Fraud allure
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A former U.S. investment advisor has been accused of running a US$300 million Ponzi scheme involving unregistered real estate investments, the U.S. Securities and Exchange Commission (SEC) alleges.

The regulator charged Atlanta-based Drive Planning LLC and its CEO, former advisor and insurance agent Russell Todd Burkhalter, alleging that they misappropriated millions of investor assets to fund Burkhalter’s lifestyle, which included buying a yacht and various properties, and using private jets.

In a complaint filed in the U.S. district court for the northern district of Georgia, Drive Planning and Burkhalter were charged with securities fraud.

The SEC’s complaint alleged that they raised more than US$300 million for purported real estate investments, promising investors 10% quarterly returns, and pushing them to tap retirement savings and borrowing to invest.

“In reality, the defendants did not have a business capable of generating the promised returns. Instead, they used investor funds to make Ponzi-like payments,” the SEC alleged.

The court granted a preliminary injunction, an asset freeze, and other emergency relief against the defendants, which they did not oppose. It also appointed a receiver over the firm.

In addition to the emergency relief, the SEC seeks civil penalties, disgorgement with prejudgment interest, and permanent injunctions against the defendants, and an officer-and-director ban against Burkhalter.

The allegations have not been proven.

“Drive Planning and Burkhalter gained the trust of everyday people and encouraged them to invest in this scheme by promising exorbitant returns, but as our complaint alleges, the defendants’ business was nothing more than a classic Ponzi scheme, using new investor money to pay returns to existing investors, with Burkhalter stealing millions to fund a lavish lifestyle,” said Nekia Hackworth Jones, director of the SEC’s Atlanta office.

“Investors should be vigilant when they encounter aggressive sellers who make over-the-top sales pitches and promise high rates of guaranteed returns,” she added.