The lawyer placed in charge of cleaning up an Alpharetta company at the center of an alleged $300 million Ponzi scheme has started compiling a list of investors allegedly bilked, while searching for money and other assets wrongly obtained.
A federal judge on Tuesday named Miami attorney Kenneth Murena the receiver for Drive Planning as the Securities and Exchange Commission probes the company it says defrauded investors.
That was the same day the SEC filed suit against Drive Planning and its founder and chief executive, Russell Todd Burkhalter, alleging real estate loans sold as investments by Drive were fraudulent. A judge in U.S. District Court in Atlanta ordered Drive Planning’s assets and those of Burkhalter and related companies frozen and appointed Murena to help preserve assets.
A luxury yacht, a ranch in the North Georgia Mountains and luxury cars are among the lavish purchases made by Burkhalter with proceeds of the alleged fraud, according to the SEC complaint.
Burkhalter had offered what his promotional materials called a “bridge loan opportunity,” dubbed REAL, an acronym for Real Estate Acceleration Loan, and required a minimum of $20,000 to participate. The loans were sold as short-term investment vehicles to real estate developers in need of construction financing for projects already underway, according to the marketing materials.
The loans were for three-month terms earning 10% interest. In a chart on one brochure, Drive Planning listed an example $100,000 investment in a loan rolled over 12 months being worth more than $146,000, or nearly a 50% profit.
In the colorful brochure, the company helpfully asked the question, “You might be wondering, is the REAL Plan too good to be true?”
The brochure reassured the reader that investments were backed by collateral. “Even if something goes wrong in the real estate market, the risk is really low.”
Investor payments ‘indefinitely suspended’
Burkhalter, an author who worked in metro Atlanta’s financial industry for years, has cooperated with the SEC in its initial actions, according to a statement issued late Thursday by his attorneys, Aaron Danzig and Kara Silverman.
“Mr. Burkhalter denies the allegations contained in the SEC’s complaint and looks forward to quickly resolving this matter,” the statement said.
Murena, who has been appointed receiver for Drive Planning, declined to comment.
Murena, however, has launched a publicly available website aimed primarily at people who were investors in the company. The site is meant to provide information, but also to seek out those who put money into Drive Planning in the hopes of eventually reconnecting allegedly bilked investors with the money they are owed.
Payments to investors “are indefinitely suspended,” Murena wrote in a letter posted to investors on the new website. “The Receiver is not able to return any investments at this time,” he wrote.
The goal is to “to maximize the recovery for the investors,” he wrote.
According to the SEC complaint , Drive Planning attracted a lot of investor money.
Over four years starting in 2020, the company raised more than $336 million from more than 2,000 investors, with $66.9 million of that amount coming from retirement accounts, according to the SEC.
Drive Planning paid $131 million of “purported returns to investors,” the SEC said in its complaint, citing a company document. “Based on the spreadsheet, Drive Planning owes investors $287 million.”
How much regulators and Murena will be able to recover for investors isn’t clear.
The SEC listed a number of expenditures that Burkhalter made, part of what officials said was a lavish, self-indulgent lifestyle funded by investors. However, the spending listed in the filing totals less than $15 million.
Years to resolve?
The receiver’s job is to round up goods wrongly purchased, while searching for the rest of the money gained under false circumstances, said Chris Tierney, a partner at Atlanta-based accounting firm Moore Colson, who has been named a receiver in about 40 cases.
A receiver can issue subpoenas, impose liens on property, take possession of bank accounts and other assets and call on law enforcement when needed, he said.
“The receiver has tremendous power,” Tierney said. “The receiver is the right hand of the judge.”
Much of the receiver’s task is to uncover the details, Tierney said. “I’ll guarantee you, as the receiver goes through all this, they’re going to find other things that people didn’t know about. There are many more shoes to drop.”
As sizable as this alleged scam seems to have been, it was modest compared to the one run by Bernie Madoff for nearly two decades, a Ponzi scheme involving more than $60 billion, according to the Corporate Finance Institute.
But it’s still a lot of money, and for individuals, it can mean financial disaster, Tierney said. “Unfortunately, you are probably going to have a lot of people who are going to lose money here.”
Everyone has weaknesses and is potentially susceptible to some kind of scam, Tierney said.
Burkhalter’s come-on began in the early days of the pandemic, a time of uncertainty and concern about financial security. Now, especially for older investors, the legal process can be painfully extended.
“Based on the size of this, you are talking years before it’s resolved,” Tierney said. “That means that investors won’t see their money for years. If some of those investors are older, than some of them might die first.”
Were you an investor with Drive Planning?
A website has been created by the receiver for Drive Planning to make contact with investors: https://driveplanningreceivership.com/
What to know
What is a Ponzi scheme? Scams come in myriad sizes and shapes. A Ponzi scheme typically promises outsized returns and no risk. And at least at first, the scamster seems to deliver those returns to initial investors by using money that comes from later waves of victims.
What should set off warning bells? If it sounds too good to be true, well, maybe it is. Always double-check the history of anyone you are trusting with a lot of money. Get a second opinion. Maybe a third.
Are there special alarms? Watch out for high-pressure sales tactics, demands to decide without consulting other experts or friends, pushes to take money from retirement funds that you cannot afford to lose.
Sources: Moore Colson, Investopedia
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