The SEC has filed settled charges against Wavemark Capital and founder Michael Ayala over an alleged $9.6 million promissory-note offering tied to mobile home investments. Investors were reportedly promised guaranteed annual returns of 12% to 14%, but the SEC alleges that no mobile homes were purchased. Investor funds were instead used for Ponzi-like payments, sales commissions, affiliate debts, operating costs and personal expenses.
U.S. Securities and Exchange Commission (SEC)
Official Release:
https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26643
NEWS:
The Securities and Exchange Commission filed a settled civil action against Wavemark Capital, LLC and its founder and chief executive, Michael Ayala, alleging fraud in a mobile home investment program that raised approximately $9.6 million from nearly 100 investors. According to the SEC's complaint, the money was raised between approximately October 2021 and February 2025 through Wavemark Income Fund, LLC, an entity managed and controlled by Wavemark Capital and Ayala. Investors received promissory notes that generally offered annualized returns of 12% to 14% and matured after periods ranging from nine to 24 months. Wavemark allegedly told investors that their capital would be used to purchase mobile homes costing approximately $40,000 to $70,000 each, install those homes in mobile home parks owned by Ayala-controlled affiliates, and then generate revenue through rentals or sales. The complaint alleges that investors were told the completed homes could be sold for as much as $150,000 and that proceeds from those operations would fund the promised interest and principal payments. Some offering documents reportedly described the investment as a secured note and claimed that investor money would be used exclusively for buying and installing mobile homes, rather than paying management expenses or existing affiliate debt. The SEC alleges that those representations created the appearance of a defined, asset-backed business model even though the operating reality was materially different.
According to the complaint, Wavemark Income Fund did not purchase any mobile homes with investor capital and did not generate revenue from mobile home rentals or sales. Instead, the SEC alleges that investor money was commingled across accounts belonging to Wavemark, Wavemark Income Fund and several Ayala-controlled affiliates. Nearly $2 million was allegedly used to make interest and principal payments to earlier investors, creating the appearance that the investment program was producing the promised returns. The SEC characterized these transfers as Ponzi-like payments because they were funded with capital raised from other investors rather than operating income. Approximately $2.4 million—about one quarter of all investor money raised—was allegedly paid as commissions to sales agents who promoted the notes, even though offering documents reportedly stated that commissions would generally be between 5% and 8% of the offering proceeds. The complaint further alleges that Ayala transferred approximately $4 million to affiliated companies, with at least $2 million used to repay older debts and obligations of those businesses. More than $400,000 was allegedly directed to Ayala or a related entity and used for personal expenses, including mortgage and credit-card payments. By November 2023, Wavemark was allegedly unable to make payments to certain investors. Monthly investor communications continued to discuss expected refinancing and repayment plans, but the SEC says Wavemark Income Fund owed approximately $7.4 million in outstanding principal by January 2025. In February 2025, Ayala reportedly informed investors that payments would be suspended or deferred and that the company was considering a restructuring that might repay principal and interest over three to five years.
Without admitting or denying the SEC's allegations, Wavemark Capital and Ayala consented to proposed final judgments that remain subject to court approval. The proposed resolution would permanently enjoin both defendants from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5. Wavemark and Ayala would be jointly and severally responsible for $8,817,909 in disgorgement and $736,725 in prejudgment interest. Ayala would also pay a $236,451 civil penalty and become subject to a conduct-based injunction restricting his participation in certain securities offerings. For investors, the case demonstrates why a promissory note should not be treated as low-risk merely because it is described as secured or connected to tangible real estate. A genuine asset-based note program should provide verifiable evidence that the stated assets were purchased, titled, insured and installed, together with records showing how those assets produce the cash flow required to pay interest. Investors should also compare promised yields with actual operating margins, identify every affiliated entity receiving funds, review the priority and enforceability of any claimed security interest, and determine whether commissions substantially reduce the capital available for investment. A program promising guaranteed double-digit returns while relying on short-duration notes requires particularly careful examination because the timing of investor payments may depend on continued fundraising rather than sustainable revenue. The Wavemark allegations also show why bank records, asset-purchase documentation and cash-flow reconciliation may reveal risks that polished offering materials and regular investor payments do not.
KEY POINTS:
- Wavemark Capital and Michael Ayala allegedly raised approximately $9.6 million from nearly 100 investors through promissory notes issued by Wavemark Income Fund.
- Investors were reportedly promised guaranteed annualized returns of 12% to 14% from the purchase, rental and sale of mobile homes.
- The SEC alleges that no mobile homes were purchased and that nearly $2 million of new investor capital was used to make Ponzi-like payments to earlier investors.
- Approximately $2.4 million allegedly went to sales commissions, while additional investor funds were used for affiliate debts, operating expenses and personal costs.
- The proposed settlement includes approximately $8.82 million in disgorgement, $736,725 in prejudgment interest and a $236,451 civil penalty against Ayala, subject to court approval.