Former CEO Of Real Estate Private Equity Investment Firm Sentenced To 5 Years In Prison For $58 Million Securities Fraud | USAO-SDNY
Damian Williams, the U.S. Attorney for New York’s Southern District, announced that ERIC MALLEY, the founder and former chief executive officer of real estate private equity investment firm MG Capital Management LP, was turned 60 today by U.S. District Judge Edgardo Ramos Months imprisonment in connection with a securities fraud program in which he fraudulently tricked hundreds of people into investing a total of approximately $ 58 million in two real estate funds. MALLEY pleaded guilty to Judge Ramos on May 20, 2021.
US Attorney Damian Williams said, “For years, Eric Malley has betrayed investors by making false promises about himself, his credentials, his track record and the health of his real estate funds. Today’s judgment sends an important message that such a deception will have grave consequences. “
According to the allegations contained in the complaint, information Malley pleaded guilty of, other court documents, and statements made in public trials:
MALLEY founded MG Capital Management LP (“MG Capital”) in around January 2013 and served as Chief Executive Officer and Chief Investment Officer from that point through approximately December 2019. During this time, MALLEY established two real estate funds (collectively, “the Funds”) – MG Capital Management Residential Fund III (“Fund III”), around February 2014, and MG Capital Management Residential Fund IV (“Fund IV”), around September 2017.
MALLEY, in attracting investors and throughout the life of the funds, pledged that the funds will present an opportunity to own an interest in hundreds of luxury homes across Manhattan that follow a debt-free investment strategy that is allegedly backed by sophisticated proprietary research carried out by the MALLEY had developed into real estate over the course of his career. MALLEY announced two allegedly hugely successful previous funds he had established, Fund I and Fund II; assured investors that the funds would and were debt free; and advocated that the properties held by the Funds would and would be rented primarily to corporate tenants, including, but not limited to, well-known technology companies and a well-known New York City university with which Malley had pre-existing agreements. But MALLEY’s accounts were wrong. Funds I and II did not exist. The funds were not free of debt but held mortgage property. The properties that made up the funds were rented almost exclusively to private individuals and not to companies. Malley did not have the corporate relationships or pre-existing arrangements he advertised. The funds held far less real estate than MALLEY had represented. And although Malley promised the investments were fully protected from loss, they weren’t.
Through these and other fraudulent misrepresentations, MALLEY prompted approximately 335 investors to invest a total of approximately $ 58 million in the funds. The funds have together suffered millions in losses and are currently being liquidated.
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In addition to serving the sentence, MALLEY, 51, of New Canaan, Connecticut, was sentenced to three years supervised release and sentenced to redress of $ 33,249,822.12 and confiscation of $ 5,625,747.45 .
This case is being handled by the Office’s Securities and Commodities Task Force. Deputy Attorney General Elizabeth A. Hanft leads the indictment.