SAN JOSE — Loan defaults in the East Bay and South Bay have begun to pile up on a Bay Area developer who is the focus of a fraud probe, according to public documents detailing potential foreclosure proceedings.
Developer Sanjeev Acharya and his company Silicon Sage Builders face an array of financial and legal complications, including federal fraud allegations, bankruptcy, and potential property foreclosures.
In a new challenge for Acharya, lenders have begun foreclosure proceedings on several properties owned by affiliates that he controls. The loan defaults were all filed in January either in Santa Clara County or Alameda County.
Among the Archarhya-controlled properties that are in default on their loans:
— 42021 Osgood Road in Fremont. An office building at that site is in default on an $8.3 million loan, papers filed on Jan. 25 show.
— 1313 Franklin St. in Santa Clara. The retail portion of a mixed-use commercial and residential complex is in default on $7.9 million in financing, according to a notice filed on Jan. 27. The retail fronts on Monroe Street between Benton Street and Franklin Street.
— Properties at and near the corner of Fremont Boulevard and Peralta Boulevard, including 37358 Fremont Blvd. The properties are in default on $4.6 million in financing, a notice filed on Jan. 25 shows.
— A commercial property at 1665 Alum Rock Ave. in east San Jose is in default on $1.8 million in financing, according to a document filed on Jan. 27.
— The retail and office portion of Madison Park, a mixed-use complex at 1368 El Camino Real between Madison Street and Monroe Street in Santa Clara, is in default on $3.5 million in financing, a notice filed on Jan. 11 shows.
The two properties in Santa Clara had been developed but didn’t have retail tenants, although at least some of the residences had been sold. The two properties in Fremont and the one in San Jose hadn’t been developed yet.
On Jan. 23, Acharya filed for a Chap. 11 bankruptcy proceeding, seeking to reorganize his finances.
In the bankruptcy case, Acharya stated he had incurred at least $100 million and as much as $500 million in debts, according to documents on file with the U.S. Bankruptcy Court.
The value of his assets ranged from $1 million to $10 million, the court papers show.
Acharya estimated that he owes money to anywhere from 200 to approximately 1,000 creditors, court papers show.
All of these difficulties have arrived on the heels of a complaint filed on Dec. 21 by the Securities and Exchange Commission that claims Acharya and Silicon Sage Builders defrauded hundreds of investors in his development ventures.
An estimated 250 people who paid about $119 million to invest in real estate projects launched by Acharya and Silicon Sage Builders face the prospect that they were defrauded through a financial web woven by the real estate developer, according to a complaint the SEC filed.
The fraudulent activity allegedly orchestrated by Acharya and Silicon Sage Builders began around August 2016, according to the SEC complaint, filed in the U.S. District Court for Northern California.
“Since August 24, 2016, Silicon Sage Builders has raised approximately $119.2 million from approximately 250 investors through a continuous series of misrepresentations and omissions and other deceptive conduct,” the SEC claimed in its complaint.
Silicon Sage and Acharya painted an overly rosy picture of the outlook, prospects, and financial strength of the company’s array of projects, according to the SEC’s allegations.
“Since at least August 24, 2016, Silicon Sage Builders and all but one of its real estate development projects have not been profitable,” the SEC complaint alleges.
The SEC case, the bankruptcy proceeding, and the array of mortgage defaults could create a financial tug of war with competing interests that might leave the investors with an uncertain fate as they attempt to recoup the money they placed with Acharya.
One Acharya-orchestrated financing campaign detailed in the SEC case was known as the Bridge Fund, which was formed in 2014 and whose purpose was to help bankroll an array of construction activities for the Silicon Sage projects.
Silicon Sage’s Bridge Fund raised tens of millions of dollars over a period of years from investors. The financial status of the fund, as documented in the SEC complaint, raises questions about whether investors will be repaid.
“As of October 2020, the Bridge Fund has $19.58 in its bank account, and owes the Bridge Fund investors approximately $40 million,” the SEC filing shows.