SEC Seeks Emergency Relief to Halt Prominent New York Developer’s Ponzi-Like Real Estate Investment Scheme
Washington D.C., — (RealEstateRama) — The Securities and Exchange Commission filed an emergency action charging Robert C. Morgan, a New York residential and commercial real estate developer, and two of his entities, Morgan Mezzanine Fund Manager LLC and Morgan Acquisitions, LLC, with fraud for siphoning and misusing investor funds. In its action, filed Wednesday, the SEC seeks an asset freeze and other emergency relief.
The SEC’s complaint alleges Morgan financed his development projects in different ways, including through sales of securities directly to more than 200 retail investors, many of whom invested through their retirement accounts. Morgan represented to investors that their money would be used to improve multifamily properties, and based on these representations, raised more than $80 million. Instead, as alleged in the complaint, Morgan and his entities diverted investor funds to facilitate Ponzi scheme-like payments to earlier investors. In addition, the complaint alleges Morgan’s improper use of more than $11 million in investor funds to repay an inflated, fraudulently-obtained loan for an unrelated apartment complex.
“In seeking this emergency relief, the SEC is acting to protect current and potential future victims of this elaborate scheme by halting Morgan’s fraud, which we allege involves the improper use of more than $25 million dollars in investor funds,” said Daniel Michael, Chief of the SEC’s Division of Enforcement’s Complex Financial Instruments Unit.
The SEC’s complaint, filed in federal district court in Buffalo, NY, charges Morgan and his two entities with violating the antifraud provisions of the federal securities laws. The SEC is requesting an order freezing Morgan’s assets and appointing a temporary receiver over the relevant funds. The SEC’s complaint further seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and a permanent receiver over the entities.
The SEC’s continuing investigation is being conducted by Lee A. Greenwood, Joshua Brodsky, and Daniel Nigro of the Complex Financial Instruments Unit and Kerri L. Palen of the New York Regional Office. The investigation is being supervised by Osman Nawaz. The litigation is being handled by Mr. Greenwood, Neal Jacobson, and Alexander Vasilescu, with assistance from Alistaire Bambach. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Western District of New York and the Federal Housing Finance Agency Office of Inspector General.