Collateral Damage: How Lenders Enabled Reg D's Reckless Boom
By Barry Minkow
On November 18, 2024, Truliant Federal Credit Union, in an apparent attempt to revive pre 2008 underwriting standards, did the unthinkable. The Fannie Mae approved lender funded a cross collateralized loan for $28.3M to Spartan Investment Group secured by 11 public storage assets. Problematic because no less than five of those assets were already encumbered by a previous cross collateralized loan granted on December 16, 2021, to Spartan Investment Group for $56,972.500 and issued by BRMK LENDING LLC.
That wasn’t an anomaly—it was a pattern.
DLP Capital: The Disappearing Equity Act
On September 20, 2024, KeyBank granted what was thought to be a $53,900,000 loan to Ashville Exchange Owner, LLC, an entity owned and controlled by DLP Capital Partners, on a 312-unit multifamily asset located at 105 Exchange Circle, Ashville NC. The purchase price was $77M, which for a property with a subcategory cap rate of 5.40% and a current book value less than a year from closing of $55,867,232 making the LTV 96.48% based on the book value.
But buried on page 20 of 63 in the loan documents was the real principal amount: $80.5 million—meaning:
That’s not a loan—that’s synthetic equity via fantasy financing.
Rastegar Capital: 70 Units, 319% LTV
Rastegar Capital’s Velo Flats, a 70-unit Austin multifamily asset, was bought in 2021 with an initial loan of $7.4M. But in September 2022—after interest rates were no longer a “threat” but a lived reality—Thrive Lending (another Fannie Mae-approved outfit) wrote a $11.25M second TD, pushing total debt to $18.65M.
The property’s book value? With a cap rate of 5.67%, $5.84 million, giving us a real-time LTV of 319.36%.
RSN Property Group: $35M Purchase, $69M in Funding
Reed Goossens’ RSN Property Group purchased two properties in Greenville, SC total of 281-units) for $35 million. SEC filings confirm he raised $16.9 million in investor equity under Reg D. First Carolina Bank, meanwhile, recorded a $26.5 million loan… or so it seemed.
Tucked away on pages 18–19 of the mortgage documents is the actual number: $53 million.
That’s $69 million in capital raised for a $35 million purchase—a $34 million gap that went somewhere. If you guessed “into the deal,” try again as this was no construction loan.
Viking Capital: The 347% LTV Bomb
Then there’s Viking Capital, helmed by Ravi Gupta and Vikram Raya—already with priors (and I should know) for “ghost properties.” On September 11, 2024, Bank of America gave them a $72 million second mortgage on the 5504 Town Center Dr.property in Granger, Indiana (Elevate on Main). Problem: the first mortgage from ReadyCap for $66.75 million still appears active with no evidence of a lien release that I could find.
Book value? With a cap rate of 7.68%, $40.13 million.
These aren't loans. They're lifelines to prolong an apparent Ponzi-esque spiral.
The Missing Link Isn’t Data—It’s Sanity
The predictable response to these examples is to assume we must be missing something—some footnote, some sophisticated financial mechanism that justifies it all.
I call that the NASD 20—the “But Madoff was vice-chairman of NASD and his fund had a run for 20+ years--he must be legit!” reflex. As a former financial fraud perpetrator, that’s exactly the mental trap I wanted you to fall into. You fill in the blanks with credibility I didn’t earn.
The Real Motive
When cash flow dries up, cash has to be manufactured—through relentless equity fundraising (cue the 20% IRR pitch deck on your social media feed), or by taking on progressively insane debt. Promoters become professional borrowers.
The Reg D machine keeps spinning, backed by lenders apparently willing to ignore risk, due diligence, and reality. If values “eventually” go up, then who’s hurt and as long as the payments are made, who's hurt?
The investor is.
Because when the IRR fantasy crashes into a wall of overleveraged assets, it's the investor who finds out the emperor had no equity.
Final Thought
I’m no lawyer, and I barely touched a law book in prison, but here’s what I do know: if lenders—through incompetence, recklessness, or outright complicity—enable these financial illusions, they’re not neutral parties. They’re part of the problem. And they shouldn’t be shielded from accountability when the fallout hits.