SEC Charges Individual with Defrauding Reit Investors and Business Development Company
Litigation Release No. 24691 / December 16, 2019
Securities and Exchange Commission v. Suneet Singal, First Capital Real Estate Investments LLC, First Capital Real Estate Advisors LP, and First Capital Real Estate Trust Inc., No. 19-cv-11452 (S.D.N.Y. filed December 13, 2019)
The Securities and Exchange Commission charged Suneet Singal and three entities with two separate frauds, one relating to First Capital Real Estate Trust Inc. (First Capital REIT), and the other relating to a business development company (BDC).
According to the SEC's complaint, Singal falsely claimed that he beneficially owned 12 hotels and purported to contribute them to First Capital REIT in order to acquire a $15.2 million interest in the REIT's operating partnership. Singal and First Capital REIT then made material misrepresentations and omissions concerning the hotels in several Commission filings. The complaint alleges that, as a result of Singal's conduct, First Capital REIT reported inflated net asset values and issued common shares to investors at inflated prices.
The SEC's complaint further alleges that, after acquiring an ownership interest in a BDC's external investment adviser, Singal directed the BDC to make two $1.5 million loans to an entity that he controlled, and then used nearly half of the loan proceeds for his own purposes. The BDC completely lost its $3 million investment.
The SEC's complaint charges Singal with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, Section 206 of the Advisers Act of 1940, Sections 36(a) and 57(a) of the Investment Company Act of 1940 and Rule 17d-1 thereunder, and for aiding and abetting violations of Section 206. First Capital REIT was charged with violating Section 17(a) of the Securities Act and Sections 10(b) and 15(d) of the Exchange Act and Rules 10b-5, 15d-1 and 15d-13 thereunder, and First Capital Real Estate Advisors, LP was charged with aiding and abetting First Capital REIT's violations. First Capital Real Estate Investments, LLC was charged with aiding and abetting Singal's violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. The complaint seeks injunctive relief against all defendants, disgorgement and prejudgment interest from Singal and First Capital Real Estate Investments, LLC, and civil money penalties against Signal, First Capital Real Estate Advisors, LP, and First Capital Real Estate Investments, LLC. The complaint further seeks an officer-and-director bar as to Singal.
The SEC's investigation was conducted by Complex Financial Instruments Unit staff Jennifer Brannan and Armita Cohen, with assistance from Joshua Braunstein, and was supervised by Jeffrey Weiss and Daniel Michael. The SEC's litigation is being led by Joshua Braunstein and Matthew Scarlato and supervised by Fred Block.