors said Tropeano and his associates also stole the identities of two homeowners and used them to fund refinance loans that never occurred.
Tropeano and his father, Silvano Tropeano, also established fraudulent bank accounts in the names of two attorneys and listed them as settlement agents on refinances without their knowledge or consent, the press release stated.
Tropeano was arrested on July 21, 2010.
A co-defendant, John Kosta, conducted closing on the new mortgages and notarized documents even though he was not a notary or licensed to conduct such closings. Another co-defendant, Krista Selig, was listed as the settlement attorney on 12 fraudulent loans and facilitated the fraudulent transactions on behalf of Hawthorne, prosecutors said.
Silvano Tropeano, Kosta and Selig all pleaded guilty earlier last year to third-degree conspiracy charges and are pending sentencing.
Prosecutors will recommend Tropeano be sentenced to 14 years in prison, with a seven-year period of parole, and that full restitution be made to his victims as a condition of his release.
His sentencing is scheduled for March 22.