A New Jersey homebuilder is charged with deceiving investors and inflating values on properties it mortgaged.
The Securities and Exchange Commission announced Tuesday that it filed a complaint to halt fraudulent unregistered offerings of securities and the ongoing Ponzi scheme operated by NJ Affordable Homes Corp. and its owner and president Wayne Puff.
The complaint alleges that NJ Affordable violated several federal securities laws by making “materially” misleading misrepresentations and omissions concerning investment risk and the nature of the homebuilder’s business in the selling of at least $40 million in notes to about 500 investors nationwide since 1999, according to the announcement.
The commission said NJ Affordable operated a Ponzi scheme — guaranteeing investors returns of between 15% and 20% based on promises that investors’ money would be used to fund the purchase, renovation, and resale of real property.
The company, however, did not let investors know that it could not pay such high rates of return, that it is funding payments to existing investors by soliciting new investor money, and that it was generating fictitious revenue by selling the properties to insiders, investors, and affiliated entities, and at routinely inflated values on homes it put mortgages on, the commission reported.
NJ Affordable faces the possibility of a temporary restraining order, freezing of assets and a temporary receiver over it, among other emergency relief. Moreover, the commission said it seeks to have NJ Affordable and its owner permanently enjoined from committing future violations of securities laws and for a final judgment ordering the company to disgorge ill-gotten gains, and assessing civil penalties.