SEC slaps real estate firm with $600m fine for ponzi scheme


The Securities and Exchange Commission (SEC) has charged National Reality Investment Advisors and four of its former execs for running a ‘ponzi-like scheme’.

According to the SEC, the NRIA raised approximately $600m from around 2,000 different investors.

The complaint by the commission alleged that beginning in 2018, NRIA and its executives raised funds by promising investors that their money would be used to buy and develop real estate properties, with the four execs promising returns on the properties of up to 20%.

However, in reality, investor money was being used to pay distributions to other investors, to fund an executive’s family’s personal and luxury purchases and to pay reputation management firms to thwart investors’ due diligence of the executives.

The complaint also alleges that NRIA manipulated the real estate fund’s financial statements and the financial information in marketing material distributed to investors, intentionally disguising the misuse of investor funds and creating the false appearance that NRIA and the fund were generating more revenue than they actually were and that operations were successful.

However, NRIA had little to no revenue, and thefund filed for Chapter 11 bankruptcy protection on June 7, 2022.

The NRIA and the executives will be charged by the SEC with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Thomas Smith – associate regional director of enforcement in the SEC’s New York Regional Office – said, “In classic Ponzi fashion, these defendants allegedly told investors that they would be paid distributions from profits of their fund when, in reality, payments were being made from the investors’ own funds. What makes this behaviour even more callous is that they allegedly took advantage of 382 retirees who had contributed more than $94 million in savings.”

The SEC recently slapped Barclays and Barclays Bank with a total fine of $361m for controls failures.

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