The U.S. Securities and Exchange Commission (SEC) recently brought an action against a former real estate investment company chief executive officer who they allege defrauded investors of $46 million by selling them fake interests in real estate investment limited partnerships.
He convinced many of the 200 investors he defrauded to transfer funds from their individual retirement accounts (IRAs) to self-directed IRAs in order to invest in the limited partnership interests he offered and sold.
Kenneth Mattson, the former CEO of LeFever Mattson in San Francisco did manage legitimate limited partnerships that invested in residential and commercial real estate but the SEC alleges that from about 2007 to April 2024 Mattson allegedly offered and sold fake ownership interests which were not reflected in the legitimate records of ownership, thereby defrauding investors.1
Many of his investors in this scheme were retired senior citizens whom Mattson met through his church.
Mattson co-mingled new investor funds with personal and business funds and made Ponzi-like payments to investors. He also provided fake tax records and used investor funds to pay for personal expenses.
The SEC issued an Investor Alert warning about self-directed IRAs in February 2023.2 Traditional IRAs have accounts which are held by custodians such as banks and other financial institutions, life insurance companies, mutual funds and stockbrokers. trust companies or other entities approved by the Internal Revenue Service (IRS).
While the IRS does not approve IRA investments, some kinds of investments are generally not allowed in a traditional IRA. These include collectibles like most coins, metals with the exception of certain kinds of bullion, gems, stamps antiques, artwork and other items. 3 Most traditional IRA custodians do not allow IRA owners to invest IRA funds in real estate.
Self-directed IRAs are held by custodians, as are traditional IRAs. but they allow the investor to invest in a broader set of assets than allowed by most traditional IRAs. These broader assets can include real estate, precious metals, crypto assets, private placement securities, promissory notes, tax lien certificates and real estate.
The SEC Investor Alert on Self-Directed IRAs states, “Investments in these kinds of assets have unique risks that investors should consider. These risks can include a lack of information and liquidity — and the risk of fraud.”4 Self-directed IRAs are subject to a lack of legal and regulatory protection and the investor is solely responsible for evaluating and understanding the investments in the account.
In a traditional IRA the custodial firm limits IRA investments to firm-approved stocks, bonds, mutual funds and CDs. Self-directed IRA custodians, like Kenneth Mattson, who was charged with fraud by the SEC, “do not sell investment products or provide investment advice; do not evaluate the quality or legitimacy of any investment in the self-directed IRA or its promoters; and do not verify the accuracy of any financial information that is provided for an investment in the account.”5 The custodian for a self-directed IRA has no responsibility for investment performance.
Protect your Investments with Expert Securities Law Representation
If you have questions about the management of your financial investments or suspect broker negligence, an experienced securities lawyer will fight for and protect your rights as an investor. Call our Michigan Securities Law Firm in Royal Oak and speak to an attorney about the management of your investments today.
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1, SEC Charges Former Real Estate Investment CEO with Operating Multimillion Dollar Ponzi-Like Scheme, 5/22/2025
Link: https://www.sec.gov/newsroom/press-releases/2025-76-sec-charges-former-real-estate-investment-ceo-operating-multimillion-dollar-ponzi-scheme
2, 4, 5 Investor Alert: Self-Directed IRAs and the Risk of Fraud, 2/7/2023
Link: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/investor-14
3, Retirement Plans FAQs regarding IRAs
Link: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras#investments