For years, National Realty Investment Advisors recruited unsuspecting individual investors to a real estate fund that was actually a Ponzi scheme, federal prosecutors say.

The U.S. Attorney's Office in New Jersey has charged NRIA founder and former President Rey Grabato and former executive Thomas Nicholas Salzano with 18 counts, including securities fraud, wire fraud and conspiracy to commit wire and securities fraud, the Department of Justice announced Thursday.

FBI agents arrested Salzano on Wednesday while Grabato, a native of the Philippines who is believed by NRIA attorneys to have fled there, remains at large, the release stated.

Salzano had already been arrested in March 2021 for identity theft for an attempt to solicit investors to the NRIA Partners Portfolio Fund, the investment vehicle at the center of the alleged fraud. No trial date has been set for those charges.

Also on Thursday, the Securities and Exchange Commission announced it has filed civil charges against NRIA, Grabato, Salzano, former NRIA sales manager Arthur Scutaro and former NRIA executive Coley O'Brien for securities fraud. The SEC had also charged Salzano for the alleged identity theft last July, years after it had found he committed fraud while running a telecommunications company.

NRIA's fund continued to solicit investors until January, even after a September report in the Philadelphia Inquirer publicized the FBI and SEC investigations and Salzano's arrests, heightening scrutiny on the company and prompting organizational changes.

NRIA filed for bankruptcy on June 7, and the New Jersey Bureau of Securities issued a cease-and-desist order against the company and the four principals named by the SEC two weeks later.

"In classic Ponzi fashion, these defendants allegedly told investors that they would be paid distributions from profits of their fund when, in reality, payments were being made from the investors’ own funds," SEC New York Regional Director of Enforcement Thomas Smith said in a statement.

"What makes this behavior even more callous is that they allegedly took advantage of 382 retirees who had contributed more than $94 million in savings."

Barry Minkow, a self-described crook-turned-whistleblower who himself has been convicted of financial crimes, had been exhorting the SEC to shut down NRIA's fundraising since 2020, when New Jersey authorities began investigating the firm, Minkow told Bisnow.

“I don’t understand and I will never understand why it took this long," Minkow said.

Scutaro, who also goes by Arthur Scuttaro, pleaded guilty to one count of conspiracy to commit fraud in a New Jersey federal court on Tuesday.

Scutaro, an associate of Salzano dating to his previous financial crimes, operated as a lieutenant in carrying out the scheme.

"There's no way [Scutaro's guilty plea] was a coincidence," Minkow said of the timing of Salzano's arrest.

According to financial documents NRIA produced for its bankruptcy proceedings, the fund's properties have a book value of just under $300M, while its total liabilities are estimated at more than $511M.

NRIA's new, court-approved leadership is assessing the current market value of NRIA's properties and will present its findings in the next two or three weeks, lawyers for a committee of NRIA investors said in a digital town hall on Wednesday before the charges were announced. After this article was published, NRIA outside counsel Cole Schotz sent Bisnow a statement on behalf of the firm.

Based on the global economy's deterioration over the past eight months, the fund's holdings are unlikely to approach that $300M number. Many of the fund's investors will likely never be repaid, the SEC said in its announcement.

"Even if charges were filed one year ago, we would have a recovery that’s probably substantially better than [it will be] now, given the interest rate environment," Minkow said.

UPDATE, OCT. 15, 11:10 A.M. ET: This article has been updated to include a statement from NRIA's outside counsel Cole Schotz.