Company's Own AI Rats them Out!

NEW STARTUPS

Startups that you can invest in with as little as $100 right now:

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🏔️ AspectAvy - Saving lives through their avalanche avoidance app (Wefunder)

🧬 Genomic Expression - New cancer-fighting approach with $1.7M in funding (StartEngine)

GATEWAY TO HELL

This story has it all - shameless greed, hidden romance, and fake charities.

And it all started with an investor email that tipped me off.

Our story begins with LEX Markets, a real-estate investing platform that opened up commercial real estate investing to everyday investors. During its existence, investors could buy/sell shares in real estate properties.

Investors that bought shares typically receive dividend payouts and also hope for the shares to appreciate in value.

One particular property was called Gateway Garage, which had listed 10% of its shares to retail investors on the LEX Market.

Gateway Garage is a 600-car parking garage in Portland Maine that was valued at $10M when listed on LEX.

NO LEX, NO RULES

Things were going seemingly well until…LEX Markets went out of business in 2023.

This wouldn't impact the underlying real-estate properties that had listed on the platform, just reduce the liquidity that investors had.

Investors still owned the real estate assets but were no longer able to quickly buy and sell shares as they had been doing.

Only 10% of Gateway Garage was owned by the retail investors. The remaining 90% was owned by a REIT owned & controlled by CJ Follini.

Follini had full control over Gateway Garage’s business decisions in this setup. When LEX Markets shut down, he sent a letter to retail investors that essentially stated the following:

• Because there was no more liquidity, Gateway Garage would dissolve itself

  • This seems like a stretch, it'd be like if SpaceX had some of its shares listed on a secondary market that shut down and SpaceX goes, 'sorry, we now gotta sell the business because of this'

• The sale needed to be done quickly, and no other interested parties could be found

  • This seems unlikely, especially given the ultimate sale price, which we’ll get to

• The only available and willing buyer was CJ Follini's REIT, the one that already owned the other 90% of Gateway Garage

Meaning, he sold it….to himself. And not only did he sell it to himself, but he sold it at a firesale price.

Retail investors had acquired shares for $250 apiece when Gateway Garage launched on LEX Markets. Follini paid out investors of these shares just $60 each, a whopping 76% discount.

If you had originally invested $5,000 your payout would have been… $1,200.

This could have made sense if the underlying asset was in steep decline, but this was far from the case with Gateway Garage.

WHAT SHOULD HAVE HAPPENED

For this sale to have been above board, Follini should have gotten an independent reviewer to assess the value of the asset

We don’t know if Follini did this, but if he did there does not appear to be any details around why a seemingly stable asset would become worth so much less overnight.

It’s also hard to believe Follini’s story of needing to sell when we look at how another property (286 Lenox Partners) handled the closure of LEX Markets. 

They issued asset holders an offer to buy back the shares, but it was OPTIONAL.

Whereas Gateway Garage investors had no say in the matter, their shares were dissolved for pennies on the dollar.

With shady dealings, often times EVERYTHING the orchestrator does is shady. So I decided to poke around some of Follini’s other dealings…

NOYACK WEALTH CLUB

Follini owns a non-profit called Noyack Wealth Club - its mission it to help educate the next generation of investors through their free member community.

I thought to myself, ‘how could the same guy that sold himself Gateway Garage shares super cheap at the expense of investors also be a good samaritan that runs a non-profit?’

I suspected there was some sort of money-grab going on, but because this was a non-profit there were few options for Follini to extract cash from the organization.

Now, non-profits are required to file Form 990 with the IRS. Part of this form details the compensation that top executives at non-profits make.

Maybe Follini was just using the non-profit to excessively compensate himself?

To test this hypothesis, I needed to see his compensation package on the non-profit’s Form 990.

I spent a full hour searching for Noyack Wealth Club’s Form 990 but for some reason it was nowhere to be found.

Tired, frustrated, an idea popped into my head.

…..what if…..he’s lying about it being a non-profit?

Noyack wasn't in the IRS database, but I wanted more. Trying to determine how to best answer this, I turned to an unlikely informant…

COMPANY A.I. RATS OUT NOYACK

Noyack’s website features an A.I. chatbot and I decided to ask it if Noyack Wealth Club was a non-profit. Here’s what the chatbot responded:

Bingo. Could the grift be that they're masquerading as a non-profit - building goodwill that they don’t deserve, and possibly even skirting paying taxes?

Claiming to be a non-profit when you’re not is… (checks notes)….very illegal. 

And Follini refers to Noyack Wealth Club as a non-profit multiple times, it’s not just a one time slip-up. Some examples:

• On his LinkedIn profile

• In his newsletter

• On Noyack Wealth Club’s LinkedIn page

The exact punishment varies with each case, but at the worst end of the spectrum falsely claiming to be a non-profit can result in jail time and fines up to $50,000.

I should mentioned that the AI Chatbot may have gotten confused with Noyack’s for-profit arm when answering my question, even though I specifically mentioned the Wealth Club entity.

Even if this is the case, Noyack should be appearing in the IRS database, and it’s not.

FOLLINI LANDS ON WEFUNDER

What is disheartening to see is that Follini is trying to launch a fine-art investment fund on Wefunder, again targeted at retail investors.

Nothing is glaringly off (YET), but I can see how someone of bad character could potentially screw over investors with this kind opportunity.

Here's how Follini lays out the opportunity - through Wefunder he’ll sell shares in a fine-art fund to retail investors.

Follini will then use investor money to buy works of fine art, which he will provide.

This last part is key.

Follini could easily buy a painting for $10k and then sell it to the fund at a valuation of $100k. Follini could pocket the $90k immediately, and repeat with other pieces of art.

Selling an asset to himself, sound familiar? It could turn into Gateway Garage all over again.

BUT not to worry, an esteemed art professional is going to be the Chief Curator of the collection so this should all be above-board right?

Well, that Head Curator is CJ Follini's WIFE - which is not disclosed at all on their page. Furthermore her last name is Pemberton, so it's not clear that the two are married - I did not make the connection until viewing Follini’s Instagram profile.

Let me be clear - it's not a bad thing to be a husband-wife duo (I invested in one!), but this should absolutely be disclosed to potential investors.

Having top management executives be in a personal relationship is a risk that investors should be able to take into consideration when evaluating the investment opportunity.

CLOSING THOUGHTS

When investing in startups, you are more than anything making a bet on the founder. Make sure you’re doing your due diligence on them before risking your entire investment.

That’s it for today, let me know what you think of today’s story!