Eric Malley, a New Canaan resident and founder and former CEO of the New York City real estate private equity investment firm MG Capital Management LP, has been arrested and charged by federal authorities with securities fraud and wire fraud for his role in an investment scheme.
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![Eric Malley securities fraud](https://westfaironline.com/wp-content/uploads/2021/01/Malley.jpg)
Malley ran MG Capital Management from January 2013 through December 2019. The company formed the real estate investment funds MG Capital Management Residential Fund III in February 2014 and MG Capital Management Residential Fund IV in September 2017.
According to the charges brought against him, Malley made false assurances to investors that he previously ran two other real estate investment funds and that Fund II and Fund IV were debt-free. However, those funds held mortgaged properties that were almost entirely leased to individual tenants and not the corporate tenants that Malley stated.
Fund III attracted approximately $23 million from roughly 60 investors, but net operating losses of approximately $860,000; the investors never received distributions or a return of their investments, although Malley channeled at least approximately $278,000 to himself.
Fund IV attracted approximately $35 million from roughly 275 investors, but incurred millions of dollars in losses that Malley did not disclose until approximately two years into its operation.
The investors in both funds lost all or nearly all of their money, and many of these invested put the entirety of their retirement savings into these funds.
After stepping down as chief executive, Malley become aware of a U.S. Securities and Exchange Commission probe into his activities and deleted approximately 10,000 files from the company server, including broker information and closing documents.
Malley is charged with one count of securities fraud and one count of wire fraud, with both crimes each carrying a maximum potential sentence of 20 years in prison.