According to the SEC, Malley and his firm raised almost $60 million from investors through various alleged fraudulent representations and omissions. For this misconduct, the SEC seeks a permanent injunction preventing Malley from further violating federal securities laws, disgorgement of all ill-gotten gains from the alleged scheme, and civil money penalties.
The SEC’s Complaint Explains How Malley And MG Capital Solicited Investors Through Allegedly Fraudulent Offering Materials
According to the SEC, Malley launched his first real estate fund, named “Fund III”, in 2014 and raised money by distributing a set of marketing materials to targeted investors, primarily high net worth individuals, family offices and institutional investors. The marketing materials included “an Investment Profile, Investor Presentation, and Frequently Asked Questions.” As alleged in the SEC’s Complaint, Malley’s investment strategy “involved purchasing hundreds of luxury apartments in Manhattan at below-market prices and leasing them to corporate tenants” and “investors . . . would receive annual distributions of the net rental income that the fund received from leasing such apartments.”
Among other things, the SEC alleged that Malley and MG Capital made the following misrepresentations to investors:
- “Defendants falsely represented that they had managed two successful prior funds, ‘Fund I’ and ‘Fund II’ . . . to convince potential investors that Defendants had the experience to successfully run Fund III and should be entrusted with the investors’ investment capital. Fund I and Fund II, however, were entirely fictitious.”
- “The . . . PPM included fraudulent performance metrics for the non-existent earlier funds.”
- “Malley (and MG Capital through Malley) knew that the representations concerning Fund I and Fund II and their performance were false.”
The SEC goes on to detail that Malley and MG Capital engaged in similar alleged falsehoods with respect to another fund they developed: Fund IV.
Ultimately, the SEC alleged Malley and MG Capital misappropriated more than $7 million of investors’ funds through a series of bogus fees and “concessions”.
Real Estate-Based Securities Frauds Are A Major Issue For Retail Investors
Malley and MG Capital perpetrated an alleged securities fraud involving purported funds deriving value from real estate investments. This is unfortunately an all-too-familiar issue facing retail investors.
Unfortunately, fraudsters are frequently able to convince investors to invest in real estate offerings through complex vehicles such as the real estate funds offered by MG Capital. These investments are often enticing given high barriers to entry for individuals to purchase their own real estate investment properties, while promising steady income from leasing out the properties the funds hold.
Have You Lost Money In A Real Estate Fund?
Silver Law Group is experienced in representing investors who suffered losses in real estate based securities frauds and Ponzi Schemes like the alleged fraud committed by MG Capital and Malley. There may be a path to recovery of your financial losses. If you or someone you know was the victim of investment fraud, please contact Silver Law Group toll free at (800) 975-4799 or e-mail ssilver@silverlaw.com for a confidential consultation.