The Securities and Exchange Commission has charged BNZ and co-founders Brett Barber and Louis Zimmerle for fraudulently raising $13.5 million from more than 100 retail investors.
Barber and Zimmerle have raised, through BNZ, $13.5 million from retail investors by promising to pay investors significant returns, generally 10% per year, in real estate and alternative investments.
The defendants used only $6.4 million of the $13.5 million raised from investors to invest in real estate and alternative investments, and those investments generated just $300,000 in profits, according to the SEC.
Despite generating minimal profits, the defendants paid investors returns of at least $1.7 million using funds raised from other investors in a Ponzi-like fashion, and transferred over $1.6 million to Barber and over $700,000 to Zimmerle, the regulator alleges.
Brett Barber had previously been barred by the Financial Industry Regulatory Authority (FINRA) from affiliating with any member firm.
“The complaint here alleges that when defendants failed to earn sufficient profits in order to pay investor returns, they made Ponzi-like payments to investors using other investors’ money, and, separately, also used investor funds to pay themselves handsomely. Individuals who engage in such misconduct should expect to be held accountable for their actions by the SEC”, said Michele Wein Layne, Regional Director of the SEC’s Los Angeles Regional Office.
Brett Barber was arrested on federal fraud and money laundering charges in a six-count indictment. The wire fraud charges carry a statutory maximum sentence of 20 years in federal prison, and the money laundering offense carry a statutory maximum sentence of 10 years in prison. He entered not guilty pleas.
Louis Zimmerle was charged Thursday with one count of wire fraud and agreed to plead guilty to the felony offense. Zimmerle admits that he received and kept approximately $582,815 of investor money.
According to court documents, BNZ Capital primarily used investor funds to pay Barber, Zimmerle and others associated with the scheme, including purchasing residences where Barber and Zimmerle lived.
Because several million dollars were paid to earlier investors, investigators estimate that actual losses resulting from this alleged scheme are more than $9 million.