Fortress Real Developments Founders Jailed, Ordered to Pay $12.2 Million Each
The founders of Fortress Real Developments, Jawad Rathore and Vince Petrozza, have been sentenced to five years in prison for fraud. Both co-founders were also ordered to pay $12.2 million each as part of their sentencing for defrauding investors.
Background on Fortress Real Developments
Fortress Real Developments Inc. was established in 2008, aiming to democratize syndicated mortgages. The company facilitated mom-and-pop investors in financing real estate projects that were previously reserved for institutional players. Over time, more than 14,000 retail investors contributed around $920 million to finance 80 different construction projects, although many of these projects ultimately failed.
Details of the Case
The criminal trial focused primarily on two specific developments: the Collier Centre in Barrie, Ontario, and a proposed 45-storey tower named SkyCity in Winnipeg. The Ontario Court of Justice found that Rathore and Petrozza misled investors regarding the security associated with their mortgage loans.
Judicial Sentencing Rationale
Justice Daniel Moore, who presided over the case, stated that no sentence could restore investor losses or alleviate the psychological damages incurred. Prosecutors initially sought a 10-year prison sentence along with a forfeiture of $26 million. The final decision included the prison term and a fixed financial penalty of $12.2 million each for the founders.
- Co-founders: Jawad Rathore and Vince Petrozza
- Sentencing: Five years imprisonment and $12.2 million fine each
- Initial charges: Fraud against investors
- Investment total: $920 million across 80 projects
- Year founded: 2008
- Number of investors: Over 14,000
Appeal Process and Defense Arguments
Following the sentencing, both Rathore and Petrozza’s legal teams announced plans to appeal the verdict. They are currently seeking bail while the appeal is pending. The defense argued that the charges did not resemble traditional Ponzi schemes, as there were actual projects undertaken by Fortress.
Despite the mitigating factors, such as the absence of prior criminal records and potential for rehabilitation, the complexity and impact of the fraud heavily influenced the sentencing decision. Many mom-and-pop investors faced drastic financial and psychological repercussions due to these fraudulent actions.
Conclusion
This case marks a significant moment in the realm of residential real estate financing, highlighting the risks associated with syndicated mortgages. Fortress Real Developments’ downfall serves as a cautionary tale for investors and developers alike.
