SEC Charges San Diego-based Companies and Their Principal with Operating $15 Million Ponzi Scheme
Securities and Exchange Commission v. Fusion Hotel Management, LLC, Fusion Hospitality Corporation and Denny T. Bhakta, No. 3:21-cv-02085-L-MSB (S.D. Cal. filed December 14, 2021)
SAN DIEGO, CA (STL.News) The Securities and Exchange Commission today announced charges against Fusion Hotel Management, LLC, Fusion Hospitality Corporation, and their founder, Denny T. Bhakta of San Diego, California, for fraudulently raising at least $15 million from more than 40 retail investors.
According to the SEC’s complaint, filed December 14, 2021, in the U.S. District Court for the Southern District of California, from at least January of 2016 through January of 2020, Bhakta and the Fusion entities raised funds from investors by falsely telling them that Fusion was in the business of buying blocks of hotel room reservations from major hotel chains and re-selling those reservations at higher rates to Fusion’s clients, including a major airline company. To entice investors, Bhakta allegedly touted Fusion’s successful track record, when in fact, Fusion’s business was a sham. According to the complaint, Fusion did not engage in the business of re-selling blocks of hotel room reservations for profit, and the contracts and bank statements Bhakta provided to investors to lend credibility to that business were fabricated. The complaint further alleges that, rather than using investor funds to buy and sell reservations as promised, Bhakta misappropriated those funds for gambling and other personal expenses and to pay purported returns to earlier investors.
The SEC’s complaint charges Fusion Hotel Management, Fusion Hospitality Corporation, and Bhakta with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934, Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against all of the defendants.
The SEC’s investigation was conducted by Lance Jasper and supervised by Spencer Bendell of the Los Angeles Regional Office. The litigation will be led by Daniel O. Blau and supervised by Amy J. Longo. The SEC acknowledges the assistance of the United States Attorney’s Office for the Southern District of California, the Federal Bureau of Investigation, and the Texas State Securities Board.