According to this article on Bloomberg, hundreds of average real estate investors lost a total of $250M on deposit at two 1031 exchange firms in Nevada. The lost funds had been placed temporarily with the firms while the investors arranged tax-free exchanges. The two firms are accused of diverting the customer assets to invest in other businesses.

Adding further injury, the defrauded investors will have missed the exchange deadline to purchase a new property and will as a result be liable for the income taxes due on the proceeds from the original property sales.

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