Bankruptcy
In 2005 with impound funds depleting and the reduced ability of borrowers to sell condos to the public or sell land to builders, borrowers began to default on their obligations. USACM hid this fact from both the Nevada regulators and the investors. In a bid to stay solvent USACM not only continued to collect fees by originating speculative loans into a weakening real estate market but told investors that loans had been extended when in fact the loans had paid off. The proceeds of the payoffs, instead of being paid to the rightful beneficiaries, were diverted to pay thousands of other investors their monthly interest checks. As such every loan in the portfolio appeared to be performing.
On April 13, 2006 the company declared bankruptcy. At the time of insolvency the company had 6,500 investors and was managing $962,000,000 in investor assets, making it the biggest bankruptcy case in the history of Nevada.
Read more about this topic: USA Capital
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