The former chief executive officer of Germantown-based Wisconsin Home Buyers Network has been sentenced to 16 months in federal prison after taking part in an investment scheme that defrauded over 20 victims of at least $2.2 million.
Joseph Nemeth, age 53, pleaded guilty to one county of wire fraud, according to a press release from the U.S. Department of Justice.
The DOJ found that Nemeth was working with one other person to run Wisconsin Home Buyers Network in between 2012 and 2018. During this time, both partners raised approximately $2.8 million from more than 20 investors while promising the investors little to no risk with returns ranging from 12% to 36%.
In return, investors received promissory notes detailing the investment terms. Some investors also received mortgages that purported to be for specific properties to be acquired and rehabilitated with the investor’s funds, although the partners failed to record all but a few mortgages.
While the investors believed the money they provided was secured by Wisconsin Home Buyers Network’s assets, the company actually had business debt, delinquent tax obligations and other financial issues. This meant the company was not able to make payments on the promissory notes.
“Rather than being used for the promised investment purposes, investor funds were comingled with other funds and were used for Ponzi-type payments to existing investors, payroll for related businesses, debt reduction, personal draws by the partners, back taxes, and legal fees,” according to the DOJ.
When Nemeth and his partner realized they could not make payments on the promissory notes, they asked for extensions, requested more money from existing investors, and tried to find new investors. In the end, less than $400,000 of over $2.8 million in investor funds was returned to investors.
