One Orange County real estate company owner has agreed to plead guilty and another has been indicted in connection with what federal prosecutors Friday said was a Ponzi scheme revolving around a property-flipping investment plan.
Brett Reed Barber, 42, of Costa Mesa was arraigned following his arrest Thursday and is expected to be released from custody Friday, said Thom Mrozek, a spokesman for the U.S. Attorney's Office. A trial date has been set for Dec. 21.
Louis Alfonso Zimmerle, 62, of Sacramento, has agreed in a plea deal filed Thursday to admit to a felony count of wire fraud, according to Mrozek.
The two are co-owners of Newport Beach-based BNZ Capital One LLC.
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The duo also face a Securities and Exchange Commission complaint filed on Thursday.
The two raised at least $13.5 million from about 105 investors since June 2019, according to the SEC.
The two promised annual returns on their investment of 10%, with Barber accused of assuring them "that their investments were safe and the returns guaranteed,'' the SEC alleged.
"Since BNZ's inception, however, BNZ has not been profitable because its investments -- when Barber and Zimmerle actually made investments -- have not generated enough profit to return investor principal and pay the promised returns,'' according to the SEC. "In fact, from June 2019 through February 2020, defendants raised $6.9 million from investors, but invested only $2.7 million and generated less than $5,000 in profits from those investments.''
The two are accused of taking in investor cash to repay other investors in a Ponzi scheme, prosecutors said.
"Barber and Zimmerle also paid themselves handsomely from investor funds, including transferring hundreds of thousands of dollars to Barber's company'' Guaranteed Income Solutions Inc., according to the SEC.
After March of last year, they raised $6.6 million more while "misleading investors about BNZ's profitability, and continuing to make Ponzi-like payments to investors and lavish payments to themselves,'' the SEC alleged.
The company invested $6.4 million of the $13.5 million from investors in real estate, generating just $300,000 in profits and using $1.7 million to pay other investors in the alleged Ponzi scheme, the SEC said.
"And despite BNZ's miniscule profits, BNZ transferred more than $1.6 million to (Guaranteed Income Solutions) and more than $700,000 to Zimmerle, while also paying certain of Barber's and Zimmerle's personal expenses, including for vehicles, meals and travel,'' the SEC alleged.
Barber also failed to tell investors that the Financial Industry Regulatory Authority barred him from working with a broker-dealer, prosecutors said.
Prosecutors say the losses due to the alleged scheme amount to about $9 million. Zimmerle admitted in his plea agreement that he kept about $582,815 of investor money, prosecutors said.
Barber is charged with four counts of wire fraud and two counts of money laundering.