SEC Charges Investment Adviser and Affiliates with Real Estate Fund Fraud
The SEC brought charges against defendants Charles Tralka, Thomas Braegelmann, Matthew Sullivan, Jordan Goodman, investment adviser Good Steward Capital Management Inc. and its owner Robert Barr, as well as relief defendants Secured Real Estate Income Fund I LLC and Secured Real Estate Income Strategies LLC in connection with an alleged offering fraud that raised more than $7.3 million from about 147 investors from April 2016 through March 2021.
The SEC’s complaint alleges that the funds’ managing members Tralka and Braegelmann selected and managed the real estate investments, managing member Sullivan acted as investor relations, and managing member Goodman, a recidivist, drummed up potential investors through his radio programs.
The complaint also alleges that Good Steward and Barr, though described as the funds’ investment adviser, primarily served in an administrative capacity. The SEC further alleges that both funds’ offering documents and marketing materials misled investors regarding the payment of reliable monthly distributions at an 8% annual rate; Tralka and Braegelmann’s purported 50+ years of real estate investing experience; and that SEC-registered investment adviser Good Steward would make the funds’ investment decisions.
In addition, the SEC alleges that, although Income Strategies’ offering circular stated that it would meet its $1 million investment threshold with investments from third parties, it in fact met this threshold through investments from related parties Income Fund and Good Steward and also failed to keep investor funds in escrow.
The SEC’s complaint charges Tralka, Braegelmann, Sullivan, and Goodman with violating the registration provisions of the SEC.
The complaint also charges Tralka, Braegelmann, Sullivan, Good Steward and Barr with violating the antifraud provisions of the SEC. The complaint seeks permanent injunctions, disgorgement with prejudgment interest and civil penalties against Tralka, Braegelmann, Sullivan, Goodman, Good Steward and Barr. The complaint also seeks conduct-based injunctions against Tralka, Braegelmann, Sullivan, Goodman, and Barr, and officer and director bars against Tralka, Braegelmann, Sullivan, and Barr. The complaint also seeks disgorgement plus prejudgment interest from relief defendants Income Fund and Income Strategies.
Goodman, without admitting or denying the allegations in the SEC’s complaint, consented, pre-filing, to the entry of a final judgment permanently enjoining him from violating the registration provisions of the SEC; prohibiting him from participating in the issuance, purchase, offer, or sale of any security in an unregistered offering by an issuer; and ordering him to pay disgorgement with prejudgment interest and civil penalties, with the amounts to be determined by the court upon motion of the SEC.
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