SEC Files Suit Against Eric Malley and MG Capital Management

From the Desk of Jim Eccleston at Eccleston Law LLC:

The U.S. Securities and Exchange Commission (“SEC”) has filed a lawsuit against Eric C. Malley, and his company MG Capital Management L.P. In the lawsuit, the SEC alleges that Malley and MG Capital defrauded investors via two real estate funds that were managed by MG Capital. The SEC is seeking injunctive relief, civil penalties, disgorgement and prejudgment interest.

According to the SEC, Malley and MG Capital raised $58 million in investments in two real estate funds known as MG Capital Management Residential Funds III and IV, beginning in 2014. In the solicitation of these investments, investors were told that Malley and MG Capital had previously managed two successful real estate funds that had a total value of $1.18 billion, when in fact those real estate funds did not exist, the SEC alleged.

According to the SEC, Malley and MG Capital made additional misrepresentations and provided fabricated documents to potential investors.  The misrepresentations to investors included a promise that the investment was “100 percent protected from loss.”  According to the SEC, the two real estate funds, MG Capital Management Residential Funds III and IV, suffered huge losses.  The SEC also alleged that Malley and MG Capital misappropriated $7 million in investor funds.

The SEC complaint charged Malley and MG Capital with violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. Additionally, the SEC charged Malley with aiding and abetting MG Capital’s violations and violating the control person provision of Section 20(a) of the Exchange Act.

Tags: eccleston, sec, eric malley, mg capital management, lawsuit