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The SEC charged Eric Malley and his company, MG Capital Management, with defrauding investors of $7 million in two real estate funds managed by MG Capital.
The SEC alleges that Malley fraudulently solicited investment from primarily high net worth individuals, family offices and institutional investors in two real estate funds. Malley’s marketing materials included various fraudulent representations ranging from a misleading name, fabrication of investment track record, to promising investors that their capital was “100% protected from loss” and secured by a strong balance sheet. Malley also claimed that MG Capital had partnerships with hundreds of corporate tenants with pre-signed, multi-year lease agreements which did not exist. Malley furthered these misrepresentations through direct contact with investors, use of a crowdfunding platform, webinars and public speaking engagements.
Ultimately, the funds raised $58 million from investors of which Malley misappropriated $7 million by siphoning off assets for improper payments and distributions to related entities. Malley and his companies then concealed their misappropriation by submitting false invoices and reporting inflated purchase prices to the funds’ administrator and to investors.
The SEC is seeking to permanently enjoin Malley, MG Capital and all others involved with the fraud. Additionally, the SEC is seeking disgorgement of all ill-gotten gains with pre-judgment interest and civil monetary penalties.