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Ponzi Playground: Northern Californians Robbed of Millions
September 15, 2021

Ponzi Playground: Northern Californians Robbed of Millions

by The CE Shop Team

Allegedly Defrauded Real Estate Investors Are Seeking Justice

We often write about how real estate professionals are the heroes of their neighborhood — but what happens when those heroes go rogue? Such is the case with Sanjeev Acharya, founder of Silicon Sage Builders. 

Acharya’s Scheme Was Short-Lived

Acharya and his company sold investors on a plan to build a mega-village in the San Jose area. Specifically preying on Indian Americans in his community, Acharya allegedly defrauded nearly 250 investors out of $119 million. 

"Wrongdoers sometimes prey on the trust of members of their communities to raise funds for their fraudulent schemes. Affinity frauds are particularly harmful to retail investors, and this case demonstrates the SEC's commitment to pursuing such schemes and protecting retail investors," said Alka Patel, Associate Regional Director of the SEC's Los Angeles regional office, in a press statement regarding their investigation into Silicon Sage Builders.

From 2016 - 2019, Acharya promised investors life-changing returns of 18%-23% per year on funds invested for projects and 15% return per year for funds invested in his Bridge Fund. 

In reality, he was allegedly using funds from new investors to pay previous investors, all while digging his own grave. He promised to pay investors monthly dividend interest and presented a positive picture of the company’s overall financial health. But in 2020, the truth began to come to light.

After receiving complaints from defrauded investors, the Securities and Exchange Commission (SEC) announced on 12/21/2020 that it filed an emergency action against Acharya and Silicon Sage Builders.  SEC court documents filed in the U.S. District Court for the Northern District of California pointed to one particularly egregious juncture in 2020. Acharya’s Bridge Fund owed $40 million to investors but had just $19.58 in its bank account.

Not surprisingly, only one of Acharya’s projects actually generated profit, but it was nowhere close to being able to pay off what investors were owed. 

In January of 2021, Acharya filed a Chapter 11 bankruptcy case to reorganize his finances. Shortly thereafter, a federal court authorized the seizure of Acharya’s properties and business operations with the hope of selling some or all of the assets to help pay back investors and creditors. Despite reaching a partial settlement with the SEC in March of 2021 and deciding to pursue Chapter 7 status instead, thereby liquidating his and his company’s assets, investors still don’t know if they’ll receive their money back — and Acharya isn’t taking the blame.

“This is a settlement agreement in which Mr. Acharya does not admit or deny the SEC’s allegations,” according to a statement released by his attorney, John Hemann of Cooley LLP, a Palo Alto-based international law firm.

Multiple misled investors testified that they had used their or their wives’ retirement savings, anxious to reap the rewards of their risk with promises of 20% or higher return rates. Only time will tell if they can recoup any of their losses. To better protect your clients and spot the red flags of potential real estate scams, it’s important to familiarize yourself with the most common real estate scams. 

Acharya and SEC reach settlement deal

Most Common Real Estate Scams

As an agent, you’re responsible for protecting your clients’ interests and should be aware of common real estate scams and schemes. Here are the five most common real estate scams to keep an eye out for:

1. Escrow wire fraud: Scammers claiming to work with your client’s title or escrow company will reach out to them with instructions on where to wire their escrow funds. Fraudsters will go to great lengths to enact this ruse, even setting up fake websites that appear similar to the title or lending company your client is working with, making their request seem like the real deal.

2. Loan flipping: Loan flipping occurs when a predatory lender persuades a homeowner to refinance their mortgage repeatedly, often borrowing more money each time.

3. Foreclosure relief: Homeowners who fall on hard times and get behind on their mortgage payments can become desperate to save their homes. Scammers will swoop in with offers of foreclosure relief to capitalize on homeowners’ vulnerability. In reality, they’re just collecting a large upfront fee with no real intentions of helping the homeowner.

4. Rental scams: Scammers post fake property rental ads on Craigslist or social media using photos from other listings to lure in unsuspecting renters. Fraudsters, who have no connection to the property or its owner, will ask for an upfront payment to let your clients see the property (or hold the money as a “deposit”).

5. Moving scams: Your client has found a new place to call home, and now they have to find a way to move all of their belongings. They might fill out a form for a moving company estimate, outlining all their items, and receive an estimate for $4,000 to ship them from their current home to their new one. Once this is done, the “company” will raise the estimate and corner your client into paying more to give their belongings back.

If you see any sign of these common housing scams, report what you find to the Federal Trade Commission. For scams found online, file a report with the FBI Internet Crime Complaint Center.