"Obviously, we're very disappointed," said Greg Hoole, the attorney for investors. "The plan was supported by 98 percent of investors who responded to a straw poll."
About 220 investors in Management Solutions had put forth their own proposal on how to liquidate the properties consisting mostly of apartment buildings because they said the receiver's proposals would have cost them millions of dollars.
But on Friday,without hearing arguments from attorneys, Jenkins said the investor plan had serious flaws, including financial projections that couldn't be verified and was in a form appropriate for bankruptcy court only.
"I've come to the conclusion the plan is not the sort of plan the court can approve," Jenkins told the courtroom, filled with attorneys and investors.
He invited investors to make a bid for the properties if they thought they would increase in value in the future.
On Thursday, Jenkins had handed down a decision that said Management Solutions was not a Ponzi scheme overall, while various transactions might have been fraudulent. Investors had sought that ruling because it will affect how much the receiver could get back from some of them and how much might be returned to them after the properties were liquidated.
Management Solutions and owners Wendell and Allen Jacobson were sued in December 2011 by the Securities and Exchange Commission that alleged the company was insolvent and the owners had operated it as a Ponzi scheme in which money from new investors went to pay existing ones. Regulators also said the father-son duo had lied to potential investors about how their funds would be used and on other matters.