Victims of 1031 exchange scammers Southwest Exchange and Qualified Exchange Services, or QES, soon could be recovering portions of the estimated $98 million swindled from 130 clients, according to Santa Barbara law firm Hollister & Brace, which is representing the class of victims.
 

A 1031 exchange allows investors to defer capital gains taxes when transferring investment capital from one like-kind property to another.
 

Qualified exchange intermediaries act as third-party holders of funds awaiting 1031 exchange. Some $10 million of the missing exchange funds were being held by QES, which was acquired by Nevada-based Southwest Exchange in 2006.

QES and Southwest Exchange collapsed in January 2007, and Hollister & Brace filed suit in February 2007. The suit named Southwest Chairman Donald McGhan and eventually added a host of financial services companies to the defendant roster. In March, a federal judge in Nevada approved a $23 million settlement with UBS Financial Services.

Hollister & Brace said it has recovered $60 million for the scam victims so far. The firm is still in trial with non-settling defendants.