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An order is opened at Chicago Title and Trust on December 1, 2015. The buyer in the transaction deposits an international promissory note in the amount of the required deposit of $3.2 million. The escrow closer deposits the item only to have it immediately returned by the bank.

promissory_note

The buyer then provides Processing Instructions that reads as follows:

  Fiduciary Collector:
This is a prepaid discharge item with an attached charging instrument that has been accepted for value and returned for value, discharge and settlement of account no. 15025574NSJ valued at $3,200,000.0 by the Undersigned, This Exempt Exchange Item [International Promissory Note] is to be presented through electronic medium by FED Wire to access the pre–established Account referenced above. Post the uncollected funds into the asset column of this account and charge the offer and acceptance for settlement; prepaid and exempt when entered in the post–closing balance. Return of original–issue profile is priority–exempt after acknowledgement from the undersigned principal, a Treasury accrual item and a U.S. bankruptcy–proceeding remedy.

Huh? A quick Internet search reveals a promoter of the international promissory note advertises it as the secret government instrument used to pay your debts using the "government's secret species of money."

The last person who perpetrated this scheme issued more than 2,000 promissory notes for more than $100 million. He was eventually arrested and brought to justice. As reported in the April 2012 edition, he was found guilty of 11 counts of creating false obligations and 10 counts of mail fraud, and faces 30 years in prison.

It is only a matter of time before the latest perpetrator is caught. Regardless, it is clear the buyer and seller in this particular transaction were in cahoots. They attempted to coerce the escrow closer into disbursing the $3.2 million upon receipt of the international promissory note, but their attempt failed when the trust bank refused the deposit.

 

 
 

MORAL OF THE STORY

Settlement agents should remain vigilant and shut down the transaction by resigning as escrow holder immediately if a promissory note is tendered as payment. Settlement agents should not attempt to deposit an international promissory note at the bank. Acting swiftly to cancel the transaction will help sellers put their property back on the market and real estate agents move on to a transaction that will actually close.

 
 

 

 
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