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Timothy Barton, et al.

SEC Charges Fraud in Real Estate Investment Offering

Litigation Release No. 25523 / September 26, 2022

Securities and Exchange Commission v. Timothy Barton, et al., No. 3:22-cv-2118 (N.D. Tex. filed September 23, 2022)

The Securities and Exchange Commission today announced charges against a Texas real estate developer and two other people for operating a fraudulent real estate investment offering that raised over $26 million from more than 100 investors.

The SEC alleges that developer Timothy Barton partnered with home builder Stephen T. Wall and Haoqiang Fu a/k/a Michael Fu to entice investors - mostly Chinese nationals - into purchasing securities issued by limited liability companies the defendants controlled. Barton and Fu gave investors offering documents representing that their investments would only be used to purchase specific real estate parcels for residential development and would be fully repaid, with interest, in two years. But according to the complaint, none of this was true. Instead, the SEC alleges that the defendants misrepresented to investors that they were purchasing real estate at particular prices that were in fact as much as three times higher than what the defendants had already contracted to pay for the properties. The defendants also allegedly misappropriated nearly all investor funds for such undisclosed purposes as making Ponzi payments to other investors, purchasing real estate in the names of other Barton companies, paying sales commissions to Fu, and funding Barton's personal lifestyle, including a private aircraft purchase. According to the SEC, the properties were never developed and investors have not been repaid.

The SEC's complaint, filed in U.S. District Court for the Northern District of Texas, charges Barton and several companies he controls with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder. Wall and Fu are charged with fraud under Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act of 1934 and Rules 10b-5(a) and (c). Fu is also charged with violating the broker registration provision of Section 15(a) of the Exchange Act. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against all defendants, as well as bars against Barton, Wall, and Fu from serving as officers or directors of any public company. The complaint also names two other Barton-controlled companies as relief defendants for purposes of disgorging ill-gotten gains, with prejudgment interest.

In a parallel action, the U.S. Attorney's Office for the Northern District of Texas separately announced criminal charges against Barton.

The SEC's investigation was conducted by Jason A. Braun and Carol Hahn of the SEC's Fort Worth Regional Office, under the supervision of Jim Etri and Eric R. Werner. The litigation will be led by Keefe Bernstein and supervised by B. David Fraser. The SEC acknowledges the assistance of the U.S. Attorney's Office for the Northern District of Texas and the Federal Bureau of Investigation.

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