SEC Obtains Final Judgment Against Fund Manager Involved in Misappropriation of Investor Funds in Distressed Areas

SEC obtains final judgment against fund manager involved in development of distressed areas

The U.S. District Court of New York Southern District issued a final judgement on May 1, 2020 against Joshua Burrell. This judgment imposed certain restrictions upon him, and also provided for other remedies in response to his involvement with fraudulent activities.

Burrell, acting through Activated Capital, LLC, raised about $6.3 Million from investors between the months of February 2019 and February 2020. The funds were intended to be invested in Opportunity Zones – a community development initiative established by the Tax Cuts and Jobs Acts of 2017 – a program that encourages investment in Opportunity Zones. Burrell was accused by the SEC of misusing investor funds to purchase properties on behalf of other Activated entity, where the investors’ funds and funds themselves had no ownership stake. Burrell is also accused of using investor money for distributions to investors, and making false statements about an outside fund custodian and the Activated partners’ investments in the fund. Burrell is also accused of misappropriating $100,000 in investor funds. This includes $56,000 he claimed was fraudulent. “property improvement” expenses.

The SEC accused Burrell of violating the Securities Act of 1933, Section 10b of the Securities Exchange Act of 1974, and Rule 10b-5. The Court issued consent judgments on January 25, 2022 against Burrell, and Activated. These judgments prohibited them from committing any further violations. The SEC informed Court of its decision to not seek monetary damages against Activated on April 28th, 2023. This effectively ended the litigation involving that entity. On May 1, 2023 the Court, with Burrell’s consent, entered a final judgement against Burrell permanently prohibiting him from violating these provisions. He agreed to return $100,155.42 of ill-gotten gain, plus prejudgment interests, and was satisfied by an order for restitution in a parallel criminal matter, United States v. Burrell. 0063 (S.D.N.Y.).

Alison Conn Kim Han Lindsay S. Moilanen Kerri Palen and Judith Weinstock conducted the SEC’s investigations under Thomas P. Smith Jr. Paul Gizzi was the lead litigator. The SEC thanked the U.S. Attorney’s Office of the Southern District of New York as well as the U.S. Postal Inspection Service.

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SEC: What You Need to Know

The Securities Exchange Commission, or SEC, is a US regulatory agency with the primary aim of protecting investors and maintaining fair and efficient markets. The SEC achieves this by a number of methods, including:

1. Enforcement of securities laws. The SEC enforces federal security laws such as Securities Act of 1933, Securities Exchange Act of 1964, and others to prevent fraud, manipulation and other illegal activities on the securities market. The SEC investigates violations of these laws and takes legal actions against those who violate them.

2. Regulation and oversight. The SEC oversees and regulates a variety of participants in the financial market such as brokers, investment advisors and mutual funds. The SEC sets standards and rules to ensure that these entities are operating fairly, providing relevant information to investors and following ethical practices.

3. Investor protection and education: The SEC encourages education of investors by offering resources, publications and online tools that help people make informed decisions about investing. The SEC offers advice on how to avoid scams and fraud, understand risks and know their rights as an investor.

4. Disclosure requirements. The SEC mandates companies to publicly disclose relevant non-financial and financial information to investors. This ensures transparency and allows investors to make well-informed decisions. These include quarterly and annual reports as well as prospectuses and proxy statement.

5. Market surveillance: The SEC is responsible for monitoring the markets, looking out for suspicious activities such as insider trading and market manipulation. It uses data analysis and advanced technology to detect possible violations and take the appropriate actions to maintain fair, orderly and fair markets.

In general, the SEC has a vital role to play in protecting investors. It does this by enforcing security laws, regulating markets participants, promoting educational programs for investors, ensuring accurate disclosure of information and monitoring market activity. The SEC’s goal is to increase investor confidence, preserve market integrity and promote efficient capital allocation.

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