Feb. 28 (Bloomberg) -- California businessman Walter Ng, his business partner and his son were sued today by the U.S. Securities and Exchange Commission over a multimillion-dollar fraud on investors in their real estate funds.
Ng and his partner raised more than $85 million from investors, many residing in San Francisco, from 2007 to 2009 for a real estate fund that they said was strong, safe and successful, the SEC said in a complaint filed today in federal court in San Francisco. Most of the money was used to pay off investors in an earlier real estate fund having cash flow problems. Both funds went into bankruptcy, leaving investors unlikely to recover their money, according to the complaint.
Ng lured investors to Mortgage Fund ’08 LLC and managed an earlier fund called R.E. Loans LLC, which made high-interest loans to developers who repaid the money when traditional lenders refinanced their projects, according to the complaint.
At its peak, R.E. Loans had more than $700 million in outstanding commercial real estate loans and thousands of investors, the SEC said. By 2007 borrower payments slowed and Ng and others decided to start the new fund, which they said would invest in commerical real estate loans secured by deeds of trust. Ng and his partners raised tens of millions of dollars in California, Oregon and Washington, according to the complaint.
The SEC seeks disgorgement of investor money and unspecified civil fines. Ng, of Lafayette, California, filed for bankruptcy protection in 2011, listing assets and debt of as much as $1 billion each, according to filings in U.S. Bankruptcy Court in Oakland, California.
Ed Swanson, an attorney for Ng, had no immediate comment on the lawsuit.
The case is Securities and Exchange Commission v. Ng, 13-895, U.S. District Court, Northern District of California (San Francisco).
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