Remember last summer when Scott Cole, president of Mortgage Ltd. committed suicide? Problems surfaced at that time with a company called "Radical Bunny" which promised high rates of return to investors. Radical Bunny funded many of Mortgage Ltd.’s projects.
A Phoenix investment firm embroiled in the bankruptcy of commercial lender Mortgages Ltd. raised up to $300 million from 900 investors despite warnings it was violating securities laws, the Arizona Corporation Commission alleges.
The commission claims in a notice filed Thursday that Radical Bunny LLC and its managers violated the Securities Act of Arizona by selling unregistered securities, failing to register as securities dealers or salesmen and defrauding investors.
As early as 2006, their attorneys told Radical Bunny managers that they needed to have a state license to sell their investments, but the managers continued accepting investors’ money to help fund real-estate loans made by Mortgages Ltd., the commission claims.
The managers could have to pay up to $5,000 per violation and an undetermined amount in restitution, which would be paid to investors.
Radical Bunny, which is in Chapter 11 bankruptcy, owed investors about $190 million as of July, according to the notice.
The "Mortgage Ltd. and the Radical Bunny Affair" differs significantly from the Madoff scandal. David Crantz, CEO of Landmarc Capital & Investment Company in Scottsdale, AZ said:
I don’t know if you can call it a true Ponzi scheme. What you can call it is over-lending to have a ridiculous, obnoxious lifestyle. Using other people’s money to create some Hollywood lifestyle that movie stars don’t even live. That’s what happened.
In the end though, whether it was a Ponzi scheme or just bad business is unlikely to make a difference to the investors. They have been victimized either way.
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Those $5,000 fine only deal with the State level civil fines. The Federal criminal penalties will likely put these guys away for 11 to 23.5 years. Only way around the criminal penalty is if they sold the mortgages directly to an investor or group of investors and recorded the sale. It does not sound like they did this.
When it comes to securities violations it usually takes extraordinarily blatant fraud to get a criminal case started. Even most Ponzi scams seldom result in criminal prosecution. Now that the SEC is getting keelhauled for ignoring Bernie perhaps that will change.
Igor says: clueless
My mother lost everything in radical bunny LLC. The bad thing is we are told by the SEC that they can only level civil penilitys not criminal. The AZ corp comm. can refer it to the attorney general for criminal prosacution but we haven’t heard anything about that yet. The bad thing was SEC did know about this in 2007 all they did was told Hirsch to stop taking money because he and RBLLC was not licened. They never did anything about it and were able to milk another 50million from 07-08. The money was gone as of 08 ML was way over extened and they knew it was over.