Phoenix-based Radical Bunny LLC has been ordered by the Arizona Corporation Commission to pay $189.8 million in restitution to its investors.
After a 22-month investigation, the commission has found that Radical Bunny fraudulently sold unregistered deed-of-trust investments. The group, which raised money from almost 900 investors and then lent it to Mortgages Ltd., was not registered as a securities dealer.
Investors in Radical Bunny were told that their money would be used to purchase fractionalized interests in notes secured by real-estate deeds of trust. However, the Corporation Commission found that Radical Bunny pooled investor funds to make unsecured loans to Mortgages Ltd.
The probe also found Radical Bunny continued to raise money from investors after being advised by lawyers that it was violating Arizona securities laws.
A separate administrative Corporation Commission investigation is still pending into Radical Bunny's former managers: Tom Hirsch, Harish Shah, Howard Walder and Berta "Bunny" Walder.
Radical Bunny is in Chapter 11 bankruptcy and controlled by a court-appointed trustee. The Corporation Commission restitution order can't be enforced until Radical Bunny emerges from bankruptcy. It's unclear what assets it will have to go toward paying the settlement.
Separately, the U.S. Securities and Exchange Commission is pursuing a fraud lawsuit against Radical Bunny LLC.
When lender Mortgages Ltd. was forced into bankruptcy in June 2008, Radical Bunny had made $197 million in investor-funded loans to it.
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