A Tampa man, his business partner and their company have been charged with defrauding hundreds of investors in what federal regulators describe as a Ponzi scheme.
Brian Davison, owner and CEO of EquiAlt LLC, a real estate investment company in Tampa, and Barry Rybicki, who lives in in Phoenix, Arizona and is managing director of EquiAlt, conducted a Ponzi scheme over several years that raised more than $170 million for several investment funds from more than 1,100 investors nationwide, according to a complaint filed by the U.S. Securities and Exchange Commission and unsealed Feb. 14 in federal court in Tampa.
“Defendants promised investors that substantially all of their money would be used to purchase real estate in distressed markets in the United States and their investments would yield generous returns. Instead, EquiAlt, Davison and Rybicki misappropriated millions in investor funds for their own personal use and benefit,” the complaint said.
A federal judge in Tampa granted the SEC’s request for emergency relief on Friday, issuing a temporary restraining order, an assets freeze, an order against destroying documents and an accounting against EquiAlt, a news release said. The court also granted the SEC’s request to appoint a receiver in the case.
A call to Davison at EquiAlt seeking comment was not immediately returned.
In 2017, Davison announced that EquiAlt would build a condominium project in downtown St. Petersburg, according to the Tampa Bay Times. Pinellas County property records show EquiAlt owns several parcels at the project site, at 3rd Avenue South and 5th Street. All of the parcels are listed as vacant commercial land.
One of the funds included as a defendant in the SEC complaint is EquiAlt 519 3rd Ave S. LLC.
Another fund is TB Oldest House Est. 1842, an apparent reference to what’s been described as the oldest home in Tampa , an 1842 bungalow that EquiAlt bought and moved from Ybor City to South Tampa in 2018.
Davison formed EquiAlt in 2011, the SEC complaint said. Davison had signature authority over the company’s bank accounts. Rybicki managed EquiAlt’s relationships with unlicensed sales agents who sold securities in various funds, communicated with investors and were involved in raising money for the funds.
According to the complaint, EquiAlt, Davison and Rybicki told investors they would use about 90 percent of the money raised to buy undervalued real estate, rent or flip the properties, and pay investors 8 percent to 10 percent annual interest.
In reality, less than 50 percent of the funds raised were used to invest in properties, the complaint said. Money from one investment fund controlled by EquiAlt was used to make payments to investors in another fund, the SEC said.
EquiAlt sold three-year and four-year debentures, which are unsecured loans. Many of the investors were elderly and used retirement accounts to fund their investments, the SEC complaint said. The investors often were unaccredited or unsophisticated, lacked knowledge and expertise in financial or business matters and were not capable of bearing the economic risks of the investments, but were told the funds were “secure,” “safe,” and “low risk,” the complaint said.
Since the beginning of operations, the funds suffered significant financial losses with monthly costs and expenses exceeding the revenue generated from business operations, the complaint said. Even if the funds were able to liquidate their real estate holdings at stated values, “the Funds’ combined assets would fall millions of dollars short of the amount owed to investors by December 2020,” the complaint said.
The SEC also said Davison and Rybicki misappropriated millions of dollars from the funds for their own personal benefit. The two men used what the SEC described as “improper cash distributions” to buy luxury cars and to charter private jets. In April 2017, Davison took a $1.8 million cash distribution that he used to pay back personal income taxes, the complaint said.
“We allege that Davison and Rybicki made ‘too good to be true’ promises about nearly every material aspect of EquiAlt’s business to induce retail investors, including elderly individuals, to invest with them,” Eric Bustillo, director of the SEC’s Miami Regional Office, said in the news release. “The SEC’s emergency action seeks to prevent further harm to these retail investors and locate and preserve as many assets as possible.”