Two Boulder mortgage executives face charges

DENVER — A bankrupt Boulder-based mortgage lending firm and two of its former executives have been charged with securities law violations.

Colorado Securities Commissioner Gerald Rome said Monday that he filed a civil complaint in Denver District Court against US Capital Inc. and its two former executives, Lee Weinstein and John Koral, both of Boulder.

The complaint alleges they violated the anti-fraud provisions of the Colorado Securities Act in connection with raising funds for their mortgage lending company.

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In the complaint, the Rome alleges that US Capital operated as a so-called “hard money lender” that specialized in making loans to commercial borrowers who may not qualify for traditional bank financing to purchase real estate. A hard money loan is a type of asset-based loan financing through which a borrower receives funds secured by the value of a parcel of real estate.

In order to fund these loans, Koral and Weinstein obtained funding in excess of $7.8 million from investors. When obtaining these investor funds, the complaint alleges that investors believed their investments were secured by the real estate.

The complaint also alleges that Koral and Weinstein, rather than securing the investor funds with the real estate, used the real estate to secure bank loans, Koral’s own personal debt, and to secure loans to Koral and Weinstein’s other companies, all to the detriment of the investors.

According to the complaint, US Capital eventually was unable to meet its obligations to the investors and other creditors and went bankrupt, with the investors unable to recover their investments. The commissioner seeks a permanent injunction, restitution and the return of ill-gotten gains.