The Securities and Exchange Commission (SEC) is accusing Florida-based real estate firm EquiAlt LLC, and its owner and managing director, with running a Ponzi scheme that raised over $170 million from 1,100 investors and misappropriated millions of dollars to pay for personal luxury items including sports cars and private jet travel.
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On February 18, 2020, the SEC announced that it had sued EquiAlt LLC (as well as EquiAlt Fund, LLC, EquiAlt Fund II, LLC, EquiAlt Fund III, LLC, and EA SIP, LLC), owner and CEO Brian Davison, and managing director Barry Rybicki in federal court. The SEC suit will proceed in the United States District Court in the Middle District Florida.
The SEC’s request for emergency relief was granted by a federal judge, which included a temporary restraining order, asset freeze, an order not to destroy documents, and the appointment of a receiver over the corporate and relief defendants.
The SEC is seeking repayment of the allegedly ill-gotten gains as well as well as financial penalties against the defendants.
EquiAlt Alleged Sales Pitch
The defendants allegedly told investors that they would pool their money and use about 90% of it to buy real estate to rent or flip, using the profits to pay investors an 8-10% annual return. The SEC’s complaint alleges that less than 50% of the money raised was actually used to invest in properties, and that a large amount of money funded Davison and Rybicki’s personal spending on items like Porches, Ferraris, and watches.
It is also alleged that money from one investor fund was used to pay investors in another fund, which the SEC says is like a Ponzi scheme.
The SEC alleges that that EquiAlt “used in-house employees and unlicensed external sales agents to solicit investments from the general public through cold calling campaigns, social media, websites, and in-person meetings.” It is alleged that EquiAlt concealed millions of dollars in commission payments to these intermediaries.
According to the SEC, many investors were elderly and financially unsophisticated retirees who were sold 3 or 4-year term fixed rate debentures which purportedly provided a fixed annual return.
Eric Bustillo, Director of the SEC’s Miami Regional Office, is quoted in a press release “We allege that Davison and Rybicki made ‘too good to be true’ promises about nearly every material aspect of EquiAlt’s business to induce retail investors, including elderly individuals, to invest with them. The SEC’s emergency action seeks to prevent further harm to these retail investors and locate and preserve as many assets as possible.”
EquiAlt Alleged To Have Used Unregistered Sales Agents
According to the SEC’s Complaint, EquiAlt sold its investments in part through numerous unregistered sales agents, to whom it paid undisclosed commission payments. Among other things, the SEC alleges that these unlicensed agents “solicited investors in the Funds, provided investors with offering materials, provided advice on the merits of the investment, and received transaction-based compensation.”
Federal securities laws make it unlawful for a person to “effect a transaction in securities” or “attempt to induce the purchase or sale of, any securities” unless that person is appropriately registered with the Financial Industry Regulatory Authority (FINRA), a regulatory arm of the SEC in charge of, among other things, licensing broker-dealers.
Federal securities laws also provide remedies to investors who purchased securities through these unregistered agents. These provisions serve to protect investors like the ones allegedly misled into investing in EquiAlt.
The SEC has taken action against unregistered brokers in the past. For example, in 2017 the SEC cracked down on unregistered brokers selling investments in Woodbridge Wealth, another Ponzi scheme.
Silver Law Group Helps Ponzi Scheme Victims
Silver Law Group’s managing partner Scott Silver, a leading investment fraud attorney, has been featured in an article on Ponzi Schemes in The New York Times. The article addresses Ponzi schemes that have been revealed in the decade since Bernie Madoff was caught, including an alleged scheme run by Christopher Parris and Perry Santillo, whose victims Scott Silver has assisted.
Though none has gotten as much attention as Bernie Madoff’s, the Ponzi scheme continues to be a popular form of fraud.
The Income Store
In January, 2020, the SEC announced that it obtained an emergency enforcement action against The Income Store, a company that it accuses of operating like a Ponzi scheme and raising over $75 million from more than 500 investors by telling them that they could earn high rates of return from the revenue from websites.
The SEC alleges that The Income Store was paying old investors with new investor’s money, making unlicensed security offerings, and using investor money to pay personal expenses for the company’s founder, Kenneth Courtright.
GPB Capital Holdings
Silver Law Group represents investors who purchased private placements in the funds of GPB Capital Holdings, a company that raised $1.8 billion since 2013 and is accused of being a Ponzi scheme. GPB stopped paying dividends to investors, announced a significant decline in the value of its biggest funds, and is under investigation by the FBI and other government agencies.
Are You An EquiAlt Investor?
Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct and Ponzi schemes.
Silver Law Group also serves as counsel to corporate monitors and securities receivers. If you have questions about recovering your investment losses, call toll free at (800)-975-4345 or e-mail firstname.lastname@example.org for a no-cost confidential consultation. Most cases are handled on a contingent fee basis, meaning that you won’t owe us unless we recover money for you. Contact us today.