Feds: New Canaan Man, 50, Charged in Real Estate Investment Scheme

Feds: New Canaan Man, 50, Charged in Real Estate Investment Scheme

Federal prosecutors announced last week that they’ve charged a 50-year-old New Canaan man with securities fraud for his role in a real estate scheme.

Eric Malley,  founder and former chief executive officer of real estate private equity investment firm MG Capital Management L.P., also faces charges of wire fraud after inducing “hundreds of individuals to invest a total of more than $50 million in two real estate investment funds by, among other things, lying about his own prior experience and investment track record and about the nature and characteristics of those funds,” U.S. Department of Justice officials said in a press release.

“Eric Malley allegedly promised his clients that they would reap the benefits of owning equity in Manhattan real estate through his time-tested, sophisticated, debt-free investment strategy,” Acting Manhattan U.S. Attorney Audrey Strauss said in the release. “As alleged, those promises were lies. Malley lied about his prior funds’ existence and performance, and he lied in promising clients that the funds were free of debt and leased to prominent corporate tenants. While his investors lost money, Malley enriched himself. We will continue to work with our law enforcement partners to protect investors from these types of deceptive practices.”

He will be presented before a magistrate judge in the Southern District of New York.

According to a complaint unsealed Jan. 12 in federal court in Manhattan, Malley founded MG Capital Management L.P. around January 2013, serving as CEO from that time until approximately December 2019.

He described MG Capital as an opportunity for investors to invest in luxury residential real estate properties through limited partnership interests, and formed two real estate investment funds in 2014 and 2017, the complaint said. Malley told investors that he’d formed two highly successful funds in the past, assuring them that their own funds would be debt-free and that the properties held by the funds would be leased primarily to corporate tenants.

Yet his “representations about the existence and performance of” the funds “were largely fabricated,” according to the press release from the U.S. Attorney for the Southern District of New York.  

“Furthermore, the funds were not debt-free, but instead held mortgaged properties, and the properties that made up the funds were almost entirely leased to individual, not corporate, tenants,” it said.

About 60 investors put in about $23 million into one of the funds, and though one of them incurred losses of about $860,000, Malley paid himself about $278,000 as general partner. In another fund, some 275 investors put in about $35 million, and it incurred “millions of dollars in losses,” the release said.

Malley stepped down as CEO of MG Capital in December 2019. A few months later, after he became aware of the SEC investigation, he accessed the company’s server and “deleted approximately 10,000 files from the server, including broker information and closing documents detailing the closing costs associated with acquisition of properties, which were used to obtain funding from the funds’ administrators,” officials said.

The single counts of securities fraud and wire fraud that Malley faces each carry a maximum sentence of 20 years in prison.

Grand County Real Estate sales, Jan. 10-16 Previous post Grand County Real Estate sales, Jan. 10-16
Three reasons there won’t be a 2021 housing market crash Next post Three reasons there won’t be a 2021 housing market crash