National Realty Investment Advisors, a New Jersey-based developer that revealed last year that it was under investigation by federal prosecutors, the Securities and Exchange Commission and state financial regulators, has filed for bankruptcy, court records show.
Secaucus-based NRIA said in its filing Tuesday with the US Bankruptcy Court in New Jersey that it was seeking Chapter 11 in light of the company’s financial condition.
The firm has been under the leadership of an independent manager since late April following the resignation of its longtime president and CEO, Rey Grabato, according to the document.
An NRIA attorney did not respond to a request for Barron’s looking for comments on the petition.
NRIA’s main offering is a real estate portfolio known as the Partners Portfolio Fund, which is covered by the bankruptcy petition.
The firm has sought investors for the fund through frequent announcements on national broadcast outlets such as Fox News and Bloomberg Radio that promised above-market returns.
The portfolio comprises dozens of condominium, townhome and apartment projects focused on Philadelphia, Northern New Jersey, Brooklyn and Palm Beach County, Florida. Three are nearing completion and 16 are unbuilt, according to a filing Wednesday with bankruptcy court.
Some 2,000 investors collectively own about $540 million in company stock, according to the filing.
In a July 2021 offering memorandum seeking additional investment, NRIA revealed that it may use cash from new investors to pay existing ones. That could be a risky way to operate a mutual fund, as it may require more and more participants to contribute to the fund, instead of making money from your business.
NRIA also disclosed in the memo that it was being investigated by law enforcement officials and financial regulators “in connection with the management and operation of the company and its compliance with various laws, rules and regulations.”
The SEC, the New Jersey Bureau of Securities, the Illinois Department of Securities, and the Alabama Securities Commission had subpoenaed the NRIA for documents, and the US Attorney’s office in New Jersey had subpoenaed it to testify and present documents before a grand jury. it said in the note. NRIA previously told the Philadelphia Inquirer that it is cooperating with the agencies.
Separately, a former company leader named Thomas N. Salzano was arrested by the Federal Bureau of Investigation in February 2021 for allegedly using false loan documents to try to extract more money from an existing NRIA investor.
Salzano’s initial court date on the criminal charges has been repeatedly delayed and currently continues until at least July 29. The SEC has also filed a civil lawsuit against Salzano. An attorney for Salzano did not respond to a request for comment.
No charges were filed against the NRIA itself in the case.
Prior to the disclosure of the federal and state investigations into the NRIA, the company had been the subject of an August 2020 report to the SEC by a convicted fraudster-turned-whistleblower named Barry Minkow, who said he gathered NRIA material. for the complaint by posing as a potential investor in the company.
He alleged in his report that the NRIA was promising returns to investors that it had little hope of delivering.
In a television ad last year, the company said it was offering “expected returns of 21%,” according to the Inquirer.
NRIA strongly denied Minkow’s claims to the Inquirer, calling him uninformed and financially motivated. Under SEC rules, some “whistleblowers” get up to 30% of the cash recovered through agency investigations for themselves.
Among NRIA’s biggest creditors are Cipolla & Co., a Franklin Lakes, NJ accounting firm, which claims it is owed $1.3 million, and the director of New York public relations firm Repute PR, which has a $450,000 claim, according to the petition. .
Neither responded to requests for comment.
NRIA’s 30 largest investors had placed sums with the firm ranging from $952,580 to $5.5 million, according to the petition.
NRIA founder Grabato stepped down as CEO and chairman of the firm and named Brian Casey as independent manager on April 29, according to the bankruptcy filing.
Casey was a fund manager and co-manager of the Partners Portfolio Fund, according to a previous NRIA announcement. Casey did not respond to a request for comment.
Email Jacob Adelman at [email protected]