Drive Planning founder and CEO gets 20 years for a $380 million Ponzi scheme

Todd Burkhalter, founder and CEO of Drive Planning, was sentenced Friday to 20 years in federal prison. That is the maximum term the law allowed for the $380 million Ponzi scheme he ran. Burkhalter pleaded guilty in January. WealthManagement.com reported the sentencing and the court filings behind it.

Federal prosecutors said Burkhalter spent investor money on yachts, luxury vehicles and private jets. The Justice Department described the scheme as likely the largest Ponzi in Georgia history. The case shows how ordinary private-debt products can hide an old fraud.

Drive Planning sold two investments. The Real Estate Acceleration Loan, pitched as a bridge loan to developers, promised 10% returns every three months. The Cash Out Real Estate Fund promised 100% passive income from tax liens. It guaranteed 10% returns every six months. Court documents say Burkhalter told investors they did not need accredited status, and he encouraged them to drain retirement accounts, savings and credit lines.

The collateral story fell apart at the first document review. Burkhalter claimed the loans were fully collateralized by real estate. His firm produced collateral sheets assigning values to properties, some of which did not exist. According to the Justice Department, none of the money raised through the Real Estate Acceleration Loan went where it was supposed to go. The first $50,000 in the scheme included a payment to an earlier investor. The payment was at least $21,000.

Prosecutors said Burkhalter also claimed a prominent developer stood behind the investments. That developer sued Drive Planning after learning its name was used. U.S. Attorney Theodore Hertzberg called the sentence a deterrent and said Burkhalter lured investors with promised returns, pushed them to drain college funds, take early retirement distributions and borrow at high interest.

For an RIA principal, the first test is arithmetic. A 10% quarterly return compounds quickly. Compounded over a year, it clears 40%. A guaranteed return at that level, offered to non-accredited investors and secured by collateral nobody verified, should end the meeting.

The word 'guaranteed' deserves its own diligence file. Burkhalter attached it to two products. If the returns were real, each fund would have been an extraordinary generator of income. Instead, the income stream was the next investor's principal.

The checks that stop a scheme like this are not elaborate. Where is the cash held? Who values the collateral? What did the first monthly statement show? Drive Planning's earliest account activity would have failed all three.

Advisors who only refer clients to a sponsor carry the same exposure as the one who runs the money. When a client loses a retirement account, the introduction is remembered longer than the due-diligence memo. A single referral gone bad can take years to repair.

The accredited-investor language should have been just as loud. Burkhalter did not stop at letting everyone in; he urged them to borrow at high interest to fund the investment. Waiving the accreditation bar is a way to sell a guaranteed 10% quarterly return to people with limited ability to absorb the loss.

Firms under pressure to hit growth numbers are especially vulnerable to this pitch. A sponsor with a guaranteed private-market return can look like the answer. The cost of checking is a phone call to the named developer. In this case, the developer did not confirm the relationship; it sued.

The sentence closes the criminal case. The due-diligence lesson was visible in the first month's wires. New investor money went to an earlier investor, not into loans. A wire-level review then would have exposed the fraud before the total reached $380 million.