The Securities and Exchange Commission on Thursday accused the California real estate company Diversified Lending Group Inc. and Bruce Friedman, its chief executive, of running a $216 million investment fraud.

The SEC also charged Applied Equities Inc., a subsidiary of Diversified. It has obtained a temporary restraining order and is seeking a final judgment permanently enjoining Friedman and his companies from violating antifraud provisions and ordering them to pay disgorgement of ill-gotten gains.

A lawyer for Diversified was not immediately available to comment.

The SEC complaint alleges that Friedman and his companies sold unregistered promissory notes to investors, many elderly; misrepresented the true nature of these securities; and did not invest the funds as represented.

Diversified told investors that it would invest their funds in real estate and mortgage lending ventures.

But according to the SEC complaint, the firm instead "diverted a substantial amount of investor money to undisclosed business ventures or investments unrelated to real property or mortgage lending."

Friedman misappropriated at least $17 million of the $216 million raised from investors to support his lifestyle, including "purchases of a luxury home, cars, vacations, jewelry, and designer clothing," the SEC said in its complaint. Friedman and Diversified have been under investigation by securities regulators in various states.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.