$50M Ponzi Scheme Alleged in Michigan

     DETROIT (CN) – BBC Equities and Bravata Financial Group and the two men who run them – one of them an ex cop – took $50 million from 440 investors in a Ponzi scheme, the SEC says in Federal Court. It claims John J. Bravata and Richard Trabulsy are still running the real estate fraud, took more than $7 million from it, spent more than $14 million to advertise it, and owe more than $128 million on the “highly leveraged” properties they did buy.

     “The Defendants characterize BBC Equities to prospective investors as a real estate investment fund, and as a safe investment vehicle with annual returns of 8 percent to 12 percent,” the complaint states. “However, BBC Equities is far from a safe investment. Unbeknownst to the investors, their proceeds have been used to finance Defendants’ and Relief Defendant Shari Bravata’s expensive lifestyles, paying for luxury homes, watercraft, jewelry, gambling, exotic vacations, and expensive cars. Indeed, John Bravata used money from the first two investors to buy himself a $90,268 Ferrari. In total, John Bravata and Trabulsy spent at least $7 million of the investors’ money for their own benefit, and for the benefit of John Bravata’s wife, Shari A. Bravata, and son, Antonio Bravata.”
     John Bravata, 42, of Brighton, Mich., is a former police officer and co-founder and chairman of BBC Equities and Bravata Financial. He is not registered with the SEC.
     Trabulsy, 26, of Northville, Mich., is also a co-founder of the companies, and is not registered with the commission.
     Thee complaint continues: “The Fraud Defendants have lied to prospective investors about the use of investor funds; the risks associated with the investment; the purported compensation, commission, and finder’s fees paid to them and others; and the true financial condition of BBC Equities.
     “To keep their scheme afloat, the Fraud Defendants have spent an additional $11.3 million of investor funds perpetrating a Ponzi scheme. They have used new investment proceeds to make the quarterly payments to earlier investors, among other payments. They have also spent $14 million of investment proceeds soliciting and raising money from new investors to fuel the scheme.
     “Defendants’ lavish spending and the cost of propping up their Ponzi scheme left BBC Equities with little to invest. Of the more than $50 million in investment proceeds, no more than $21 million remained for BBC Equities to use acquiring real estate properties. Worse, those properties are highly leveraged, with mortgages and other liabilities exceeding $128 million.
     “Defendants’ malfeasance has rendered BBC Equities financially insolvent. Its monthly expenses exceed its revenues by a ratio of more than 10-to-1. To avoid the collapse of their scheme, Defendants are apparently continuing to actively solicit new investors and fresh investment proceeds.”

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