New Jersey Man Sentenced to Prison for Real Estate Ponzi Scam

A Somerset County, N.J., man faces 108 months in prison for his role in defrauding victims of an investment scheme by misusing their capital contributions and misrepresenting the performance of their real estate-related investments.

David Connolly, 51, of Watchung, N.J, previously pleaded guilty before U.S. District Judge William J. Martini to two counts of a superseding indictment charging him with securities fraud and money laundering, according to the Federal Bureau of Investigation.

In addition to the prison term, Judge Martini, who imposed the sentence earlier this week in Newark federal court, ordered Connolly to pay $18.7 million in restitution and forfeit $9.9 million.

According to documents filed in this case and statements made in court, from at least 2006 through October 2009, Connolly orchestrated a real estate investment fraud scheme in which he took in more than $50 million from more than 200 victims, causing losses of at least $18 million.

To induce victims to invest, Connolly made numerous materially false and misleading statements and omissions. He told victims their money would be used to purchase a specific property, and the property would generate rental income that would be used to pay investors monthly distributions. Connolly also told victims their money would be held in escrow until the closing of a purported real estate transaction and that each property would be financially independent from all the others. Connolly misrepresented the amount of equity victims had in the properties, the condition of the properties and the financial performance of the properties. Although the investment properties experienced significant negative cash flow, Connolly told investors they were performing well.

Connolly took significant portions of his victims money, which had been provided for specific real estate transactions, and used it for other purposes without victims knowledge. He funded unrelated real estate transactions in which he was engaged, paid prior victims and paid himself.

The scheme collapsed in the summer of 2009 after Connolly began defaulting on the mortgage payments for the investment properties.

In addition to the prison term, restitution, and forfeiture, Judge Martini sentenced Connolly to serve three years of supervised release, in the case, which was brought in coordination with President Obamas Financial Fraud Enforcement Task Force.

Article source: http://www.nationalmortgagenews.com/dailybriefing/New-Jersey-Man-Sentenced-Real-Estate-Ponzi-Scam-1036779-1.html

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