U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25709 / May 5, 2023
Securities and Exchange Commission v. Joshua Burrell and Activated Capital, LLC, No. 1:21-cv-9422 (S.D.N.Y. filed Nov. 15, 2021)
SEC Receives Final Judgement Against Fund Manager Involved in Development of Distressed Areas
On May 1, 2023, the U.S. District Court for the Southern District of New York entered a final judgment against Joshua Burrell, enjoining him from violating certain antifraud provisions of the federal securities law and imposing other remedies.
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 Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. On January 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 thereon, the payment of which was deemed satisfied by the restitution order in the parallel criminal proceeding, United States v. Burrell, 21 Cr. 0063 (S.D.N.Y.).
The SEC's investigation was conducted by Alison Conn, Kim Han, Lindsay S. Moilanen, Kerri Palen, and Judith Weinstock under the supervision of Thomas P. Smith, Jr. The SEC's litigation was led by Paul Gizzi. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the U.S. Postal Inspection Service.