Fund manager charged for defrauding retail investors to the tune of $58m

A fund manager has been accused of having defrauded retail investors by coercing them to invest $58m in two funds, despite having zero investment experience, the Securities and Exchange Commission alleged.

The SEC has charged fund manager Eric C. Malley and his company MG Capital Management L.P. in a new suit filed in the US District Court for the Southern District of New York.

The charges allege that the investor and his company lied to retail investors to trick them into investing in two real estate funds, saying that the business had previously managed two highly-successful real estate funds with a combined portfolio value of $1.18bn.

However, those earlier funds never existed, according to the regulator.

Moreover, Malley and MG Capital are accused of having lied in their marketing materials and offering documents, including claiming that investors’ capital was “100% protected from loss” and secured by a non-existent $250m balance sheet and that they had partnerships with hundreds of prospective tenants with pre-signed, multi-year lease agreements.

Finally, the complaint alleges that Malley and MG Capital misappropriated more than $7m in investor assets while using falsified financial reports to conceal huge losses that ultimately forced the two funds into wind-down.

“As alleged in the complaint, Malley and MG Capital defrauded investors who thought they were entrusting their money to a fund manager with a long and successful track record,” said Richard R. Best, director of the SEC’s New York regional office. “This case demonstrates our commitment to hold accountable perpetrators of offering frauds for the harm they inflict on retail investors.”

Enjoyed the story? 

Subscribe to our weekly RegTech newsletter and get the latest industry news & research

Copyright © 2018 RegTech Analyst


The following investor(s) were tagged in this article.