On August 15, a United States district court in Georgia granted the U.S. Security and Exchanges Commission (SEC) a temporary injunction, asset freeze, and other emergency relief against businessman Russell Todd Burkhalter. The SEC claims that Burkhalter, the founder and CEO of Atlanta, Georgia-based Drive Planning, LLC, was the mastermind behind a Ponzi scheme that defrauded 2,000 investors out of over $300 million to fund his lavish lifestyle. Though Burkhalter denies the SEC’s allegations, it’s worth looking into the details of the case to better understand what happened.
Todd Burkhalter and Drive Planning
In 2008, Burkhalter registered with the SEC as an investment advisor; between 2008 and 2014, he worked comparatively brief stints at four investment firms. Since 2014, though, he hasn’t been registered with either the SEC or FINRA, the Financial Industry Regulatory Authority. In 2015, Burkhalter founded Drive Planning, LLC, a self-described “comprehensive financial group” that offered investment and financial planning services for clients in various industries, including film and TV projects, renewable energy, and real estate. Drive Planning has offices in Atlanta, Georgia; St. Petersburg, Florida; and Fishers, Indiana.
The SEC’s Allegations
https://://gty.im/1171295705
In its complaint against Burkhalter and his company, the SEC alleges that between 2020 and June of this year, Burkhalter raised more than $300 million from 2,000 investors through his financial group. The commission claims that Burkhalter encouraged investors to take money from their savings, retirement accounts, and open lines of credit to invest in his company’s Real Estate Acceleration Loans (REAL), which are unregistered securities or bridge loans with attractive interest rates for investors.
Burkhalter told investors that their investments would fund land development and real estate projects and that they would receive 10% returns on investments every three months. According to the SEC, however, since Drive Planning didn’t have the capacity to generate those promised returns, Burkhalter instead set up a Ponzi scheme in which he used funds provided by later investors to repay earlier ones. The SEC also alleges that he further misappropriated and stole millions of dollars from his investors in order to fund lavish purchases, including buying a $3.1 million yacht, spending $4.6 million on chartering private jets and luxury car services, and purchasing a $2.3 million luxury condo in St. Petersburg, Florida.
The SEC’s Case and The Court’s Actions
Filed in the U.S. District Court for the Northern District of Georgia, the SEC charges Burkhalter and Drive Planning with “violating the antifraud provisions of the federal securities law.” To remedy the ill-gotten gains that Burkhalter, his wife Jacqueline Burkhalter, and several entities related to Drive Planning got from defrauding investors, the SEC is seeking permanent injunctions, the return of ill-gotten gains, and civil penalties against the defendants. They also seek to bar Burkhalter from serving as the officer or director of Drive Planning.
Thus far, the court has granted the SEC’s request for emergency relief (intended to prevent the defendants from concealing any money gotten from investors). The court has also ordered the freezing of the defendant’s assets and the appointment of a receiver to manage the defendant’s funds. The court, however, acknowledges that Burkhalter and his attorney have denied any wrongdoing and hasn’t made a final determination on the case’s merits yet. Though Burkhalter hasn’t yet responded directly to any requests for comments, his attorney Aaron Danzig says that he denies any accusations of wrongdoing and “looks forward to quickly resolving this matter.”
Final Thoughts
The SEC’s investigation into Drive Planning’s alleged fraud is still ongoing. Furthermore, though the court has granted emergency relief for investors and frozen Burkhalter’s and Drive Planning’s assets, they have yet to rule on the merits of the case. The SEC has presented a strong case, and if Burkhalter is found liable for defrauding investors, he should be punished for his actions.
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