The Securities and Exchange Commission has filed an emergency action charging Robert C. Morgan, a New York residential and commercial real estate developer, and two of his entities, Morgan Mezzanine Fund Manager LLC and Morgan Acquisitions LLC, with fraud for siphoning and misusing investor funds. The SEC is seeking an asset freeze and other emergency relief.
The SEC’s complaint alleges Morgan financed his development projects in different ways, including through sales of securities directly to more than 200 retail investors, many of whom invested through their retirement accounts.
Morgan allegedly represented to investors that their money would be used to improve multifamily properties, and based on these representations, raised more than $80 million.
Instead, the SEC claims that Morgan and his entities diverted investor funds to facilitate Ponzi scheme-like payments to earlier investors, and also improperly used more than $11 million in investor funds to repay an inflated, fraudulently-obtained loan for an unrelated apartment complex.
“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, which we allege involves the improper use of more than $25 million dollars in investor funds,” said Daniel Michael, chief of the SEC’s division of enforcement’s complex financial instruments unit.
The SEC’s complaint was filed in federal district court in Buffalo, New York and charges Morgan and his two entities with violating the antifraud provisions of the federal securities laws.
The SEC is requesting an order freezing Morgan’s assets and appointing a temporary receiver over the relevant funds. The complaint further seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and a permanent receiver over the entities.