Is Jason Grosfeld’s Costa Palmas Resort the New Madoff Scheme?

The East Cape of Los Cabo, Mexico has become a hotbed of luxury developments, including Costa Palmas, a high-end resort owned and operated by Los Angeles real estate firm Irongate. Homes in Costa Palmas range from already-built homes starting at $2.5 million to beachfront lots for more than $25 million.

According to interviews with Jason Grosfeld in 2021, Irongate’s founder and CEO, Costa Palmas has enjoyed more than $1 billion in home sales, spurred on largely by the pandemic. Some homeowners in Costa Palmas, however, accuse Irongate of being a present-day Bernie Madoff, using the millions of dollars that it receives for luxury homes in a loosely structured Ponzi scheme to take or divert money from home buyers for Irongate’s own personal profit.

At least two homebuyers in Costa Palmas have filed lawsuits against Irongate and certain of its representatives in the United States, and sources say that civil and criminal legal proceedings have been brought or are being initiated against Irongate and its Mexican subsidiaries in Mexico, for fraud, racketeering, extortion, conspiracy and other wrongful conduct. Investigations by various Mexican and United States law enforcement agencies and other authorities may also be underway.

From public filings this year against Irongate in state and federal courts in California, two homebuyers in Costa Palmas, GS 1975 LLC and TRG CP, LLC, accuse Irongate and its Founder and CEO, Jason Grosfeld, its Director of Marketing, Michael Radovan, its Director of Development, David Waller, and its General Counsel, Mitch Laufer, along with others, of fraudulently inducing home buyers into paying Irongate and its affiliates tens of millions of dollars for construction of luxury homes that were not in fact completed and extorting additional payments for work that was not done, was already paid for, or was not approved.

These lawsuits allege that Irongate made false promises to construct the buyers’ homes within eighteen months but that  Irongate then took the buyers’ money and/or materials purchased by the buyers and used them for other purposes or for other homes. In both instances, the buyers allege they paid millions of dollars to Irongate for homes which, several years later, are nowhere near complete and cannot be occupied.

These lawsuits also allege that Irongate and its representatives extorted millions of dollars in payments from them by threatening to declare defaults of their contracts or to stop all construction work if the monies were not paid.  And in both instances, the buyers allege that when they tried to protect themselves from Irongate’s wrongful conduct, Irongate immediately punished them by causing other Irongate affiliates to terminate their valuable memberships at the Costa Palmas Beach & Yacht Club.

The state court file for GS 1975 LLC reveals that upon Irongate’s motion, the matter has been referred to arbitration in Mexico. Steve Anderson, a representative for GS 1975 LLC, has stated that arbitration proceedings against Irongate have been filed in Mexico. GS 1975 LLC is seeking more than $20,000,000 in damages from Irongate. Mr. Anderson also stated that GS 1975 LLC is working with prosecutors in Mexico to bring criminal charges against Irongate, Mr. Grosfeld, Mr. Waller, and Mr. Radovan, as well as any other remedies that may be available to redress the harm suffered.  

The federal court action brought by TRG CP, LLC is still pending. Irongate and its representatives have also asked the court to force TRG CP, LLC to arbitrate its claims in Mexico, but no order on that motion appears in the court file.  We reached out to TRG CP, LLC, who declined to comment. James Grosfeld, the father of Jason Grosfeld, a noted investor in BlackRock, an asset management company of which he bought $94 million in stock, served as chairman and CEO of the PulteGroup for 16 years starting in 1974 before resigning from his position on the board amid internal controversy over the corporate governance of Pulte according to The Real Deal.  

Given the number of homes Irongate has sold in Costa Palmas and the more than $1 billion that Irongate has received in sales, these homebuyer complaints may be only the tip of the iceberg.