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Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24870
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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I set up an LLC in CT and had someone invested $25,000 into

Resolved Question:

I set up an LLC in CT and had someone invested $25,000 into it through his self directed IRA.

I had asked the investor to lend the money to the LLC but he chose to purchase ownership.

The LLC went into loss primarily because we lost money in the deposit of a foreclosure property.

Now the investor wants to get his $25,000 back.

What legal recourse does he have against the LLC and/or me?

The LLC has insolvent but I have money from other sources including my W2.

That is, do I personally owe him any money, and what kind of actions can he take to collect his money?

I have a lots of questions but I want to just start with the above. I will start other threads for the subsequent questions or give you additional accepts as questions are answered.

Thanks
Submitted: 3 years ago.
Category: Business Law
Expert:  Law Pro replied 3 years ago.
Welcome to JustAnswer! My goal is to do my very best to understand your situation and to provide a full and complete excellent answer for you.

My name is XXXXX XXXXX I'm going to assist you with your question.

Please bear with me if you believe my answer isn’t coming fast enough because I’m also working with other customers too. I apologize for any seemingly late response.

First, an IRA is permitted by law to purchase stock of a corporation (except for an "S-corporation") or a membership interest in an LLC.

What type of business was the LLC in?
Customer: replied 3 years ago.
Real estate purchase, sell and rental.
Expert:  Law Pro replied 3 years ago.
Unless there was provable fraud or misrepresentation - I don't think he has a cause of action.

He gets or has no guarantee when he invests in a business - LLC or otherwise.

Do you think he has a claim for fraud or misrepresentation?
Customer: replied 3 years ago.
This is what I want to understand what can constitute fraud or misrepresentation?
Expert:  Law Pro replied 3 years ago.
An intentional misrepresentation of a known fact is fraud or misrepresentation.


A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury.

Fraud is commonly understood as dishonesty calculated for advantage.

 

 

Fraud must be proved by showing that the defendant's actions involved five separate elements:

(1) a false statement of a material fact,

(2) knowledge on the part of the defendant that the statement is untrue,

(3) intent on the part of the defendant to deceive the alleged victim,

(4) justifiable reliance by the alleged victim on the statement, and

(5) injury to the alleged victim as a result.

 

 

These elements contain nuances that are not all easily proved. Fraud must be plead with specifity and with facts showing such.

 

 

First, not all false statements are fraudulent. To be fraudulent, a false statement must relate to a material fact. It should also substantially affect a person's decision to enter into a contract or pursue a certain course of action. A false statement of fact that does not bear on the disputed transaction will not be considered fraudulent.

 

Second, the defendant must know that the statement is untrue. A statement of fact that is simply mistaken is not fraudulent. To be fraudulent, a false statement must be made with intent to deceive the victim. This is perhaps the easiest element to prove, once falsity and materiality are proved, because most material false statements are designed to mislead.

 

Third, the false statement must be made with the intent to deprive the victim of some legal right.

 

Fourth, the victim's reliance on the false statement must be reasonable. Reliance on a patently absurd false statement generally will not give rise to fraud; however, people who are especially gullible, superstitious, or ignorant or who are illiterate may recover damages for fraud if the defendant knew and took advantage of their condition.

 

 

Finally, the false statement must cause the victim some injury that leaves her or him in a worse position than she or he was in before the fraud.

 

 

A statement of belief is not a statement of fact and thus is not fraudulent. Puffing, or the expression of a glowing opinion by a seller, is likewise not fraudulent. For example, a car dealer may represent that a particular vehicle is "the finest in the lot." Although the statement may not be true, it is not a statement of fact, and a reasonable buyer would not be justified in relying on it.




So, unless he can point to specific instances of fraud - doubtful oral statements would suffice - it would need to be documented in your case - I don't think he would have a case nor be entitled to refund of his monies/investment.



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Customer: replied 3 years ago.
"doubtful oral statements would suffice"

What does that mean?
Expert:  Law Pro replied 3 years ago.
Given that the business was set up in real estate - since all matters concerning real estate must be in writing or violative of the Statute of Frauds - he could clearly do his due diligence and see the books and agreements about such.

In my experience, oral statements just aren't pursuasive or a basis to make a claim for fraud in your situation.

That you would have done something like change the books or documents or something.


Thank you so much for allowing me to help you with your questions. I have done my best to provide information which will be helpful to you. If I have not fully addressed your questions or if you have any follow up questions, or if I have misinterpreted your questions in any way, please do not rate me yet, but simply ask a follow up question without rating so I can provide you with a fully satisfactory answer. If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service with 3, 4, or 5 faces so I can receive credit for helping you today. I thank you in advance for taking the time to provide me a positive rating!

If you have any questions, about this or anything else, please ask for me, Law Pro, directly in the question and I will try to assist you as best I can.

For example, you would state, "This question is for Law Pro . . . (then on with your question).
Law Pro and 7 other Business Law Specialists are ready to help you
Customer: replied 3 years ago.
Thanks

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