Legal News

Our Ponzi Nation: Trouble Afoot in the Motor City?

By Ashby Jones

The Supreme Court’s out of session; Sotomayor’s a fait accompli; Madoff and Dreier are in the big house; and those jurors in the William Jefferson trial are taking their precious time. We can understand, LBers, if you’re feeling a little drama-deprived,

It’s high time we introduce you to a new saga. One outside possibility fell upon our radar screen this morning, an alleged — yes — Ponzi scheme, this one centered in the Motor City.

Last week, the SEC filed a civil suit against three individuals and two of their companies, located in Southfield, Mich., BBC Equities LLC and Bravata Financial Group LLC. The allegations: that the men and their firms defrauded more than $50 million from 440 investors, using the money to — what else? — buy a bunch of expensive stuff, including a a $90,000 Ferrari and a $6-million vacation home.

Attorneys for the men have denied the allegations. No criminal charges have been filed.

But according to this story, from the Detroit Free Press, it was quite a scene on Tuesday at the U.S. District Court in Detroit — where some procedural issues were handled and investors packed the place to try to get some answers to the whereabouts of their money. “We’re going to lose everything we have,” said one investor, 60-year-old Steve Schloff, to the Free Press. “It’s totally ruined our retirement. We don’t know what our future holds.”

Like many BBC investors, Schloff heard about the company through a flyer that was mailed to people’s homes. He attended a seminar about BBC’s real estate investment fund during a free dinner at Pasquale’s Restaurant in Royal Oak. According to the story, the first he heard of potential trouble was when he read the Freep’s account last week.

Full post as published by Law Blog - WSJ.com on August 05, 2009 (boomark / email).