The Securities and Exchange Commission (SEC) filed a lawsuit against BNZ One Capital for allegedly operating a Ponzi-like scheme.

The federal securities regulator also named the company's co-founders and co-managers Brett Barber and Louis Zimmerle as defendants in the case.

BNZ One Capital is based in Newport Beach, California. It is not registered with the SEC in any capacity. The company has not registed any offerings of its securities.

Allegations against BNZ One Capital and its co-founders

In its complaint, the SEC alleged that BNZ One Capital, Barber, and Zimmerle fraudulently raised $13.5 million from more than 100 retail investors.

The defendants told investors that their business is investing in real estate and alternative investments. They raised funds from investors by promising to repay their principal with a return of 10% annually, according to the Commission.

Additionally, the SEC alleged that Barber told to some investors that their investments were safe, and the returns are guaranteed.

According to the Commission, BNZ One Capital hasnt been profitable since Barber and Zimmerle established the company. The co-founders' investments failed to generate sufficients profit to repay investprs' principal and the promised returns.

The defendants raised $6.9 million from investors between June 2019 and February 2020. Of that amount, they only invested $2.7 million and generated less than $5,000 in profits from those investments.

Barber and Zimmerle used investors' funds to returns in a Ponzi-like scheme. They also used investors funds to pay themselves substantially including transferring thousands of dollars to Barber's company, Guaranteed Income Solutions (GIS). The SEC included GIS as a relief defendant in the case.

After March 2020, the defendants raised an additional $6.6 million by misleading investors about BNZ One Capital's profitability. They continied their Ponzi-like payments to investors andlavish payments to themselves, the SEC further alleged.

Overall, the defendants raised $13.5 million from investors. They only invested $6.4 million and generated barely $300,000 in profits. They paid at least $1.7 million in returns to investors in a Ponzi-like scheme. BNZ One Capital tranferred more than $1.6 million to GIS and over $700,000 to Zimmerle. The company also paid its co-founders including personal expenses including for meals, travels, and vehicles.

Barner, and Zimmerle's conduct is a violation of the anti-fraud provisions  of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The defendants also violated the broker-dealer registration provisions of Section 15(a) of the Exchange Act, according to the SEC.

In a statement, SEC Los Angeles Regional Office Director Michele Wein Layne said, "The complaint here alleges that when defendants failed to earn sufficient profits in order to pay investor returns, they made Ponzi-like payments to investors using other investors' money, and, separately, also used investor funds to pay themselves handsomely."

"Individuals who engage in such misconduct should expect to be held accountable for their actions by the SEC," she added.

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