Two Criminal Offering Fraud Actions

Offering frauds have become a staple of SEC enforcement at least since Madoff was uncovered and jailed years ago. Now it may also become a key area of interest for criminal prosecutors. Recently, a lawyer and a CEO were ensnarled in criminal charges tied to offering frauds involving real estate. U.S. v. Rosenfeld, No. 21-cr-236 (E.D.N.Y. Guilty plea May 20, 2021); U.S. v. Malley, No. 1:21-cr-00215 (S.D.N.Y. Guilty plea May 20, 2021).

Defendant Shimon Rosenfeld is an attorney licensed to practice in New York. The charges against him alleged that he defrauded investors out of at least $6 million. Over a four-year period, beginning in 2014, attorney Rosenfeld solicited investors to purchase real estate. Potential investors were told that their money would be used to buy parcels of real estate. The properties would then be “flipped” or sold. The profits would be split. In fact, Mr. Rosenfeld misappropriated the investor funds. Mr. Rosenfeld pleaded guilty to defrauding the investors. The date for sentencing has not been set.

Defendant Eric Malley is the founder and former CEO of real estate private equity investment firm MG Capital Management L.P. He pleaded guilty to securities fraud.

During the time Mr. Malley operated MG Capital, founded in 2013. He also he formed two real estate investment funds, one in 2014 and the other three years later. Potential investors were told that by investing in the funds they would have the opportunity to own interests in luxury properties in Manhattan. The properties supposedly were leased by various corporations, including well know technology firms, and debt free.

The claims were false. The properties were mortgaged and there were fewer held by the funds than claimed. Nevertheless, about 335 investors put in about $58 million. In fact, the funds had losses and Defendant took large sums for himself.

Mr. Malley pleaded guilty to one count of securities fraud. He is scheduled to be sentenced on September 16, 2021.