South Florida man used his real estate company to steal $1.1 million, the SEC charges

Two South Florida men have agreed to pay what’s likely to be millions of dollars after the Securities and Exchange Commission charged them as cooking up a $2.4 million South Florida white collar crime entree: real estate fraud with Ponzi scheme seasoning.

Legally, neither Coral Springs’ Larry Brodman nor Lake Worth’s Anthony Nicolosi admits or denies any of the allegations in the SEC complaint filed against against them in Fort Lauderdale federal court. But that they quickly agreed to pay “disgorgement of ill-gotten gains” as well as interest and a civil penalty speaks loudly.

The SEC said Brodman used unregistered securities offerings to raise $9.06 million for Property Income Investors and the company would use that money to buy residential real estate and turn them into rental properties.

“In reality, Brodman misappropriated approximately $1.12 million in investor funds, which was diverted into his personal account,” the SEC complaint said. “Brodman, PII, and the Property Entities also misused approximately $1.2 million in investor funds by paying sales commissions to sales agents, including Nicolosi, despite statements in the offering materials that commissions would only be paid to licensed brokers.

“A portion of the “profits” distributed to investors were actually payments funded by other investors, and there was extensive commingling of investor funds.”

Property Income Investments, Brodman and Anthony Two-Names

State records say Brodman started Property Income Investors (PII) in March 2016.

PII marketed itself as a “real estate investment company based in South Florida with a focus on multifamily, turnkey properties.”

For each property bought, Brodman formed a separate company and named it “Property Income Investors” and added a number. The eight-unit Coral Springs building at 3050 Coral Springs Dr., for example, was bought by “Property Income Investors 304.” In its complaint, the SEC collectively called the 10 companies “the Property Entities.”

The top producing sales agent for PII and the Property Entities, the SEC said, was Nicolosi, who once was known as Anthony Peluso. He was a registered representative with 18 SEC-registered broker-dealers from 1994 through 2000.

The SEC complaint said Anthony Peluso legally changed his name “Anthony Nicolosi” to cover his tracks after the National Association of Securities Dealers permanently barred him from associating with any member for lying to customers and high-pressure sales tactics. He received a cease and desist order in 2010 from the Alabama Securities Commission in part for not letting customers know about his name change and the NASD action.

Where the money came in and where the money went

The SEC complaint says from January 2016 through September 2020, Property Income Investors raised that $9.06 million from 156 investors over 26 states. Investors were told Brodman and investors would have a 30-70 percentage split on rental profits and 50-50 on property sales.

According to the SEC, about $4.1 million money went into buying 12 properties, ranging for $265,000 to $1.25 million. Broward County property records say the aforementioned 3050 Coral Springs Dr. building was sold for $1.25 million on Aug. 29, 2019. Another $752,000 was spent on property renovation and maintenance.

PII and Property Entities sold three of the properties and collected about $1.04 million in rent on the others.

“The companies did not distribute any profits from property sales to investors,” the complaint said. “Based on the disclosures in the offering materials, Brodman was entitled to receive,at most, a total of approximately $312,000 as his share of the profits from the businesses.

“However, even after offsetting this $312,000, Brodman misappropriated approximately $1.12 million in investor funds, which was diverted into his personal account.”

Investors were told licensed brokers might be paid “up to 10% of proceeds raised” in commissions, the SEC said. But, the agency pointed out, none of PII’s brokers were licensed and the $1.2 million spent on commissions exceeded 10% of the $9.06 million raised.

Also, “at least $124,000” returned to some investors as profits, the SEC said, actually were payments by later investors. The same was claimed about “a significant portion of $460,000” from two 2020 investors.

“In total, PII, Property Entities, and Brodman misappropriated and misused approximately $2.44 million of the offering proceeds,” the SEC said.

Four Doral cops suspended with pay as feds probe COVID relief small business loans