SEC Obtains Emergency Asset Freeze to Halt Multi-Million Dollar Real Estate Investment Fraud

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Washington, D.C., March 5, 2009 — The Securities and Exchange Commission has charged Los Angeles resident Bruce Friedman and two of his companies with securities fraud, and obtained an emergency court order to freeze their assets and halt an alleged ongoing investment scheme involving purported real estate and mortgage lending ventures.

According to the SEC's complaint, Friedman and his companies — Los Angeles-based Diversified Lending Group, Inc. (DLG) and Applied Equities, Inc. (AEI) — raised at least $216 million from hundreds of investors nationwide, many of whom are senior citizens, by promising guaranteed high returns through real estate-related investments. Instead, Friedman diverted substantial investor money to ventures unrelated to real estate, and also misappropriated at least $17 million to support his lavish lifestyle, including purchases of a luxury home, cars, vacations, jewelry, and designer clothing for himself and an alleged girlfriend, who is named as a relief defendant.

"Investors were lured into this alleged scheme based on misrepresentations about the true nature of the securities and the defendants' business," said Rosalind Tyson, Regional Director of the SEC's Los Angeles Regional Office. "Our emergency action today demonstrates that the SEC will act aggressively in fraud situations like this to preserve assets for investors."

The SEC's complaint, filed in federal district court in Los Angeles, charges Friedman and his companies with selling securities in the form of one- or five-year "Secured Investment Notes," representing that DLG pools investor money and invests it 70 to 80 percent in real estate property and 20 to 30 percent in mortgage lending. Once investors invested in the Notes, Friedman and his companies continued to misrepresent how their money was being used. They assured investors that DLG's investments were profitable, that their money was safe, and that returns of either 9 percent or 12 percent were guaranteed.

However, the SEC's complaint alleges that Friedman and his companies did not invest DLG investor proceeds as represented. Instead, they diverted a substantial amount of investor money to undisclosed business ventures unrelated to real property or mortgage lending, including Friedman's charitable foundation and businesses operated by affiliates and Friedman's family members and friends. Friedman and his companies only recently changed their written disclosure to mention these additional business ventures to DLG investors, even though DLG investors had financed them for years. Friedman also misappropriated substantial investor money for his own personal purposes.

Neither DLG nor AEI have ever registered with the SEC. The Commission's complaint alleges that Friedman, DLG, and AEI violated the antifraud provisions of the federal securities laws, and in addition to the emergency and interim relief that has been obtained, the SEC seeks a final judgment permanently enjoining the defendants from violating the antifraud provisions and ordering them to pay disgorgement of ill-gotten gains and financial penalties. The SEC's complaint also seeks disgorgement from relief defendant Tina Placourakis.

The SEC acknowledges the assistance of the Arkansas Securities Department, the California Department of Corporations, the Michigan Office of Financial and Insurance Regulation, and the Financial Industry Regulatory Authority (FINRA).

Source: SEC