ILOILO City – Four individuals including the son of an Iloilo town mayor were charged by the US Securities and Exchange Commission (SEC) for running an alleged Ponzi-like scheme that raised approximately $600 million from about 2,000 investors.
In its website, the US SEC on Oct. 14 announced charges against New Jersey-based National Realty Investment Advisors LLC (NRIA) and four of its former executives namely Rey E. Grabato II of Hoboken, New Jersey; Daniel Coley O’Brien of Southampton, New York; Thomas Nicholas Salzano of Secaucus, New Jersey; and Arthur S. Scutaro of Bloomfield, New Jersey.
Grabato is the son of Mina, Iloilo’s Mayor Lydia Grabato.
His family in Iloilo will reportedly issue a statement about this matter on Tuesday.
According to the US SEC, beginning in 2018 NRIA and its executives raised funds by promising investors their money would be used to buy and develop real estate properties, which would generate profits through a fund that NRIA set up to invest in the projects.
The four accused allegedly solicited investors in a nationwide campaign promising returns of up to 20 percent.
In reality, alleged the US SEC, investor money was used to pay distributions to other investors, to fund an executive’s family’s personal and luxury purchases, and to pay reputation management firms to thwart investors’ due diligence of the executives.
It further alleged that NRIA manipulated the real estate fund’s financial statements and the financial information in marketing material distributed to investors, intentionally disguising the misuse of investor funds and creating the false appearance that NRIA and the fund were generating more revenue than they actually were and that operations were successful.
However, NRIA had little to no revenue, and it and the fund filed for Chapter 11 bankruptcy protection on June 7, 2022, according to the US SEC.
The SEC’s complaint, filed in federal court for the District of New Jersey, charges NRIA and the four former executives with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Meanwhile, in a separate news release, the United States Attorney’s Office District of New Jersey filed separate charges against Salzano and Grabato, specifically an 18-count indictment, unsealed Oct. 12, 2022 for alleged conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, wire fraud, and conspiracy to defraud the United States.
Salzano is also charged with two counts of aggravated identity theft, two counts of tax evasion, and five counts of subscribing to false tax returns.
Salzano was arrested Oct. 12, 2022, while Grabato remains at large.
Also on Oct. 13, Scuttaro, pleaded guilty before US District Judge Evelyn Padin in Newark federal court to an information charging him with one count of conspiracy to commit securities fraud in the same scheme. His sentencing is scheduled for Feb. 23, 2023.
“As charged in the indictment, these defendants schemed to create a high-pressure, fraudulent marketing campaign to hoodwink investors into believing that their bogus real estate venture generated substantial profits,” US Attorney Philip R. Sellinger said.
“In reality, their criminal tactics were straight out of the Ponzi scheme playbook so that they could cheat their investors and line their own pockets. Our message from today’s charges is that we remain deeply committed to rooting out all types of financial fraud schemes. These schemes undermine our markets and erode the public’s trust in investing. Together with our enforcement partners, we will continue to prioritize investigating and prosecuting financial crime in all of its forms.”/PN (With reports from https://www.justice.gov/usao-nj/pr and https://www.sec.gov/litigation)
