One Orange County real estate company owner has agreed to plead guilty and another has been indicted in connection with a Ponzi scheme involving real estate flipping investment schemes uncovered by federal prosecutors on Friday.
Brett Reed Barber, 42, of Costa Mesa, was arraigned after his arrest Thursday and is expected to be released Friday, U.S. Attorney's Office spokesman Tom Mrozek said. A trial is scheduled for Dec. 21.
Luis Alfonso Zimmerle, 62, of Sacramento, agreed to plead guilty to a felony charge of wire fraud in a plea agreement filed Thursday, Mrozek said.
The two are co-owners of Newport Beach-based BNZ Capital One LLC.
The companies also face a complaint filed Thursday with the Securities and Exchange Commission.
The pair raised at least $13.5 million from about 105 investors since June 2019, according to the SEC.
The SEC charged that the pair promised 10 percent annual returns on their investments and that Barber assured them that “the investments were safe and the returns were guaranteed.”
“However, BNZ has not been profitable since its inception because the investments actually made by Messrs. Barber and Zimmerl have not generated sufficient profits to return investors' principal and pay the promised profits,” the SEC said. “Indeed, from June 2019 through February 2020, the defendants raised $6.9 million from investors but invested only $2.7 million and realized less than $5,000 in profits on those investments.”
Prosecutors say the pair are accused of taking cash from investors in a Ponzi scheme and then paying it back to other investors.
According to the SEC, “Barber and Zimmer made substantial payments to themselves from investor funds, including transferring hundreds of thousands of dollars to Barber's company, Guaranteed Income Solutions.”
The SEC alleges that since March of last year, the bank raised a further $6.6 million “while continuing to mislead investors about BNZ's profitability and make Ponzi-like payments to investors and large payments to itself.”
The SEC said the company invested $6.4 million of the $13.5 million it collected from investors in real estate, making just $300,000 in profits and using the remaining $1.7 million to pay other investors in the alleged Ponzi scheme.
“Despite BNZ's minimal profits, BNZ transferred more than $1.6 million to (Guaranteed Income Solutions) and more than $700,000 to Zimmer, as well as paying for certain of Messrs. Barber and Zimmer's personal expenses, including vehicles, meals and travel,” the SEC alleged.
Prosecutors said Barber also failed to tell investors that the Financial Industry Regulatory Authority prohibited him from doing business with broker-dealers.
Prosecutors say the scheme resulted in losses of about $9 million. In his plea agreement, Zimmer admitted to embezzling about $582,815 of investors' funds, prosecutors said.
Barber has been charged with four counts of wire fraud and two counts of money laundering.