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Enforcement News: SEC Files Charges Against A Real Estate Development Firm for Perpetrating A $600 Million Ponzi-like Scheme

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  • Posted on: Oct 24 2022

By: Jeffrey M. Haber

Tasty Minstrel Games LLC (“TMG”) is a company, located in Utah, that produces board games.1 The best-known game released by TMG is Yokohama, a board game that takes place in the Meiji era of Japanese history. 

Another game that TMG produces is “Ponzi Scheme”. In Ponzi Scheme, players try to trick each other into funding fraudulent investments with the promise of extremely high returns. Like a real Ponzi scheme, the scheme works as long as new investors keep the scheme afloat. 

No doubt Ponzi Scheme, the game, is entertaining and fun to play with friends. But in real life, a Ponzi scheme is not a game. When the scheme collapses, people lose money.

A Primer on a Ponzi Scheme

In the early 20th century, Charles Ponzi invented the fraud that bears his name. Ponzi devised a scheme in which he convinced investors that they would receive a 40% to 50% return on their investment in International Postal Reply Coupons (IPRCs) within 90 days. Early investors received payouts as promised because Ponzi was using funds from later investors to give the promised payouts to earlier investors. The fraud continued to grow, as more and more investors, lured by stories of huge payouts, invested their money in IPRCs. Eventually, the scheme collapsed, but not before investors paid Ponzi several million dollars – which in the early 20th century was a significant amount of money. 

Present day Ponzi schemes operate in essentially the same way as their namesake. Early investors, lured by promises of huge payouts in a short amount of time, invest large sums of money in the investment the perpetrator is selling. The scammer may be offering investments in real estate, natural resources (i.e., oil or natural gas reserves), or any other type of investment the perpetrator can dream up. 

The hallmark of a successful Ponzi scheme is that early investors will receive their payouts as promised. Early investors spread their tales of success to unwittingly urge new investors to buy into the scam. Ponzi schemes may continue to grow for several months, or possibly several years, before new money dries up, and the scheme collapses. 

SEC v. National Realty Investment Advisors LLC

On October 13, 2022, the Securities and Exchange Commission (“SEC”) announced (here) that it charged New Jersey-based National Realty Investment Advisors LLC (“NRIA”) and four of its former executives with running a Ponzi-like scheme that raised approximately $600 million from about 2,000 investors, including 382 retirees.

In its complaint (here), the SEC alleged that beginning in 2018, NRIA and its executives raised funds by promising investors their money would be used to buy and develop real estate properties, which would generate profits through a fund that NRIA set up to invest in the projects. NRIA’s executives, four of whom were named in the complaint, solicited investors in a nationwide campaign promising returns of up to 20 percent.

In reality, alleged the SEC, investor money was used to pay distributions to other investors, to fund an executive’s family’s personal and luxury purchases, and to pay reputation management firms to thwart investors’ due diligence of the executives.

“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,” said Thomas P. Smith, Jr., Associate Regional Director of Enforcement in the SEC’s New York Regional Office. “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.”

In addition, the SEC alleged that NRIA manipulated the real estate fund’s financial statements and the financial information in marketing material distributed to investors, intentionally disguising the misuse of investor funds and creating the false appearance that NRIA and the fund were generating more revenue than they actually were and that operations were successful. However, said the SEC, NRIA had little to no revenue, and it and the fund filed for Chapter 11 bankruptcy protection on June 7, 2022. 

The SEC filed its complaint in federal court in New Jersey (here). The SEC charged NRIA and the four former executives with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks injunctions against future violations of the antifraud provisions, disgorgement of ill-gotten gains plus prejudgment interest, penalties, and officer and director bars against the four executives, and names two additional persons as relief defendants.

In June of this year, the New Jersey Bureau of Securities issued a cease and desist order to NRIA in connection with the alleged scheme (here).

Commenting on the order, Matthew J. Platkin, Acting Attorney General, stated: “The fraudulent conduct identified by our Bureau of Securities in this case is striking. Today, we are taking action to stop their unlawful conduct and to put the public on notice. If an investment opportunity promising high guaranteed returns sounds too good to be true, it usually is.”

“The conduct outlined in today’s filing is egregious. It’s the very kind of conduct that undermines public confidence in our financial institutions and – ultimately – in investing,” said Acting Bureau of Securities Director Amy G. Kopleton. “These respondents offered investors a securities opportunity that sounded too good to be true, and it was.”


If it sounds too good to be true, it probably is. Perpetrators of Ponzi schemes usually guarantee high returns in a short amount of time. Legitimate investments always involve risk, especially in a volatile economic environment, such as the one that investors are currently experiencing. 

Investors should beware of promoters who do not provide clear explanations of how the investment works, or who refuse to provide detailed information about the investment in writing.  It is very important that investors understand the details of their investments and how their money will be used or invested. 

Additionally, promoters will try to rush investors into investing in the scheme. If a promoter is trying to rush an investor into investing with promises of huge returns “but only if you act now,” the best thing to do is walk away.

[Ed. Note: this Blog has written extensively on Ponzi schemes. See, e.g., here, here, here and here.]


  1. Last summer, TMG advised people who purchased company stock that it was in “virtual bankruptcy”, leading to staff layoffs and a halt to game development. The company said that it does not expect to produce any new games for the next “two to three years”.

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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