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The New Jersey Bureau of Securities Acts against Secaucus-based Investment Advisor National Realty Investment Advisors LLC
On June 21, 2022, the New Jersey Bureau of Securities issued a Summary Cease and Desist Order to Secaucus-based National Realty Investment Advisors LLC (NRIA). The Order was based on the Bureau’s investigation into allegedly fraudulent sales of at least $630 million in securities to investors.
The fraudulent activity took place from 2018 to 2022.
The fraudulent sales involved membership units in a real estate investment fund known as the NRIA Fund. They made sales to at least 1,800 investors across the country. 380 investors lived in New Jersey.
Also named in the Bureau’s order are: NRIA Partners Portfolio Fund I, LLC (“the NRIA Fund”), NRIA Capital Partners, Inc., and NRIA Structured Credit Strategies, LLC. The company’s principals named in the order include:
- Thomas Nicholas Salzano, of Secaucus, who was a senior independent executive advisor and portfolio manager of the NRIA Fund;
- Ray Grabato, of Hoboken, president of the NRIA Fund and 80 percent owner of NRIA;
- D. Coley O’Brien, of Southampton, NY, co-CIO of the NRIA Fund and 100 percent owner of NRIA Capital Partners; and
- Arthur Scutaro, of Bloomfield, executive vice-president of project management and advisor to the NRIA Fund.
The Bureau alleges NRIA and its principals sold the NRIA Fund as a billion-dollar-plus real estate development enterprise. NRIA was to focus on the “ground-up” development of townhomes, condominium complexes and other luxury properties.
Furthermore, NRIA claimed the fund involved the opportunistic purchase of land or property at below-market value prices. The land would then be developed for sale at a large profit.
The company used a nationwide advertising campaign to lure investors. This included radio spots and high-profile messaging on billboards at the entrances to the Lincoln and Holland Tunnels.
The billboard messaging guaranteed returns of 12 percent on the investments, with the added possibility of obtaining returns as high as 21 percent.
The Bureau’s investigation further revealed that NRIA and its principals engaged in a classic “Ponzi“ scheme. In fact, the principals used investors’ own money (rather than actual cash flow) to fund annual distributions. They also used straw purchasers to create nonexistent sales of certain residential units.
Lastly, they inflated the company’s finances by improperly recognizing certain revenues in violation of Generally Accepted Accounting Principles.
Not only did NRIA principals enrich themselves, but they also used investors’ funds to enrich family members.
For instance, they paid a salary to Salzano’s wife for a no-show job. The principals also hired family-owned or controlled companies, including a construction firm where Salzano’s son was the Chief Financial Officer.
As another example, they used companies owned by Grabato’s relatives to create imposter entities and websites.
NRIA also invested up to a quarter of all investor funds in commercial mortgage-backed securities, the bulk of which were below investment grade (otherwise known as junk bonds). They did this to generate additional returns they had promised to investors but could not generate through the NRIA Fund’s real estate projects.
Moreover, NRIA also leveraged the junk bonds through repurchase agreements with financial institutions. This use of repurchase transactions to create leverage significantly increased the risk of the junk commercial mortgage-backed securities portfolio to the NRIA Fund investors. Notwithstanding this increased risk of loss, this risk was never told to investors.
New Jersey Securities Fraud AttorneysIf you are a victim of NRIA and its principals, or any other type of securities fraud, call the New Jersey securities fraud attorneys at Lubiner, Schmidt & Palumbo, LLC in their Cranford office at 908-709-0500 or contact them here.
