National Realty Investment Advisors files for bankruptcy amid investigations
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, said filed for bankruptcy, according to court records.
Secaucus’ NRIA said in its Tuesday filing in U.S. Bankruptcy Court in New Jersey that it was seeking Chapter 11 in light of the company’s financial condition.
The company has been under the management of an independent manager since late April following the resignation of its longtime chairman and chief executive, Rey Grabato, according to the filing.
An NRIA lawyer did not respond to a request for Barrons seeking comments on the petition.
NRIA’s primary offering is a real estate portfolio known as the Partners Portfolio Fund, which is covered by the bankruptcy petition.
The company sought investors for the fund through frequent advertisements on national broadcast channels such as Fox News and Bloomberg Radio that promised above-market returns.
The portfolio includes dozens of condominium, townhouse and apartment projects centered in Philadelphia, northern New Jersey, Brooklyn and Palm Beach County, Florida. Three are nearing completion and 16 are not built, according to a filing Wednesday with the bankruptcy court.
About 2,000 investors collectively own about $540 million in the company’s stock, according to the filing.
In a July 2021 offering memorandum seeking additional investment, the NRIA revealed that it could use cash from new investors to pay existing investors. This could be a risky way for an investment fund to operate, as it may require more and more participants to contribute to the fund, rather than earning money from its activities.
The NRIA also revealed in the memo that it was under investigation by law enforcement officials and financial regulators “in relation to the management and operation of the business 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 all subpoenaed the NRIA for documents, and she was subpoenaed by the attorney’s office. American from New Jersey to testify and produce documents before a grand jury, it says in the note. The NRIA previously told the Philadelphia Inquirer that it was cooperating with the agencies.
Separately, a former business leader named Thomas N. Salzano was arrested by the Federal Bureau of Investigation in February 2021 for allegedly using fake loan papers in an attempt to extract more money from an existing investor from the NRIA.
Salzano’s initial court date on the criminal charges has been repeatedly postponed and currently runs until at least July 29. The SEC also filed a civil lawsuit against Salzano. A lawyer for Salzano did not respond to a request for comment.
No charges have been filed against the NRIA itself in this case.
Prior to the disclosure of federal and state investigations into the NRIA, the company was the subject of an August 2020 report to the SEC by a convicted fraudster turned self-proclaimed whistleblower named Barry Minkow, who said he gathered information to the NRIA for the complaint by impersonating 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 TV ad last year, the company said it offered “targeted 21% returns,” according to the Inquirer.
The NRIA strenuously denied Minkow’s claims to the Inquirer, calling him misinformed and financially motivated. Under SEC rules, some “whistleblowers” get up to 30% of the money recovered from the agency’s investigations for themselves.
Among the NRIA’s main creditors are Cipolla & Co., an accounting firm in Franklin Lakes, NJ, which claims to be owed $1.3 million, and the head of New York public relations firm Repute PR, which has a claim of $450,000, according to the petition. .
Neither responded to requests for comment.
According to the petition, the NRIA’s 30 largest investors had placed sums with the company ranging from $952,580 to $5.5 million.
NRIA founder Grabato resigned as chief executive and chairman of the company and named Brian Casey as independent director on April 29, according to the bankruptcy filing.
Casey was a fund administrator and co-manager of the Partners Portfolio Fund, according to an earlier NRIA announcement. Casey did not respond to a request for comment.
Write to Jacob Adelman at [email protected]