Investors File Lawsuit Against National Realty Investment Advisors for “Ponzi-Like Fraud”
A group of investors filed suit on Friday against New Jersey-based National Realty Investment Advisors LLC and four of its former executives who the Securities and Exchange Commission charged with running a Ponzi-like scheme that raised approximately $600 million from about 2,000 investors.
As The DI Wire previously reported, the SEC charged the company with fraud in October 2022.
The class action suit is on behalf of a class consisting of all persons and entities other than the defendants, including Rey E. Grabato II, Daniel Coley O’Brien, Thomas Nicholas Salzano, and Arthur S. Scutaro, who purchased “membership units” in the NRIA Partners Portfolio Fund I LLC from at least February of 2018 to January of 2022. According to the filing, plaintiffs seek to recover “compensable damages” caused by defendants’ violation of the federal securities laws and the New Jersey statutory and common law.
According to the complaint filed in US District Court in New Jersey, defendants offered and sold at least $630 million worth of membership units in the NRIA Fund to at least 1,800 investors. Allegedly, defendants used NRIA and the NRIA Fund to carry out a scheme that included making and disseminating material misrepresentations and effectuating a Ponzi scheme to divert millions of dollars invested in the NRIA Fund for their own personal gain.
NRIA allegedly claimed the NRIA Fund was a billion-dollar real estate development firm focused on the development of townhomes, condominium complexes, luxury residences and mixed-use rental developments. The NRIA Fund’s model purported to take advantage of the purchasing of land or property at below-market prices, developing the land or property and then selling it for a profit.
According to the complaint, despite promising investors a guaranteed 12% annual return with yearly distributions, defendants misrepresented the NRIA Fund’s financial condition by intentionally misappropriating investor funds to create the false appearance that the NRIA Fund was generating revenue from their successful real estate development operations.
Allegedly, investors were paid “distributions” and “returns” that were actually funds from prior investors. Investors’ funds were being used to pay other investors their distributions, fund the Salzano family’s personal “luxurious expenses,” retain companies to scrub the internet free of defendants Salzano and Scutaro’s fraudulent past and extend undisclosed loans to entities operated by the defendants’ families.
Investors claim they were never informed that their funds were not being used for the development of real estate or real estate related investments, which was the supposed purpose of the NRIA Fund.
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