Judge appoints receiver in Lincoln case involving $44M bank fraud investigation

A district judge this week appointed a receiver to develop a plan for a fair distribution of any assets that remain to investors who suffered losses in what's been described as potentially one of the largest bank frauds in Nebraska's history.

The move came on a motion by the Nebraska Department of Banking and Finance in its case against Jesse Hill of Hickman, First SOJO Capital Group LLC and other related entities.

In December, the state sought to freeze the assets of the group of companies and two investment funds a month after the Banking Department launched an investigation into Hill's companies following the Nov. 2 death of Aaron Marshbanks, a 45-year-old Lincoln real estate investor with ties to Hill.

State investigating what could be Nebraska's largest bank fraud

Following Marshbanks' death, bankers across the state began "reporting that they had been victims of a fraud scheme perpetrated by Marshbanks, Jesse Hill and Hill's organization, First SOJO Capital Group LLC," according to the lawsuit.

The first of more than 20 creditors — banks, savings and loans and credit unions — started filing demands for notice of an application for informal probate of will and statements of claims within two days of his death.

By mid-December, they had topped $45 million.

To date, Hill hasn't been charged criminally. But civil and probate cases continue to wind through the courts.

At a hearing Tuesday in the civil case, Assistant Attorney General Erik Fern said that in December, there were well over $1 million in assets. But they've since lost 80-90% of their value due to investment losses.

"So we're talking about a significant loss of assets already. And -- in the interest of preserving as much of the assets for the rest of the investors -- we would like a receiver to address this and to prevent any additional hemorrhaging and get these folks back the money that they're able to," he told Lancaster County District Judge Ryan Post.

Fern said the receiver -- a person appointed to manage debt consolidation for a company -- would collect and organize the assets and develop a plan to reimburse the investors "as best as possible."

He said the receiver would be paid $340 an hour.

"We're limited on options on what we can try to do to sort out this mess," Fern said.

He said that if the court didn't appoint a receiver, the Banking Department and the AG's office would have to sort it out individually.

"There's still an ongoing investigation into this matter, so the Department of Banking and Finance would be investigating this matter as well as trying to fairly arbitrate the reimbursement," Fern said.

He said having a third party was the most appropriate way to handle it.

"We understand there's a cost, but we don't see a feasible alternative," he said.

Hill's attorney, Joshua Dickinson, offered a "soft objection" saying that conceptually the parties want the same thing.

"There is money that was invested in these two accounts. That money is just sitting there," he said.

And many of the investors were Hill's friends and family, he said.

"It does no one any good to have any of this money, whatever is left over, just sitting there," Dickinson said. "So we, too, want this money to be returned to the investors in as efficient a manner as possible."

It's just a question of cost and efficiency, he said.

Dickinson said he believes the process that needs to be done is relatively simple. Records reflect how much each of the dozen or so investors contributed. They need to determine the percentage each contributed to the funds, which totaled north of $4 million.

It's an over-simplification, he said, but not far off.

Dickinson suggested a guardrail to try to make sure the receiver tries to get from Point A to Point B as efficiently as possible, "given the significant losses the investors have already experienced."

That would benefit everyone involved, he said.

Fern said he thought they could work together to simplify the work of the receiver.

And Post granted the motion.

In the complaint filed in December, Fern alleged that between March 11, 2021, and Sept. 23, 2022, Marshbanks and Hill had made fraudulent statements with at least 14 banks, securing over $20 million in loans.

To get the money, he said, Marshbanks provided account statements that he and Hill had falsified showing the purported value of Marshbanks' or a Marshbanks entity's accounts at JT Equity or First SOJO Capital Group LP.

Fern said the JT Equity accounts that they gave banks security interests to in exchange for the loans didn't exist. Nor did First SOJO Capital Group LP. (Though First SOJO Capital Group LCC did.)

Despite that, Hill signed at least 22 control agreements representing to banks that the accounts were real, under his control and could be given as collateral for a loan, the AG's office alleges

The state is alleging Hill, First SOJO and his other entities committed a number of violations of the Securities Act of Nebraska, including:

* Executing over 20 fraudulent control agreements to secure nonexistent securities accounts, each of which constitutes a separate violation.

* Starting a new private fund in violation of a 2018 agreement with the department.

* Lying to investors concerning the value of their accounts.

* Failing to send quarterly statements to investors.

* And not maintaining a net capital of at least $25,000.

Fern said they believe that Hill had been pooling money from multiple investors in his personal account and using it to invest in securities, repeating conduct that had led him to be fined in 2018.