SEC charges California unregistered broker with EquiAlt fraud

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    The Securities and Exchange Commission has charged a California-based unregistered broker with illegally selling nearly $ 8 million in unregistered securities to investors in the EquiAlt scandal.

    Last February, The SEC alleged that Florida-based private real estate company EquiAlt, along with its CEO and chief executive officer, was running a fraudulent securities sale plan that raised more than $ 170 million from at least 1,100 investors, many of whom were putting their retirement savings in the funds.

    Earlier this year, the SEC filed charges against a number of unregistered brokers for their alleged roles in the system, with John Marques, the owner and operator of Lifeline Innovations & Solutions, being the final defendant. According to the commission, as of August 2016, Marques and his company began selling EquiAlt managed funds to investors in California and Washington while neither Marques nor his company were registered as brokers / dealers.

    At that point, EquiAlt CEO Brian Davidson and Vice President Barry Rybicki announced to investors that the company would use the funds to buy real estate in «troubled markets,» with revenues that pay investors an annual interest rate of 8-10% would.

    During that period, EquiAlt was recruiting unregistered salespeople across the country (allegedly including Marques) who paid them commissions of between 6% and 12% of the funds invested. Marques signed an agreement with EquiAlt in 2016 to introduce investors into the fund for compensation. But, according to the SEC, his duties went beyond being a «finder» for the company, as Marques hosted dinner seminars with potential investors.

    «Among other things, he explained to potential investors that their mutual funds would be used by the EquiAlt funds to invest in real estate that would be bought at low or distressed prices,» the lawsuit said. «He also stated that the risk of investing in the EquiAlt funds is low as it would be difficult for management to escape with real estate.»

    But the funds were unprofitable «almost from the start,» according to the SEC’s complaint against Marques.

    «Without sufficient income to pay the funds owed to investors, EquiAlt soon resorted to fraud and used new investor funds to pay the interest promised to existing investors,» the lawsuit said.

    Over time, Marques and his company raised approximately $ 7.9 million from recommending and selling the unregistered securities to more than 50 investors, according to the commission. As a result of the sales, Marques and Lifeline Innovations & Solutions earned approximately $ 824,000 in commissions. (Marques was unavailable to comment at the time of going to press.)

    Earlier this year the SEC has indicted two Arizona-based brokers for the sale of $ 50 million in EquiAlt funds, none of which is registered as ab / d. In June, the commission also incriminated Robert Joseph Armijo, a California-based, unregistered broker who fraudulently sells EquiAlt funds and earns approximately $ 1.1 million in sales commissions after raising approximately $ 4.85 million from the sale of securities.

    Following the transaction, some aggrieved investors filed a class action against EquiAlt, and the court has appointed a bankruptcy trustee to generate income for the victims, in part through the sale of assets owned by EquiAlt’s CEO (including a 2018 Pagani Huayra supercar that was expected to cost $ 2.4 million) according to the Daily mail). The recipient has set up a website with additional information, including quarterly status reports on progress.

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