The trust deed offerings were securities, but they weren’t registered with the Securities and Exchange Commission or the California Department of Corporations, charged the suit.
A number of people who have not been paid have joined in the involuntary bankruptcy filing. When he lines up others he knows about, their losses may be above $2.5 million, says Shustak.
Galuppo, Holbrook’s litigation attorney, says, “When his business fell apart, he asked me to intervene and help him to do workouts with existing lenders. His entire business operations have fallen apart. He is continuing to do real estate brokerage and short sales. He lost a few homes to foreclosure. Some homes he built — some subdivisions, other things — he couldn’t keep up the payments on. He is having difficulties throughout the entire organization. Homes and developments got in trouble in this market.” Galuppo says he doesn’t know where all the money went, “but Shustak doesn’t have enough information to make the statements he is making.” There are other creditors, such as banks, Galuppo says.
So what does Shustak say? Holbrook “commingled all the money that came in from these other investments. At most, maybe 10 percent [of the money Holbrook took in] went where it was supposed to go.”
As Holbrook himself says, the bankruptcy court will have to straighten all this out.