Robert C. Morgan, Morgan Mezzanine Fund, & Morgan Acquisitions LLC Used Notes Funds in a Ponzi Scheme-like Manner, Engaged in Securities Fraud: SEC Complaint

Robert C. Morgan, Morgan Mezzanine Fund Manager LLC, & Morgan Acquisitions LLC allegedly made false statements to investors in three Notes Funds they promoted and managed, according to the U.S. Securities and Exchange Commission (“SEC”). Morgan and his entities falsely assured investors that their investments would be used to make unsecured subordinated loans, or Portfolio Loans to affiliated Morgan-controlled entities, or Affiliate Borrowers, so that those entities could either acquire, manage, or operate existing multi-family properties, according to a SEC Complaint filed in the Western District of New York and under review by investor rights attorney Alan Rosca.

In reality, Morgan and the companies he controlled, named in the SEC complaint, misused investor money and diverted it to make distribution or withdrawal payments to existing investors, in Ponzi scheme fashion, the SEC alleged.

Investor rights attorney Alan Rosca, of the Goldman Scarlato & Penny PC law firm, is investigating activity related to Robert C. Morgan, Morgan Mezzanine Fund Manager LLC, & Morgan Acquisitions LLC’s alleged offering of a series of fraudulent private securities offerings in Ponzi-like fashion, and is looking to talk to investors. Investors who believe they may have lost money in activity related to Robert C. Morgan, Morgan Mezzanine Fund Manager LLC, & Morgan Acquisitions LLC’s  alleged offering of a series of fraudulent private securities offerings in Ponzi-like fashion are encouraged to contact attorney Alan Rosca or his colleagues, Paul Scarlato and Doug Bench, with any useful information or for a free, no obligation discussion about their options.

Morgan allegedly told investors with money in the Notes Fund operated by Morgan Acquisitions that their investments would be used in a substantially similar manner, according to the aforementioned SEC Complaint.

Morgan also told investors that they would be paid a target return of 11%, and, for the Notes Funds managed by the Fund Manager, Morgan allegedly personally guaranteed the repayment of each Portfolio Loan by each Affiliate Borrower, which he charged interest at a rate sufficient to meet the Notes Funds’ target return to investors, the Complaint states.

Morgan allegedly personally guaranteed the investor notes issued by Morgan Acquisitions to the individual investors for the Notes Funds managed by Morgan Acquisitions, the Complaint states.

Eventually, over 200 individuals and entities located in at least 17 states allegedly made investments in the Notes Funds, many of whom are residents of the aforementioned Western District of New York District, the Complaint notes.

For example, approximately three dozen investors used their retirement accounts to invest directly in the Notes Funds, and a pension plan for an electrical workers union based in this District also invested in the Notes Funds, and many of the Affiliate Borrower properties in which the Notes Funds invested did not generate sufficient cash flow to either service or repay both their secured lenders and the Notes Funds, the Complaint reports.

Morgan allegedly managed the first three Notes Funds through the Fund Manager, while he operated the fourth Notes Fund through another entity, Morgan Acquisitions.

In reality, Morgan and the two companies he controlled were operating a fraudulent investment program, the SEC charged, and engaged in extensive securities fraud.  They diverted and misused millions of dollars of investor money, unbeknownst to investors, according to the SEC’s Complaint.

Robert C. Morgan, Morgan Mezzanine Fund, & Morgan Acquisitions LLC Allegedly Used the Notes Funds as a Single, Fraudulent Slush Fund

Robert C. Morgan, Morgan Mezzanine Fund Manager LLC, and Morgan Acquisitions LLC allegedly used the Notes Funds as a so-called single, fraudulent slush fund, repeatedly using the funds for purposes inconsistent with the representations and disclosures made to investors, according to the aforementioned Complaint.

Morgan, in order to conceal said fraudulent conduct, and to mislead their auditors, allegedly papered these transfers using sham loan documents designed to make the transfers appear legitimate, the Complaint reports.

Morgan also, the Complaint states, allegedly engaged in at least three types of fraudulent conduct with respect to the Notes Funds:

  • •            Using later-formed Notes Funds to facilitate Ponzi scheme-like redemptions of earlier investors and to repay non-performing, maturing loans made by earlier-formed Notes Funds;
  • •            Lacking sufficient funds from the Affiliate Borrowers themselves, and instead of making good on Morgan’s personal guaranty, Defendants have used the Notes Funds, again in a Ponzi scheme-like manner, to make the 11% interest payments back to investors;
  • •            In connection with Morgan’s efforts to repay an inflated, fraudulently obtained loan concerning The Eden Square Apartments in Cranberry Township, Pennsylvania (Eden Square),1 and in order to conceal that fraud, Morgan allegedly improperly used more than $11 million in Notes Fund assets to help pay off the prior loan along with more than $2.6 million in prepayment penalties

The SEC’s case against Morgan is currently pending, and no judgment has been entered as to the charges mentioned in this article.

Securities Lawyers Investigating

The Goldman Scarlato & Penny PC law firm’s investor fraud lawyers, Alan Rosca and his colleagues, are currently investigating Robert C. Morgan, Morgan Mezzanine Fund Manager LLC, & Morgan Acquisitions LLC’s alleged offering of a series of fraudulent private securities offerings in Ponzi-like fashion, and are looking to talk to investors.

The firm represents investors who lose money as a result of investment-related fraud or misconduct and takes most cases of this type on a contingency fee basis and advance the case costs, and only gets paid for their fees and costs out of money recovered for clients. Attorney Alan Rosca, a securities lawyer and adjunct professor of securities regulation, and has represented thousands of victimized investors across the country and around the world in cases ranging from arbitrations to class actions.

Investors who believe they lost money as a result of Robert C. Morgan, Morgan Mezzanine Fund Manager LLC, & Morgan Acquisitions LLC’s  alleged offering of a series of fraudulent private securities offerings in Ponzi-like fashion, and is looking to talk to investors may contact attorney Alan Rosca or his colleagues, Paul Scarlato or Doug Bench, for a free no-obligation evaluation of their recovery options, at 888-998-0530, via email at rosca@lawgsp.com, or through the contact form on this webpage.