Schack was the chief investment officer of Regent Medical Properties ("Regent"), a property management company located in Glen Rock, New Jersey.  Sovereign Medical Services, and affiliates ("Sovereign"), was a network of multi-specialty, out-patient medical practices headquartered in Glen Rock, New Jersey, with various practice locations.  Co-conspirator 1 was the founder and chief executive officer of both Regent and Sovereign.

In April 2016, Schack and Co-conspirator 1 used fraudulent representations to obtain a $91.5 million loan (the "Mortgage Loan") from Lender 1 and others secured by thirteen medical office buildings in New Jersey, New York, and Florida (the "Medical Properties").  The borrowers in the Mortgage Loan were thirteen separate special purpose entities-majority-owned by Co-conspirator 1-one for each collateral property (collectively, the "Borrowers"). 

Schack and Co-conspirator 1 exploited the fact that, through Sovereign, Co-conspirator 1 controlled approximately half of the tenants in the Medical Properties.  Schack and Co-conspirator 1 misrepresented to Lender 1 the physical occupancy status of certain affiliated tenants and the Medical Properties' true rental income.

After the Mortgage Loan closed, Schack and Co-conspirator 1 continued their scheme to conceal the actual financial status of the Medical Properties by submitting fraudulent financial statements to the loan servicer on a monthly basis.  Those misrepresentations allowed Schack and Co-conspirator 1 to avoid accelerated payment on the Mortgage Loan.

Finally, after the Mortgage Loan closing, Schack and Co-conspirator 1 diverted rent payments owed through the "lockbox" account procedure specified in the Mortgage Loan agreement.  Instead, Schack and Co-conspirator 1 used the funds for both Regent's operating expenses and Co-conspirator 1's personal expenses, including credit card bills of up to approximately $80,000 per month and private jet payments.  Through such means, Co-conspirator 1 diverted millions of dollars in rental payments from the "lockbox" account over the course of the Mortgage Loan for his own personal use.

Shortly after the closing of the Mortgage Loan in April 2016, Lender 1 sold its interest into two commercial mortgage-backed security loans.  By 2019, approximately three years after the closing of the Mortgage Loan, the Borrowers were sixty days behind on loan payments, and administration of the loan was referred to a special servicer.  In February 2020, the Borrowers declared bankruptcy.   

[L]angston admitted to participating in a scheme to steal from Wells Fargo's customers while she was employed at the bank as a teller during 2017.  According to the government's evidence, Langston used Wells Fargo's systems to check the account balances of customers without customers' knowledge. Langston would then share with a confederate the customer's name and account balance.  The confederate then entered the bank and withdrew funds from the customer's account by presenting a forged signature for the customer. The conspirators used this scheme to steal $124,000 in cash and an $80,000 cashier's check from two of the bank's customers. Wells Fargo was able to detect the theft and stop payment of the $80,000 cashier's check, thus incurring total losses on behalf of its customers in the amount of the $124,000 in cash that Langston and others stole. 

The SEC's reluctance to permit traditional investment vehicles to hold bitcoin or bitcoin futures has contributed to investors seeking more expensive, less convenient, or less direct substitutes, but it also has heightened the stakes of any regulatory approval for a mainstream retail product we might one day grant. By waiting we also have magnified the first-approved advantage in the bitcoin ETP or registered fund space. Moreover, because we have comported ourselves like merit regulators, investors might view any approvals as an official blessing by the Commission about the quality of the products we approve. That would be the wrong inference to draw; investors, alone or with the help of an investment professional, need to think carefully about whether any particular security -- crypto-based or not -- is right for them.

Regulators should commit themselves to providing regulatory clarity so that traditional financial market participants can engage with crypto with confidence that they are complying with their regulatory obligations. For example, under the eye of our sister regulator, the Commodity Futures Trading Commission, a healthy bitcoin futures market has developed, and an ether-based futures market recently initiated trading. Another federal financial regulator, the Office of the Comptroller of the Currency ("OCC"), has opened the door for the banks and thrifts it supervises to participate in independent node verification networks and to use stablecoins for payment activities. SEC staff has issued guidance, including, most recently, a risk alert from our Division of Examinations designed to help investment advisers, broker-dealers, transfer agents, and exchanges craft policies and procedures for digital asset securities. We need to do more, and I look forward to working to provide that clarity with our incoming Chairman and my other fellow Commissioners.