The company that was supposed to provide a $140 million construction loan for the failed Bahama Island condominium resort was a shell corporation that never had any money, according to financial documents filed with an over-the-counter securities agency.
Meanwhile, lawyers representing Bahama Island's condo buyers are going to court to keep developer Jeff Shoup from selling his personal assets.
A judge will decide next week whether Shoup will be allowed to sell assets including a 2004 Hummer, two BMW automobiles, two motorcycles, two Rolex watches, a 28-foot boat, a coin collection, a watch collection and three guns.
Lawyers say Shoup, who sold his Briarcliffe Acres home this summer, is trying to "liquidate and conceal his assets in order to defraud" investors who lost $5.4 million in deposits on unbuilt Bahama Island units.
Tommy Brittain - a lawyer who represents Shoup and his business partner, Tommy Hix - did not respond to a request for comments.
Randy Mullins, whose law firm represents 58 buyers, said he also is looking for other assets owned by Shoup and Hix that might be used to repay investors.
Hix lost his Briarcliffe Acres home to foreclosure earlier this year.
Shoup and Hix took Bahama Island depositors' money out of an escrow account and used it to pay for salaries, travel and personal expenses, according to bank records.
The two men also gave $2 million to Duwayne Woods, a purported financier from California who was supposed to provide a construction loan for the Bahama Island resort in North Myrtle Beach.
The loan was never funded, and Shoup and Hix say they cannot locate Woods.
Woods did not respond to an e-mail requesting an interview for this story.
Woods was supposed to provide the Bahama Island loan through a company he operated called Atlewa Trust.
Shoup has said Woods told the developers that Atlewa Trust had $100 million from a bond it owned on Euroclear, a Belgium-based securities clearinghouse.
However, Bahama Island loan documents show Atlewa Trust was supposed to get its funding from another Woods-affiliated company called Sequoia Asset Management Group.
Sequoia's address at the time of the Bahama Island deal appeared to be an office suite in Encinitas, Calif., but actually was a mailbox at a UPS Store in that same town. It was the same address for other businesses operated by Woods, according to corporation registrations.
Sequoia was a shell company that was traded on a U.S.-based securities market called the pink sheets.
An annual report that Sequoia filed with the pink sheets shows the company lost more than $600,000 in 2006, the year it was supposed to fund the Bahama Island loan.
Sequoia became a publicly traded company in January 2006, after it merged with another pink sheets firm called Medical Home Products Inc., which was a spinoff of another shell corporation called Cor Equity Holdings Inc.
Medical Home Products reported a $52,876 deficit in 2005.
The company assumed the Sequoia name in 2006 and then changed its name to Platcom Inc. in 2007.
Platcom has not filed a financial report.
The Euroclear bond that Woods purportedly touted is similar to claims made by Rufus Paul Harris, a former business partner with Woods and chief executive of a penny stock company called Conversion Solutions Holding Corp.
A federal judge last month ordered Harris to pay civil penalties totaling $1.4 million related to a pump-and-dump stock scheme regulators say Harris orchestrated with Conversion Solutions. Evidence presented at trial by the Securities and Exchange Commission showed the company's Euroclear bonds did not exist and Conversion Solutions had no real assets.
Harris has said he helped form Atlewa Trust with Woods, but was not involved in the company when the Bahama Island deal was being discussed.
Bahama Island was supposed to have 320 condo units and a marina on about 22 acres along the western bank of the Intracoastal Waterway. It was one of several condominium projects Shoup and Hix said they were building at several sites along the Grand Strand.
National Bank of South Carolina, which had loaned $8.1 million for the purchase of the Bahama Island land, foreclosed on the property in May.
The bank's bid at the foreclosure auction was for less than the amount owed by developers, which means there probably will not be any money left to repay investors.
An Horry County judge is scheduled to decide in November whether depositors will get any money raised in the foreclosure sale.
S.C. real estate law appears to give the bank first priority for repayment because its loan pre-dates all of the condo contracts.
The only investors who might get their money are those who paid about $640,000 in deposits for boat slips at a marina that had been planned for the project. That's because the boat slip contracts were signed before NBSC loaned money for the land purchase.
In addition to the Bahama Island losses, at least $2 million is missing from escrow accounts from other companies the two men controlled. Shoup and Hix gave some of that money to Woods and used the rest for personal expenses, according to bank records.
The misspent money has sparked an ongoing federal criminal investigation.
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