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Date: 05-24-2021
Case Style:
Case Number: 1:21-cr-00215-ER
Judge: Edgardo Ramos
Court: United States District Court for the Southern District of New York (New York County)
Plaintiff's Attorney: United States District Attorney’s Office
Defendant's Attorney:
Description: New York, New York wire and security fraud charge criminal defense lawyer represented Defendant.
Eric Malley, the founder and former chief executive officer of real estate private equity investment firm MG Capital Management L.P., pled guilty today to a securities fraud scheme in which he fraudulently induced hundreds of individuals to invest a total of approximately $58 million in two real estate investment funds by, among other things, lying about his own prior experience and investment track record and about the nature and characteristics of those funds. MALLEY pled guilty before United States District Judge Edgardo Ramos.
U.S. Attorney Audrey Strauss said: “As Eric Malley has now admitted, he lied to his victims to induce them to invest approximately $58 million in his investment funds, promising victims they would reap the benefits of owning equity in Manhattan real estate and falsely touting his prior experience. Those lies continued for years, all while Malley enriched himself. As today’s plea demonstrates, our Office remains committed to protecting investors from investment professionals’ deceptive and fraudulent conduct.
According to the allegations contained in the Complaint and the Information and based on statements made in Manhattan federal court:
MALLEY founded MG Capital Management L.P. (“MG Capital”) in approximately January 2013, and served as its chief executive officer and chief investment officer from that time until approximately December 2019. During that time, MALLEY formed two real estate investment funds (collectively, “the Funds”) – MG Capital Management Residential Fund III (“Fund III”), in approximately February 2014, and MG Capital Management Residential Fund IV (“Fund IV”), in approximately September 2017.
MALLEY promised, when soliciting investors and throughout the life of the Funds, that the Funds would provide investors with the opportunity to own an equity interest in hundreds of luxury income-producing properties across Manhattan, following a debt-free investment strategy informed by sophisticated proprietary analytics that MALLEY had developed over the course of his career in real estate. MALLEY touted two purportedly extremely successful prior funds he had formed, Fund I and Fund II; assured investors that the Funds would be and were debt-free; and represented that the properties held by the Funds would be and were leased primarily to corporate tenants, including, among others, well known technology companies and a prominent university based in New York City. But MALLEY’s representations were false. His claims about the existence and performance of Funds I and II were largely fabricated; the Funds were not debt-free, but instead held mortgaged properties; the properties that made up the Funds were almost entirely leased to individual, not corporate, tenants; and the Funds held far fewer properties than MALLEY had represented.
Through these and other fraudulent misrepresentations and omissions throughout the life of the Funds, MALLEY induced approximately 335 investors to invest a total of approximately $58 million in the Funds. The Funds together incurred millions of dollars in losses, yet MALLEY distributed at least $278,000 to himself in his capacity as general partner in connection with Fund III, and did not disclose Fund IV’s losses until approximately two years into Fund IV’s operation.
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MALLEY, 50, of New Canaan, Connecticut, pled guilty to one count of securities fraud, which carries a maximum potential sentence of 20 years in prison. The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Sentencing has been scheduled for September 16, 2021, at 11:00 a.m.
Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and thanked the New York Regional Office of the U.S. Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Task Force. Assistant United States Attorney Elizabeth A. Hanft is in charge of the prosecution.
Outcome: Defendant pleaded guilty.
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Defendant's Experts:
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