Boulder-based attorney barred from Colorado securities industry

DENVER — Boulder-based attorney Lee Weinstein, who served as an officer of US Capital Inc., has been barred from the Colorado securities industry, Colorado securities commissioner Gerald Rome announced Monday.

Weinstein operated US Capital with his business partner, John Koral, from 1996 until 2011, when the company filed for bankruptcy.

The order of permanent injunction, signed by District Court Judge Catherine Lemon, prohibits Weinstein from participating in the securities industry in Colorado for life. A decision on the commissioner’s request for similar action against Koral is forthcoming, according to a statement issued by Jillian Sarmon, a spokeswoman for the Colorado Division of Securities.

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US Capital, formed by Weinstein, who soon partnered with Koral, operated as a so-called “hard-money lender” that specialized in making real estate loans to commercial borrowers who were not eligible for traditional loans for real estate purchases, according to Sarmo. In order to fund the loans, the company would obtain money from individuals and in return issued promissory notes entitling investors to interest. Investors were made to understand that funds obtained by Weinstein would be secured by the properties, and would have priority over any other loans on the properties.

Contrary to representations made to investors, an investigation conducted by the Division of Securities discovered that a substantial portion of investor funds were used as loans to other companies owned by Weinstein and Koral, according to the statement. Also unknown to investors, the US Capital officers reassigned real estate meant to secure investor monies to instead secure bank loans, giving the banks priority over the investors. In one instance, Koral used the real estate securing the investors’ monies to secure his own personal debt. When the debts became unmanageable, investors were notified that interest payments would be placed on hold for a time, but received no further information, and were never notified that funds from the company had been redirected to Weinstein and Koral’s other business enterprises.

US Capital went bankrupt in late 2010, and in the process individuals holding promissory notes lost more than $10 million.