Some marketers move to Florida believing that the state’s constitutional Homestead Act protects their house from the Federal Trade Commission’s (FTC) grasp. A recent case shows that the FTC may not share that belief, and a federal judge recently agreed with the FTC.

Sam J. Goldman tried looking for gold, but it didn’t pan out. In 2011, the FTC charged Goldman and others with violating the FTC Act and the FTC’s Telemarketing Sales Rule in connection with selling precious metal investments. Specifically, the FTC alleged that the defendants promoted a bogus investment scheme that conned consumers into buying precious metals on credit without clearly disclosing significant costs and risks. Subsequently, at the FTC’s request, a federal judge ordered a stop to the defendants’ deceptive practices, froze the defendants’ assets, and appointed a receiver to oversee the business. In 2012, the defendants agreed to a $24 million settlement with the FTC to resolve the matter. The judgement was not suspended. So the FTC sought to collect on same.

Fast forward to last week, the United States District Court for the Southern District of Florida granted the FTC a lien on the home of Goldman. In its order, the court found that the protections of the Homestead Act did not apply under Florida law because courts are allowed to “impose equitable liens on homesteads when the plaintiff can establish that the defendant has used fraudulently obtained funds to invest in, purchase or improve a homestead.” We’re pretty sure this is the first time the FTC succeeded in end running the Homestead Act protections.

To obtain the home lien, the FTC was required to establish that the investment scheme promoted by the defendants was fraudulent and that funds obtained from the scheme were used to purchase or improve the home. The court quickly concluded that Goldman was involved in the fraudulent scheme because, in the settlement agreement he entered into with the FTC, he agreed to the facts as stated by the FTC in the first complaint against the scheme. The FTC, with the help of a forensic accountant, was able to demonstrate that Goldman used the fraudulently obtained funds to pay for his home mortgage. In response, Goldman requested an evidentiary hearing where he would show that the forensic accountant made “a myriad of errors, inaccuracies, and omissions.” However, the court concluded that his request only contained vague statements and, notably, that Goldman presented no factual evidence demonstrating that the FTC’s forensic accountant made any errors. The court ultimately ruled that the equitable lien meant that the FTC could take possession of and sell the house to help offset the settlement judgment.

The FTC has been looking for cases to test the bounds of the Florida Homestead Act and to further develop precedent enabling it to go after Florida property that it believes was purchased with funds obtained by fraud. Unfortunately for Mr. Goldman, the FTC found such a case and the story does not have a happy ending. While the Florida Homestead Act does provide protections, those protections are not absolute. Just ask Rumpelstiltskin, I mean Mr. Goldman.