b'Chapter 31Avoiding Fraud in Your Syndicate or Fund Fraud is a constant risk in any kind of transaction but even more so in a realestatesyndication,whichinvolvespoolingfundsfrommultiple investors, many of whom are senior citizens. The SEC and state securities regulatorsareacutelyawarethatunscrupulousissuerscanquicklystrip unsuspecting investors of their retirement funds. Thus, the sale of securities is strictly regulated with stiff penalties for non-compliance.Penalties for fraud and securities violations can include jail, fines, civil lawsuits, damages, disgorgement of gains, and becoming labeled as a bad actor. This could preclude you from ever participating as a manager in another syndicate or dealing with investor funds again.As a member of an asset management team, you have the responsibility to your investors to constantly be on the lookout for illegal dealings relating to your syndicate or fund that can threaten your investors, your livelihood, and your reputation. Some of the most common forms of illegalities to beware are: Violations of securities laws by co-GPs, capital raisers or finders (See Chapter 26); Embezzlement where members of the asset management entity misappropriate investors money and transfer money to personal accounts, write checks to themselves, or withdraw company funds for personal purposes; 286'