SEC says 900 defrauded in mortgage scam

Reuters
Tue Jul 28, 5:06 pm ET
WASHINGTON (Reuters) – Four promoters and a Phoenix-based company have been accused of defrauding at least 900 investors across the United States in a mortgage lending scam, the Securities and Exchange Commission said on Tuesday.
The SEC alleges that the Arizona-based promoters, including a pharmacist and a grade-school principal, raised more than $197 million from the investors by making false statements about the safety and performance of the investments.
Through their company, Radical Bunny, the promoters pooled the investor funds to make loans to Mortgages Ltd, an originator of high-interest, short-term loans to real estate developers.
The promoters misrepresented how Mortgages Ltd could use money loaned by Radical Bunny by falsely telling investors that their funds could only be used for commercial development when there were no such restrictions, the SEC alleged.
The complaint also alleges that the promoters misled investors by saying they were closely monitoring the mortgage originator's financial condition.
The other two promoters are certified public accountants.
The SEC is seeking injunctions and financial penalties.
(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)