SEC CHARGES HEAD OF FIRST CAPITAL REAL ESTATE TRUST INC. WITH FRAUD
The Securities and Exchange Commission (SEC) on Friday, 13th December, 2019 charged the CEO and owner of a small nontraded real estate investment trust, First Capital Real Estate Trust Inc. (First Capital REIT), with fraud. Allegedly he lied about owning a dozen hotels and adding them to the REIT to close a deal.
The Allegations of REIT Fraud
The SEC alleged the CEO, Mr. Singal, received consideration valued at over $15 million USD for the hotels. “Singal’s sham contribution diluted the value of First Capital REIT’s shares and resulted in First Capital REIT selling shares at inflated prices to unsuspecting investors.” “Singal and First Capital REIT then made material misrepresentations and omissions concerning the hotels in several commission filings,” according to the complaint.
In September, 2015, at the time of conducting the transaction, the REIT net assets were valued at $42 million in net assets. Mr. Singal also acts as the Chairman of the REIT’s board, alongside being the CEO and Owner of the Firm.
Mr. Singal, while acting as CEO and Chief Financial Officer of the BDC also allegedly misrepresented conflicts of interest and misappropriated $1.5 million loaned from the BDC, which was not fully disclosed in the complaint, to a company he secretly controlled, according to the SEC complaint. In all, the BDC lost $3 million.
Response to Allegations of REIT Fraud
Mr. Singal commented on the allegations that he was “disappointed” by the SEC’s allegations and that the company has provided numerous documents and evidence to the contrary.
He hopes to be fully absolved after the process, and also believes that the SEC has ignored plenty of evidence provided. “We will prevail in the legal process and are still working for an exit for our shareholders and believe we will deliver a profitable one soon,” he said.
Before the acquisition of First Capital REIT., which was formerly named United Realty Capital Trust Inc., in 2015 by Mr. Singal, the firm reportedly had payroll difficulties in 2016 and then reorganized a year later.
Mr. Singal asserted that though the company has had challenges related to its previous administration, all that had been settled.
Pennsylvania & New Jersey Stock Broker Misconduct Lawyers
If you or someone you know has been the victim of investment fraud or broker misconduct, please contact our securities attorneys immediately for a free consultation at 215 462 3330 or by using our online contact form.
