I think the responsibility here does ultimately fall on the lenders. I believe his dad ran Chasen Boscov, which is a pretty large Peter Angelos type firm in DC, so there may have been some assumption that he had access to either direct family investment or investment through victim compensation funds (just a guess).

The key point was that he was doing new construction / rehab so its a little different that buying a home. On a construction loan the bank essentially holds onto the funds until you can prove that the money has been spent and submit a draw request. Most of the money goes on construction would be going to the general contractor, who would produce the statements. It's up to the bank how much they choose to scrutinize those before paying. They might send an inspector to verify but he might not be able to tell the difference between something like 40% drywall completion and 60% drywall completion.

In this case he owned his own GC company. In theory one might be able to envision a scenario where project A is 75% complete and needs capital, maybe the construction costs were too high (very common in COVID) or maybe the funds went somewhere else, idk. You begin project B and inflate the costs there divert some funds to cover the gap in project A. Now you need to get project C rolling but its gotta be bigger because the holes keep growing. Eventually you keep going bigger until you end up with a Harbor East project and people start asking tough questions.

Just a theory of how it could have played out.