DOJ secures guilty plea in MG Capital Management Fraud

By May 24, 2021 Fraud

On May 20, 2021, Eric Malley, the founder and former CEO of MG Capital Management, L.P., a real estate private equity investment firm, pled guilty to fraudulently soliciting $58 million in two real estate investment funds—MG Capital Management Residential Fund III (“Fund III”) and MG Capital Management Residential Fund IV (“Fund IV”).

Malley formed Fund III in February 2014 and Fund IV in September 2017, each of which appears to have been in operation until 2019. In soliciting investments in the Funds, Malley promised that investors would receive equity interests in luxury real estate properties across Manhattan, which he falsely claimed were leased primarily to corporate tenants including New York-based universities and well-known technology companies. Malley further falsely claimed that these investments were debt-free, thanks to purportedly proprietary analytics Malley had developed over the course of his career. These representations were false. The Funds held far fewer properties than Malley represented and those properties were not, in fact, debt-free. They were mortgaged properties leased to individuals, not to sophisticated and established corporate tenants.

On the basis of these misrepresentations, Malley persuaded approximately 335 investors to invest approximately $58 million in the Funds. The Funds went on to incur millions in losses. Malley hid those losses from investors for years, all the while enriching himself with hundreds of thousands of dollars in fees. Malley’s plea agreement is available here.

If you or someone you know invested with Malley or in either of the Funds, one of our attorneys at Fishman Haygood may be able to help recover your losses. Contact us today.