The Securities and Exchange Commission (SEC) charged a Phoenix-based company and four promoters with securities fraud for coordinating a multimillion-dollar mortgage-lending scheme, according to an SEC statement. The alleged scheme trapped hundreds of investors with false promises of investment performance by four parties, including two certified public accountants, a pharmacist and a grade-school principal. The charges allege the foursome raised more than $197m from investors across the country and pooled the funds through their company, Radical Bunny. From this pool, they made loans to Mortgages Ltd., a Phoenix-based originator of high-interest, short-term loans to real estate developers, according to the statement. The SEC filed their complaint in federal court in Phoenix, naming in the scheme Radical Bunny and its four managing members: Tom Hirsch of Paradise Valley, Ariz.; Harish Shah of Phoenix; and Howard Walder and Berta "Bunny" Walder, both of Phoenix, according to the statement. The complaint alleges the four promoters told investors that Mortgages Ltd. could only use their funds for commercial development, but no restrictions existed. The SEC claims that the foursome held semi-annual meetings at a luxury golf resort in Scottsdale, Ariz. There, they reportedly pitched presentations and the updated status of investments to friends, families and others that were invited to the meetings as potential investors. "These promoters promised investors more than they could possibly deliver," said Rosalind Tyson, director of the SEC's Los Angeles regional office, in the statement. "Even to friends and family, they repeatedly overstated the safety of the investment and their knowledge of the underlying business to which they lent investor funds. Unbeknownst to investors, more and more of their money was being shifted into fewer and riskier loans." Radical Bunny never registered with the SEC, and, in addition to fraud, Hirsch, Shah and the Walders face charges of offering and selling unregistered securities and for acting as unregistered broker-dealers in violation of the federal securities laws, according to the statement. In the suit, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and financial penalties against all of the defendants. According to a story by the Phoenix New Times, Scott Coles, Mortgage Ltd.’s CEO, committed suicide in June, the same month the company filed for bankruptcy. Write to Jon Prior.