New Jersey Real Estate Operator Pleads Guilty to Fraud
A New Jersey man has pleaded guilty to a securities fraud scheme that netted $50 million from more than 200 investors.
This week, in Newark federal court, David Connolly admitted he defrauded victims by misusing their cash and misrepresenting the performance of their investments. All this resulted in a $9 million loss. He also pleaded guilty to money laundering, says an FBI press release.
To bilk his clients, Connolly “made various types of materially false and misleading statements and omissions.” He told his prospects their cash would be used to buy a property that would yield rents; this rental cash would be disbursed to the investors monthly. Additionally, Connolly also promised he’d place the investment cash into escrow until the real estate transaction it was funding closed. Every property, financially speaking, would be separate from every other property.
As it turned out, Connolly lied about the equity amount each of his victims had in the properties. He also lied about the state of the properties. Even when the properties were losing money, he told his clients they were doing well, says the FBI. Connolly often took cash earmarked for specific property purchases and spent it on his own real estate deals. He also spent the money to pay prior investors and on himself. The clients who’d invested the money didn’t know how Connolly was disposing of it.
Connolly’s fraudulent operation crashed in the summer of 2009, when he began defaulting on the mortgage payments for the properties he’d bought. As part of his plea, Connolly agreed to forfeit $9.92 million. He still faces up to 30 years in prison and more than $5 million in fines. He faces sentencing on June 4, 2013.
Financial professionals can push clients to invest in risky ventures that will lose them money. Sometimes they make transactions without the client’s knowledge. In some cases, with the help of a securities fraud lawyer, victims can recover some or all of their losses. If you believe that you’ve been exploited in a securities fraud scam, call Sokolove Law today.