Source: Securities and Exchange Commission
On February 18, 2020, the Securities and Exchange Commission announced an emergency enforcement action and a temporary restraining order and asset freeze against Florida-based private real estate firm EquiAlt LLC, its CEO Brian Davison, and its Managing Director Barry Rybicki, in connection with an alleged fraudulent unregistered securities offering that raised more than $170 million from at least 1,100 investors, a number of whom invested their retirement funds.
According to the SEC’s complaint, unsealed on February 14, 2020 in the U.S. District Court for the Middle District of Florida, EquiAlt, Davison, Rybicki, and the entities they control, fraudulently raised millions of dollars by making material misrepresentations to investors about EquiAlt’s investment strategy, the financial condition of the investments, and the uses of investor proceeds. The defendants allegedly told investors they would pool investor funds and use approximately 90% of the money to purchase under-valued real estate, rent or flip the properties, and pay investors 8-10% annual interest generated from the real estate investments. In reality, the complaint alleges, a large portion of investor money went to support Davison’s and Rybicki’s lavish personal spending, and less than 50% of the funds raised were used to invest in properties. In addition, money from one investment fund controlled by EquiAlt was allegedly used to make Ponzi-like payments to investors in another fund.
On February 14, 2020, a federal judge granted the SEC’s request for emergency relief, including a temporary restraining order, an asset freeze, an order against the destruction of documents, and an accounting against EquiAlt, Davison, Rybicki and a number of companies charged by the SEC as relief defendants. The court also granted the SEC’s request to appoint a receiver over the corporate defendants and the relief defendants.
The SEC’s complaint charges EquiAlt, Davison, and Rybicki with violating the anti-fraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10b-5 of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder; the securities registration laws, Sections 5(a) and 5(c) of the Securities Act; and with aiding and abetting the broker-dealer registration laws, Section 15(a)(1) of the Exchange Act. The SEC seeks disgorgement of allegedly ill-gotten gains, and financial penalties against the defendants.
The SEC’s continuing investigation is being conducted by Mark Dee, Andre Zamorano, and Chanel T. Rowe in the Miami Regional Office and supervised by Thierry Olivier Desmet, Fernando Torres, and Glenn S. Gordon. The SEC’s litigation is being led by Alise Johnson and supervised by Andrew Schiff.
The SEC encourages investors to check the backgrounds of people selling investments by using the SEC’s investor.gov website to quickly identify whether they are registered professionals and confirm their identity.