• July 8, 2022
• National Realty Investment Advisors

A cease and desist order was issued by the New Jersey Bureau of Securities against National Realty Investment Advisors, LLC (NRIA) and its owners, as the company headquarters are in New Jersey. The real estate development company is accused of fraud, unsuitability, and investment loss.

The Allegations

NRIA is accused of securities fraud that targeted investors across the U.S. For a period of four years, from 2018 until 2022, NRIA sold membership units in an NRIA Fund to nearly 2,000 investors for a total of $630M, and at least 380 of these investors were New Jersey residents. The company carried out this fraud by drawing investors with ad campaigns that promoted guaranteed returns of 12% with the potential to earn a return of up to 21% on luxury real estate development projects.

Investors believed they were getting into a big property development opportunity with a company that had a portfolio of luxury townhouses, condos, and mixed-use developments ready to flip. The classic buy low, sell high approach was utilized by NRIA in its marketing and sales materials, allowing investors to believe that below-market-price properties were being snapped up by NRIA and upgraded with new developments before being sold for high profits.

In reality, the money that investors got back for the first three years, instead of being an annual distribution, was actually the investors’ own funds, so the company could make it look like there was a significant ROI. Cycling a portion of investors’ money back to them kept investors from asking questions and also drove investments higher. In addition, the offer and selling documents for the investments included material misstatements and omissions so investors couldn’t really make an informed decision about what they were buying and the potential risks and rewards.

NRIA took investor funds and used them to create shell companies intended to preserve the company’s reputation, funding expensive lifestyles and no-show jobs for family members of corporate leaders, while not disclosing to investors that this is how their money would be used. Investors believed that the company was buying properties, developing or redeveloping them, and selling them for profit. Investors were also being billed for development fees by NRIA Fund, and the company used fake buyers to drive up interest, investments, and prices.

NRIA began reinvesting investors’ money in commercial mortgage-backed securities or what’s more commonly known as junk bonds, hoping to get an influx of cash that would deliver on the 12% minimum return promised to investors. It also used these junk bond investments as part of repurchase agreements with financial institutions as a way to appear to have better leverage for more favorable terms.

Company leaders allegedly participated in or knew about and failed to stop the forgery and theft. They also failed to cooperate with an investigation into allegations of investment loss and failed to be up-front with investors about the same. In June 2022, amid ongoing investigations, NRIA filed for bankruptcy. Meanwhile, the New Jersey regulatory authorities filed a cease and desist action against the company, reserving the right to issue a financial penalty at a future time. Other state regulatory agencies may also open investigations into NRIA.

What This Cease-and-Desist Order Means for Investors

In the meantime, alternative investments are not regulated by the U.S. Securities and Exchange Commission (SEC), and are often subject to fraud and other schemes. Examples include commodities, hedge funds, real estate, derivatives contracts, private equity, managed futures, and venture capital. They are not typically regulated by the SEC, nor are they usually liquid or easy to value, which makes them risky investments. In addition, alternative investments are often open only to accredited investors with an income of $200,000 or more or a net worth in excess of $1M; they also require high up-front minimums. When these opportunities are opened to non-accredited investors, it may be because of unsuitability, fraud, selling away or misrepresentation, and the investor may incur losses.

The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, P.A., is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.