A Coral Springs, FL-based businessman and his top sales agent face federal charges they misused more than $9 million in funds collected from investors across the country.
Larry B. Brodman, owner of Property Income Investors LLC, raised about $9.1 million from 156 investors through a series of unregistered securities offerings between January 2016 and September 2020, according to charges in a civil complaint filed in U.S. District Court in Fort Lauderdale by the Securities and Exchange Commission.
Brodman, who operated his scheme through 12 separate companies, told investors he was using their money to purchase “turnkey, multifamily properties” across South Florida, which would then be renovated and rented to tenants, according to the compliant.
Instead, Brodman diverted about $1.12 million of the investors’ funds into his personal account and paid $1.2 million in sales commissions to unregistered sales agents, despite telling investors that commissions would be paid only to “licensed broker/dealers.” In total, Brodman misappropriated and misused approximately $2.44 million of the offering proceeds, the SEC said.
In addition to using sales agents, Brodman marketed the unregistered securities through the company’s website and on a crowdfunding site, where he advertised expected annual returns of 12%, according to the SEC complaint.
In reality, the $584,000 he distributed to some investors as so-called profits were actually Ponzi scheme-like funds two later investors handed over to Brodman in the belief they were investing the sums, the SEC said.
The SEC also accused Brodman’s “top-performing sales agent” Anthony Nicolosi, of Lake Worth, FL, with illegally acting as an unregistered broker.
The SEC complaint accuses the pair of defrauding investors and failure to register as securities agents, in addition to a variety of securities law violations.
The defendants have consented to settlements that will bar them from future securities violations, the SEC said. Brodman and his companies have also agreed to allow a receiver to take control of nine remaining properties purchased with investor funds and to pay costs, disgorgement of ill-gotten gains and civil money penalties that will be determined by the court.
Brodman did not immediately respond to an email sent.to Property Income Investors LLC, which bills itself on its website as as offering “crowdfunded real estate investments with consistent, quality returns.”
Brodman’s top salesman Nicolosi was a former registered rep who went by the name Anthony Peluso when he worked with a total of 18 different broker dealers between October 1994 and December 2000, the SEC said. He was permanently barred from the industry in 2001 by Finra’s predecessor, the National Association of Securities Dealers, for high pressure sales tactics and making misrepresentations to customers.
In December 2010, the Alabama Securities Commission issued a cease and desist order against Nicolosi for selling unregistered securities and for failing to disclose his prior NASD bar and name change to investors in a complaint involving an unrelated securities offering.