Offering Fraud Actions: A Continuing Focus
Offering frauds are continuing to be a key focus of the Commission’s enforcement program, despite the on-going discussions about crypto, the environment and other subjects. These cases have long been one of the staples of the division. While there are variations, typically the defendants market securities to the public with a “too good to be true” claim of quick riches for little risk. Unfortunately, the riches typically go to those conducting the offering and the low risk – well not for those who invested. The case below is an example of these cases.
SEC v. BNZ One Capital, LLC, Civil Action No. 8:21-cv-01788 (C.D.CA. Filed October 28, 2021) names as defendants Brett Barber and Louis Zimmerle, in addition to the firm. The action centers on the sale of interests in a firm that was involved in real estate.
Beginning in June 2019 Defendants raised at least $13.5 million from about 105 investors. Defendants told investors that they were in the business of making investments in real estate as well as alternative investments. Investors were promised that their money would be repaid, generally at 10% per year.
The difficulty was revenue – the firm was not profitable. That may have happened in part because much of the investor money was not actually invested. For example, from June 2019 through February 2020, Defendants raised about $6.9 million. Only $2.7 million was invested. About $5,000 in profits resulted – not sufficient funds to pay investors the promised return.
Some investors did, however, receive payments. Those came from Ponzi type payments using portions of investor capital. Significant payments were made to Defendants. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 10(b), 15(a) and 20(a). The action is pending.