A lawsuit filed by the Securities and Exchange Commission (SEC) charges NRIA and four former executives with antifraud violations and seeks penalties, disgorgement of ill-gotten gains, and bars against the company’s officers and directors. The company has filed for bankruptcy protection and says it has no plans to appeal the order.
The NRIA fund advertised itself as a billion-dollar real estate development business that would buy properties for below market value and redevelop them for a big profit. Advertisements for the fund appeared on television and radio, and billboards were visible at the Lincoln Tunnel. The company’s website claimed the fund would guarantee 12% returns on each unit it purchased.
NRIA has been under fire for a number of years for deceiving investors. The firm allegedly sold a bogus real estate investment fund to 1,800 investors. According to the SEC, the investors were duped out of $630 million. The scam is not limited to New Jersey, and it affected investors all over the country.
New Jersey officials said that NRIA intentionally concealed its poor performance by using investors’ money to pay off other investors in a special buy-build-sell scheme. They said that the firm used straw purchasers to create fake sales. As a result, it violated generally accepted accounting principles.