The Securities and Exchange Commission has charged Suneet Singal, CEO and chairman of First Capital Real Estate Trust, a non-traded REIT, with two separate frauds.
One charge relates to First Capital REIT itself, while the other relates to a non-traded business development company.
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Singal fraudulently claimed that he owned a dozen hotels in 2015 that he did not, according to the SEC, so that he could acquire a $15.2M interest in First Capital REIT's operating partnership.
"He then made numerous material misrepresentations in public SEC filings concerning FC REIT’s ownership of the hotels," the SEC alleges.
Singal was looking to buy the interest in First Capital REIT, but didn't have the cash to do so outright, the SEC charges say. So he allegedly pretended to own the 12 hotels, so that the properties could be transferred to First Capital REIT in lieu of cash.
Singal had been in negotiations at the time to acquire the hotels, but had not been able to do so by the time he claimed he did, the SEC alleges.
The SEC further claims that, as a result of Singal’s financial shenanigans, First Capital REIT reported inflated net asset values. Common shares were then sold to investors at allegedly inflated prices, based on Singal's misrepresentations.
Separately, the agency alleges, after acquiring an ownership interest in the BDC's external investment adviser, Singal had the BDC make two $1.5M loans to an entity that he controlled. He then allegedly pirated about half of the loan proceeds for his own use.
The SEC complaint doesn't name the BDC, but DI Wire reports it is StHealth Capital Investment Corp., previously known as First Capital Investment Corp. A BDC is a closed-end investment company that specializes in small and midsized companies.
Last year, First Capital Real Estate acquired the brokerage formerly known as Coldwell Banker Commercial Advisors, which was renamed Advisors Commercial Real Estate. By early this year, the company had gone out of business, with brokers at the company blaming Singal for its collapse, The Real Deal reports.
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