SEC Halts A “Safe,” “High Return” Investment Scheme
When the returns are far above market and the investment is safe and carries little to no risk, more likely it fits into the not to be believed category. Yet time after time investors flock to investment programs supposedly built on such pillars. So it was with a mortgage investment program that raised millions of dollars and continued even as the Commission issued investigative subpoenas and prepared to file its complaint. Unfortunately the investment program should not have been believed. The only question now is how much money the Commission and its receiver can salvage for the investors. SEC v. Bryant, Civil Action No. 4:17-cv-00336 (E.D. TX. Filed under seal May 15, 2017).
Defendant Thurman Bryant formed Bryant United Capital Funding, Inc., also a defendant, in June 2011. Mr. Bryant is the firm’s only employee and the sole signer on its checking account. He began fund raising even before forming his firm, starting in early 2011 with his father, family and friends. Marketing was by word of mouth – no documents. Rather, investors were encouraged to call Mr. Bryant who would give them his pitch. Those who called were encouraged to refer others and, if they did, were rewarded with a referral fee.
Investors were told orally about the investment, assured of its safety and the manner in which their funds were invested. Mr. Bryant told investors that their funds would be used to facilitate the funding of mortgage loans which would immediately be sold to third parties for a fix fee. Investor funds would be held safe in a secure escrow account used solely to secure a line of credit from a hedge fund that Bryant United used to fund the mortgages. Investors would receive 30% distributions with no risk.
While Bryant United was a corporation, investors purchased limited partnership interests in the firm. Investors who executed the partnership agreement were provided payment instructions. They also received monthly account statements prepared by Mr. Bryant. Those statements purported to show the investors Escrow Capital Balance, Calculated Account Balance and Accumulated Account Balance.
To date about 100 investors have purchased interests, investing about $22.7 million with Mr. Bryant and his firm. Indeed, about $1.4 million has been raised since January 2017.
Defendants’ representations, as well as the account statements they received, were, however, false. No money was ever placed in a secure escrow account. No investment related operations were conducted. Rather, Bryant United transferred about 71% of the investor money, or $16.1 million, to the Wammel Group for speculative securities trading. The remaining 29% of the investor funds, or $6.6 million, was diverted to other purposes, including supporting Mr. Bryant’s life style and making payments to certain investors.
After the staff served a subpoena on Mr. Bryant and his firm in December 2016 investor funds were diverted to Carlos Goodspeed, a/k/a Sean Phillips d/b/a Top Agent Entertainment d/b/a Mr. To Agent Entertainment. Since January 2017 about $1.37 million has been transferred to Mr. Goodspeed. Notations on wire transfer documents indicate that the funds were to be used for the promotion of concerts by Taylor Swift and Aubrey Graham. Other records indicate Mr. Goodspeed previously pleaded guilty to a felony theft charge, has been found liable on two default judgments tied to the entertainment industry and is also involved in litigation linked to concert performances. In April 2017 other funds were wired to Mr. Bryant’s father. He is one of the few investors who has received payments which exceed their initial investment.
The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The court as entered a temporary freeze order and appointed a receiver at the request of the Commission. See Lit. Rel. No. 23838 (May 22, 2017).