WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission (SEC) filed a complaint against a real-estate developer and two affiliated firms for “siphoning and misusing investor funds” to the tune of over $91 million, the agency said in a statement on Thursday.
The regulator’s emergency action, filed on Wednesday in the federal district court of Buffalo, New York, alleges that the real-estate developer raised more than $80 million from over 200 investors with the aim of improving a multi-family home complex, but rather diverted the funds to “facilitate Ponzi scheme-like payments to earlier investors” via his companies Morgan Acquisitions, LLC and Morgan Mezzanine Fund Manager, LLC.
Developer chief, Robert Morgan, is also being charged with improper use of more than $11 million in investor funds to repay an inflated loan Morgan “fraudulently obtained for an unrelated apartment complex,” the SEC statement said.
“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,” said Daniel Michael, who leads the SEC’s enforcement team that focuses on complex financial instruments.
The SEC is requesting an order freezing Morgan’s assets and appointing a temporary receiver over the relevant funds on the grounds that Morgan violated the anti-fraud provisions of federal securities laws.
Morgan, and the development companies, did not immediately respond to a request for comment.
Reporting by Katanga Johnson; Editing by Susan Thomas