In June, the state took action against National Realty Investment Advisors LLC (NRIA) after determining the company had fraudulently sold hundreds of millions of dollars worth of securities to investors over a four-year period. Now the federal government is billing the Secaucus-based company.
The Securities and Exchange Commission announced Oct. 13 that it had charged the NRIA and four of its former executives with running a Ponzi scheme that raised about $600 million from about 2,000 investors, from of 2018.
The SEC complaint alleges that the NRIA and its executives raised funds by promising investors that their contributions would be used to purchase and develop real estate properties, and that these would then generate profits through a fund the company has created to invest in the projects. Investors, many of whom were New Jersey residents, were tapped into a nationwide campaign that promised returns of up to 20%, according to the SEC.
The four executives identified and charged by the SEC as those seeking to participate are: Rey Grabato II of Hoboken; Daniel Coley O’Brien of Southampton, NY; Thomas Nicholas Salzano of Secaucus; and Bloomfield’s Arthur Scutaro.
According the complaintthe investors’ money was instead used to make distributions to other investors, to fund personal and luxury purchases for Salzano’s family “through his current and former spouses, the relief defendants” – who the SEC has identified as not working for the company in any capacity — and paying public relations to divert investors’ due diligence to company executives.
“In classic Ponzi fashion, these defendants allegedly told investors they would receive distributions of their fund’s profits when in reality the payments were being made from the investors’ own funds,” said Thomas Smith Jr. ., Associate Regional Application Manager. at the SEC’s New York regional office, which is overseeing the case. “What makes this behavior even more ruthless is that they allegedly took advantage of 382 retirees who had contributed over $94 million in savings.”
The New Jersey Securities Bureau issued a summary cease-and-desist order to the company in June, also naming the same four officers. Earlier that month, the company filed for Chapter 11 bankruptcy protection.
The SEC complaint also alleges that the NRIA manipulated the real estate fund’s financial statements in addition to representations in distributed marketing materials. According to the SEC, this was done to intentionally conceal the misuse of funds and give the false impression that the company and the fund were generating more revenue than it actually was.
According to the complaint, the NRIA claimed to have $1.25 billion under management as of 2021. During that time, the company had little to no revenue, the SEC said.
Filed in federal court for the District of New Jersey, the suit accuses the company and four executives of violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
He seeks injunctions against future violations of anti-fraud provisions, restitution of ill-gotten gains plus prejudgment interest, sanctions and officer and director bans against the four executives. The complaint names Olena Budinska and Jamie Samul (aka Jamie Samul Salzano) as relief defendants.
“The Justice Department’s actions detail abuses committed by former National Realty Investment Advisors executives,” a National Realty Investment Advisors spokesperson said. “The court-approved executives currently running the company are engaged in the process of restructuring and developing a long-term financial plan that will position us for sustained long-term success. The fundamentals of our business remain strong and we look forward to a bright future. »
The SEC said it has worked with the U.S. Attorney’s Office for the District of New Jersey, the FBI and the New Jersey Securities Office on the matter. The Commission’s investigation was led by Kerri Palen, Lisa Knoop, Doreen Rodriguez, Richard Hong, Therese Scheuer, Alan Maza and Alistaire Bambach; the dispute will be conducted by Hong.
Editor’s note: This story was updated at 8:32 p.m. ET on October 14, 2022, to include a statement from a spokesperson for National Realty Investment Advisors.