SEC Files Charges in Fraudulent Island Resort Scheme
Litigation Release No. 24289 / September 27, 2018
Securities and Exchange Commission v. James Thomas Bramlette, the Pelorus Group, LLC, Anthony Mark Hartman, Private Placement Capital Notes II, LLC, Stone Mountain Equities, LLC, Travis Kozlowski, Entelecus Fund, LLC, Aaron John Wernli, No. 2:18-cv-00761-PMW (D. Utah) filed September 26, 2018
The Securities and Exchange Commission today charged four individuals and their associated entities with carrying out a long-running and complex fraud on investors in the Melrose Resort on Daufuskie Island, South Carolina.
The SEC's complaint, which was filed in federal court in Salt Lake City, Utah, alleges that J.T. Bramlette of Salt Lake City was the ringleader of the fraud and arranged for the purchase of the Melrose Resort in 2011. The other defendants, Anthony Hartman, Travis Kozlowski and Aaron Wernli, helped raised money for the project. According to the complaint, from at least 2014, investors were promised returns of up to 24% and were encouraged to put their retirement savings in the resort. In reality, the resort was uninhabitable and was suffering significant losses each month. The resort was in foreclosure and parts of it were put up for auction for unpaid property taxes. The defendants lost their ownership in the resort when they defaulted on a series of loans, but continued to raise money from unsuspecting investors without disclosing that they had lost everything. In addition, Bramlette used a substantial amount of investor funds to pay for his lavish lifestyle, including purchases on Rodeo Drive, and automobiles for friends and family. Some investor money was also used to make Ponzi-like payments to investors.
The SEC's complaint charges Bramlette, Hartman, Kozlowski, Wernli, the Pelorus Group, Private Placement Capital Notes II, LLC, Stone Mountain Equities, LLC and Entelecus Fund, LLC with violating antifraud provisions of the federal securities laws, Section 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Bramlette, Hartman, Kozlowski and their associated entities are also charged with violating an antifraud provision of the federal securities laws, Section 17(a)(2) of the Securities Act. The SEC seeks disgorgement of ill-gotten gains, interest, penalties and permanent injunctions.
Wernli, who is cooperating with the SEC's litigation, has agreed, without admitting or denying the allegations, to the entry of a permanent injunction, including a court order prohibiting him from issuing or selling any security in an unregistered offering, as well as a monetary penalty of $40,000. This settlement is subject to court approval.
The SEC's investigation, which is ongoing, was conducted in the SEC's Los Angeles Regional Office by Teri Melson and Maria Rodriguez and supervised by Finola Manvelian. The litigation will be led by John Bulgozdy and supervised by Amy Longo.