A federal jury convicted a Detroit father-and-son for their roles in a massive Ponzi scheme that raised more than $50 million from investors. John Bravata, and his son Antonio, 25, were each convicted of a single charge of conspiracy to commit wire fraud, and John Bravata was also convicted of 15 counts of wire fraud. Each count carries a maximum possible prison term of twenty years, as well as a criminal fine of up to $250,000.
John Bravata operated BBC Equities, LLC ("BBC") and Bravata Financial Group, LLC ("Bravata Financial"), and according to Bravata, the 'BBC' is an acronym for 'Billionaire Boys Club.' Along with the aid of his son, Antonio, who served as a sales associate, and Richard Trabulsy, who served as chief executive, BBC was touted as a successful real estate investment fund, raising more than $3 million from family and friends. Later, BBC and Bravata Financial hosted free seminars where potential investors were provided with a free lunch and told that their investments would be used to purchase real estate that would provide a guaranteed annual return of 12%. Investors were provided with offering materials, including private placement memoranda outlining the proposed use of investor funds. BBC also used magazine advertisements, including a spread in Forbes magazine in December 2008, as well as a website extolling the benefits of an investment in BBC or Bravata Financial. In total, over 400 investors contributed approximately $50 million. Neither the Bravatas nor their two funds were registered with the Securities and Exchange Commission.
However, neither BBC nor Bravata Financial was a legitimate business, and instead were used by John Bravata to perpetrate a massive Ponzi scheme that survived only by constantly soliciting new investors. Of the $50 million raised from investors, approximately $20 million was spent on highly-leveraged real estate that, contrary to Bravata's representations, was not profitable and did not produce income. Indeed, it is estimated that, at the time the fraud was uncovered, existing mortgages on these properties exceeded $128 million. The remainder of investor funds were used to sustain an elaborate lifestyle for the Bravatas and Trabulsy, with purchases ranging from luxury vehicles to vacations to artwork.
The Securities and Exchange Commission also filed a complaint against the defendants, BBC, and Bravata Financial in July 2009, alleging various violations of federal securities laws and seeking relief including permanent injunctions, disgorgement, and civil monetary penalties. Trabulsy pled guilty in late 2011 and agreed to cooperate with authorities.
A receiver was appointed to recover funds for investors, but concluded that "there does not appear to be a reasonable prospect of any significant recovery for creditors and investors."
Sentencing has been scheduled for June 18, 2013.