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Real Estate Investment Scam Discovered: SEC Charges NJ Man

Real Estate Investment Scam Discovered:  SEC Charges NJ Man
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An alleged Real Estate Investment scam was discovered by the SEC and have since charged David Connolly of Watchung, New Jersey.  The SEC alleges that Mr. Connolly operated a phony scheme that duped clients into more than $2 million of real estate investment shares.  Mr. Connolly operated Connolly Properties Inc. which was suppose to supply real estate investors monthly dividends from cash-flow profits from shares purchased.  The profits were would come from rental income from apartment buildings as well as property appreciation growth profit.

Connolly Properties did initially hold real estate investments in both Pennsylvania and New Jersey.  However, after quickly figuring out that these real estate investment properties would not produce the promised dividends to investors he chose to make Ponzi-like payments to his early investors by using money from his new investors.  During that time the SEC alleges Mr. Connolly took at least $2 million in his investor funds and used them for his own personal use.

What probably caught the SEC’s eye and really brought the heat on Mr. Connolly was the fact that the security offerings in the real estate investment vehicles were never registered with the Securities and Exchange Commission.  Registering these real estate investments is required by federal law.

Connolly Properties originally began offering real estate investment in 1996, having raised over $50 million in 200 plus investors.  The SEC claims that Mr. Connolly told investors that all of their investments would be used only for properties related to the real estate investment vehicle chosen by the investor.  However, it became a mess when the funds were also mixed with other funds from various other investments including payments to made out to himself.  To continue the scheme real estate refinancing was utilized to boost the cash flow.

Mr. Connolly has been indicated on one count of securities fraud among several other criminal charges.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

2 Responses to “Real Estate Investment Scam Discovered: SEC Charges NJ Man”

  1. xavier wu says:

    The SEC has failed to do its job numerous years!!

    iTs about time they “discoveredd” the PONZI scheme! !

  2. jonathan p. says:

    IF Mr. Connolly was ripping his clients since 1996.. it makes me wonder how he got away for all these yearss!! another example on how the SEC has failed!

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