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Court Reaches Final Judgment Against Sponsor of OZ Investment Scheme

The U.S. District Court for the Southern District of New York last week entered a final judgment against Joshua Burrell, enjoining him from violating certain antifraud provisions of the federal securities law and imposing other remedies.

As The DI Wire previously reported in November 2021, federal prosecutors charged Joshua Burrell, chief executive officer of New York-based investment firm Activated Capital, with a number of securities fraud offenses in connection with opportunity zone investments.

According to the SEC’s complaint, from at least February 2019 through February 2021, Burrell, through Activated Capital LLC, raised approximately $6.3 million from investors to invest in opportunity zones, a community development program established by the Tax Cuts and Jobs Acts of 2017.

The offering materials represented that the properties would be purchased in the name of the funds in which investors had invested and that distributions to investors would come from income from the real estate. The complaint alleged that Burrell misappropriated investor money by using it to purchase properties in the name of other Activated entities for which the investors and the funds in which the investors had invested did not have an ownership interest. Burrell also allegedly used investor money to pay purported distributions to investors. The offering materials and marketing materials also included misrepresentations that one of the funds would have an outside custodian and that the Activated principals had made significant investments into that fund. Finally, Burrell also allegedly misappropriated $100,000 from investor funds, including $56,000 which he characterized as “property improvement” expenses.

The SEC’s complaint charged Burrell and Activated with violating SEC Rules. On Jan. 25, 2022, the Court entered bifurcated consent judgments against Burrell and Activated enjoining them from violating the charged provisions. On April 28, 2023, the Commission informed the Court that it did not intend to seek monetary remedies as to Activated, thereby resolving the litigation as to the entity.

On May 1, 2023, the Court entered a final judgment against Burrell by consent in which he agreed to be permanently enjoined from violations of the charged provisions. He agreed to disgorge $100,155.42 in ill-gotten gains and prejudgment interest.

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