Two South Florida men agreed to pay, likely millions of dollars after the Securities and Exchange Commission accused them of plotting a $ 2.4 million white-collar crime in South Florida: real estate fraud with the Ponzi scheme.
Legally, neither Larry Broadman of Coral Springs nor Anthony Nicolosi of Lake Worth admits or denies any accusations in the SEC complaint filed against them in federal court in Fort Lauderdale. But the fact that they quickly agreed to pay “banishment of illegal proceeds”, as well as interest and civil fines, is loudly discussed.
The Securities and Exchange Commission said that Brodman used unlisted securities offerings to raise $ 9.06 million for property-earning investors, and the company will use that money to buy residential property and turn it into rental property. …
“In fact, Brodman misappropriated about $ 1.12 million from investor funds that were transferred to his personal account,” the SEC said in a complaint. “Brodman, PII and Properties also misused approximately $ 1.2 million in investor funds to pay commissions on sales to salespeople, including Nicolosi, despite claims in the proposal materials that commissions would only be paid to licensed brokers.
“Some of the ‘profits’ distributed to investors were actually payments financed by other investors, and there was a significant mixture of investor funds.”
Investing in Property Income, Brodman and Anthony Two-Names
According to government filings, Brodman founded Property Income Investors (PII) in March 2016.
PII has positioned itself as a “South Florida-based real estate investment company specializing in turnkey apartment buildings.”
For each property purchased, Brodman formed a separate company and named it Investors in Property Income and added a number. For example, the eight-unit Coral Springs building at 3050 Coral Springs Dr. was purchased by Property Income Investors 304. In its complaint, the Securities and Exchange Commission collectively named 10 companies “Property”.
According to the SEC, the main sales agent for PII and Property Entities was Nicolosi, who was once known as Anthony Peluso. From 1994 to 2000, he was the registered representative of 18 broker-dealers registered with the SEC.
The SEC complaint said Anthony Peluso legally changed his name “Anthony Nicolosi” to cover his tracks after the National Association of Securities Dealers permanently banned him from communicating with any member for lying to customers and tactics of selling under pressure. He received a termination order in 2010 from the Alabama Securities Commission in part for do not inform clients about the change of his name and NASD action.
Where did the money come from and where did the money go
The SEC complaint says that between January 2016 and September 2020, real estate investors raised $ 9.06 million from 156 investors in 26 states. Investors were told by Brodman that investors would be split 30 to 70 percent on rental income and 50 percent to 50 percent on property sales.
According to the SEC, about $ 4.1 million was spent on the purchase of 12 properties at prices ranging from $ 265,000 to $ 1.25 million. Broward County property records state that the aforementioned 3050 Coral Springs Dr. was sold on August 29, 2019 for $ 1.25 million. Another $ 752,000 was spent on property repairs and maintenance.
PII and property organizations sold three properties and raised about $ 1.04 million in rent for the rest.
“The companies did not distribute profits from the sale of real estate to investors,” the complaint said. “Based on the disclosure in the materials of the proposal, Brodman was entitled to receive no more than $ 312,000 as his share of the profits from the business.
“However, even after the compensation of these $ 312,000, Brodman embezzled about $ 1.12 million of investor funds, which were transferred to his personal account.”
According to the SEC, investors were told that licensed brokers could be paid “up to 10% of the proceeds” in commissions. But as the agency noted, none of the PII brokers were licensed, and the $ 1.2 million spent on commissions exceeded 10% of the $ 9.06 million raised.
In addition, the “at least $ 124,000” returned to some investors as profits, according to the SEC, were in fact payments from later investors. The same was stated for a “significant chunk of $ 460,000” from two 2020 investors.
In total, PII, Property Entities and Brodman misappropriated and misused about $ 2.44 million in proceeds from the placement, the SEC said.