The allegations read: The securities and exchange commission ("the commission" or "the sec") alleges this securities enforcement action concerns an offering fraud perpetrated by the individuals and entities behind two real estate investment funds, secured real estate income fund i, llc ("income fund") and secured real estate income strategies, llc ("income strategies") (collectively, the "funds" or "relief defendants"). From april 2016 through march 2021, income fund and income strategies raised over $7.3 million from about 147 investors based on a series of false promises.
both of the funds' offering documents and marketing materials misled investors regarding a number of material issues. First, the funds' offering documents and marketing materials falsely promised the payment of reliable monthly distributions at an 8% annual rate; in reality, the funds never made distributions anywhere close to those promised, and they never had the investments or income to justify their promises of 8% returns. Second, the funds' offering documents and marketing materials falsely boasted that managing members charles tralka and thomas braegelmann had over fifty years of real estate investing experience; in reality, tralka and braegelmann had almost no experience investing in real estate for others. Third, the funds' offering documents and marketing materials falsely promised that sec-registered investment adviser good steward capital management, inc. ("good steward") would make the funds' investment decisions; in reality, tralka and braegelmann primarily decided how the funds would invest. Good steward and robert l. Barr, though described as the funds' investment adviser, primarily served only in an administrative capacity. Finally, although income strategies' offering circular stated that it would meet its $1 million investment threshold with investments from third parties, and keep investor funds in escrow until such time, income strategies in fact met this threshold through investments from related parties income fund and good steward and also failed to keep investor funds in escrow.
managing member matthew sullivan acted as investor relations and managing member jordan e. Goodman drummed up potential investors through his syndicated radio show.
by their actions, defendants tralka, braegelmann, sullivan, goodman, good steward, and barr violated the federal securities laws. Specifically: defendants tralka, braegelmann, and sullivan violated sections 5(a), 5(c), and 17(a)(1) and (3) of the securities act of 1933 ("securities act") and section 10(b) of the securities exchange act of 1934 ("exchange act") and rules 10b-5(a)-(c) thereunder. Goodman violated sections 5(a) and 5(c) of the securities act. Good steward and barr violated sections 17(a)(1) and (3) of the securities act and section 10(b) of the exchange act and rules 10b-5(a)-(c) thereunder.
