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Eric Malley, age 50, of New Canaan, was arrested on Tuesday, Jan. 12, on charges of securities fraud and wire fraud for his role in a scheme to fraudulently induce hundreds of people to invest a total of more than $50 million in two real estate investment funds, said Audrey Strauss, acting US Attorney of the Southern District of New York.
As alleged in the complaint unsealed Tuesday in Manhattan federal court, Malley founded MG Capital Management in January 2013 and served as its chief executive officer until December 2019.
Malley described the company as an opportunity for investors to invest in luxury residential real estate properties through limited partnership and formed two real estate investment funds in February 2014 and September 2017.
In connection with marketing the funds to investors, Malley touted two purportedly extremely successful prior funds he had formed and assured investors that the funds would be and were debt-free and that the properties were leased primarily to corporate tenants.
An investigation found that the funds were not debt-free, but instead held mortgaged properties, and the properties that made up the funds were almost entirely leased to individuals, not corporate, tenants.
Investors in the funds, many of whom invested the entirety of their retirement savings, lost all or almost all of their investments, the complaint said.
One of the funds, referred to as Fund III, had about 60 investors who invested more than $23 million, while the company was operating at an $860,000 loss and the investors never received a return on their investments or a return of their money.
In Fund IV, about 275 investors invested $35 million in which the investors lost all of their money.
Malley was charged with one count of securities fraud, which carries a maximum potential sentence of 20 years in prison, and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison.
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