The U.S. Securities and Exchange Commission said it halted a $50 million Ponzi scheme near Detroit that raised money for a real-estate investment fund and targeted the elderly.
A federal judge in Michigan agreed to freeze assets after the SEC sued John Bravata, 41, and Richard Trabulsy, 26, claiming they lured more than 400 investors by promising 8 percent to 12 percent annual returns, the agency said today in a statement. Of $50 million raised since May 2006, less than $20.7 million was spent on real estate, the SEC said.
“Investors thought they were investing in a safe and profitable real-estate investment fund, but instead their money was being used to pay for luxury homes, exotic vacations and gambling debts,” said Merri Jo Gillette, director of the SEC’s regional office in Chicago.
The men “lied” to prospective investors about the use of funds and spent $7.2 million buying a $85,000 Maserati, a $90,000 Ferrari, and paying about $80,000 on jewelry and almost $1 million on the mortgage for a vacation house, the SEC said. Trabulsy and Bravata made $11.3 million in Ponzi payments to earlier investors, the SEC said.
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