Receiver now says Dragul operated business as Ponzi scheme for at least 11 years

Dragul‘s company previously owned the e Happy Canyon Shopping Center along Hampden Avenue in southeast Denver. The property was sold earlier this year. (Marcus & Millichap)

The receiver overseeing the liquidation of the assets of Gary Dragul’s real estate firm, now seeking to claw back millions of dollars from credit card issuers as well as Dragul’s wife and kids, has changed how he’s characterizing the embattled businessman’s alleged wrongdoing.

“Commencing at least by 2007 and continuing through 2018, Dragul was operating his entire business enterprise as a Ponzi scheme,” receiver Harvey Sender said in recently filed court documents.

Gary Dragul (LinkedIn)

Previously, Sender had characterized Dragul’s activities more broadly as securities fraud, and made allegations such as Dragul selling more than 100 percent ownership in a particular asset. Ponzi schemes are a subset of fraud in which early investors are paid back with funds contributed by later investors, while being led to believe the funds are legitimate profits coming from market returns or some other activity.

Reached by phone last week, Sender confirmed the Ponzi scheme characterization is new, and said it is the result of forensic accountants getting access to more of Dragul’s business records and understanding what occurred.

The recently filed court records also provide more detail regarding how Dragul, of Cherry Hills Village, allegedly used his ill-gotten millions. Sender said the records show Dragul used stolen funds to pay personal gambling debts of almost $9 million and transfer millions of dollars to his wife and children, and more broadly to “fund his extravagant lifestyle.”

More specifically, Sender alleges that, among other things, Dragul used investor funds to pay off more than $8.3 million in charges his wife ran up on American Express cards, and to buy his son a condo in downtown Denver’s Spire tower for $654,000 in 2017. Sender is trying to get money back from the credit card issuer and to be granted ownership of the condo.

Dragul, whose businesses operated under the names GDA Real Estate Services and GDA Real Estate Management, did not respond to a request for comment for this story.

The businessman, whose holdings once included downtown Denver’s Writer Square, was indicted on nine counts of securities fraud in April 2018, and on five more counts in March of this year. The Colorado securities commissioner and Colorado attorney general began investigating Dragul in 2014 after receiving complaints from investors, according to court records.

The Ponzi scheme characterization appears in two separate court filings made within the past month. While Sender said Dragul’s business operations were operated as a Ponzi scheme since at least 2007, he said the business was “insolvent” from the date it was founded in 1995 “due to Dragul’s use of investor funds to finance his lifestyle and to transfer assets to his family members.”

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Sammy Deeb
8 months ago

Very interesting read, thank you for writing this @Thomas Gounley

Michael Mannino
Michael Mannino
8 months ago

Interesting details about this alleged fraud. The investors lost big time. It seems unlikely that they will collect much. Investors beware of scams and major frauds.