The Securities and Exchange Commission charged a California-based unregistered broker for unlawfully selling nearly $8 million in unregistered securities to investors, as part of the EquiAlt scandal.
In February of last year, the SEC alleged that the Florida-based private real estate firm EquiAlt, along with its CEO and managing director, ran a scheme to sell fraudulent securities that raised more than $170 million from at least 1,100 investors, many of whom invested their retirement savings into the funds.
Earlier this year, the SEC brought charges against a number of unregistered brokers for their alleged roles in the scheme, and John Marques, the owner and operator of Lifeline Innovations & Solutions, is the latest individual to be charged. According to the commission, starting in August 2016, Marques and his company began selling funds managed by EquiAlt to investors in California and Washington, doing so while neither Marques nor his firm were registered as a broker/dealer.
At this point, EquiAlt CEO Brian Davidson and Vice President Barry Rybicki were telling investors the firm would use the funds to purchase real estate in “distressed markets,” with revenue that would pay investors an annual 8% to 10% interest rate.
During this period, EquiAlt recruited unregistered sales agents throughout the country (allegedly including Marques), paying them commissions ranging from 6% to 12% of invested funds. Marques signed an agreement with EquiAlt in 2016 to introduce investors to the fund in exchange for compensation. But his duties extended beyond those of a “finder” for the firm, according to the SEC, with Marques running dinner seminars with potential investors.
“Among other things, he explained to prospective investors that their investment funds would be used by the EquiAlt Funds to invest in real estate that would be purchased at low or distressed prices,” the complaint read. “He also represented that the risk of investing in the EquiAlt Funds was low because it would be difficult for management to abscond with real estate.”
But the funds were unprofitable “almost from inception,” according to the SEC’s complaint against Marques.
“Without sufficient revenues to pay the money owed to investors, EquiAlt soon resorted to fraud, using new investor money to pay the interest promised to existing investors,” the complaint read.
Over time, Marques and his company raised about $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 made about $824,000 in commission. (Marques could not be reached for comment as of press time.)
Earlier this year, the SEC charged two Arizona-based brokers for selling $50 million in EquiAlt funds, with neither registered as a b/d. In June, the commission also charged Robert Joseph Armijo, a California-based unregistered broker, with fraudulently selling EquiAlt funds and making about $1.1 million in sales commissions after raising about $4.85 million from selling securities.
Some harmed investors filed a class action suit against EquiAlt in the aftermath of the scheme, and the court has appointed a receiver to help generate earnings for victims, in part by selling assets owned by EquiAlt’s CEO (including a 2018 Pagani Huayra supercar that was expected to sell for $2.4 million, according to the Daily Mail). The receiver has set up a website with additional information, including quarterly status reports on its progress.