sanjeev ponzi

Indian American real estate developer Sanjeev Acharya has been accused by the Securities and Exchange Commission of duping 250 Indian Americans out of $119 million in an elaborate “Ponzi scheme.” Acharya and Silicon Sage Builders warned that the SEC launched a “rush to judgment” in the case. (Silicon Sage Builders photo)

As many as 250 Indian Americans have been duped in a $119 million "Ponzi scheme" allegedly generated by Northern California real estate developer Sanjeev Acharya, founder of Silicon Sage Builders.

The Securities and Exchange Commission announced Dec. 21 that it had filed an emergency action against Acharya and his company Silicon Sage Builders. “He misled investors into believing the payments they received were derived from Silicon Sage Builders' profits when, in reality, Silicon Sage Builders and Acharya had used new investor funds to pay earlier investors,” said the agency.

The complaint also alleges that Acharya misled investors as to the amount of money the company was attempting to raise. The Indian American developer also lied to his investors, telling them they could redeem their investments when necessary, but in fact did not have the funds to do so, the complaint says.

SEC court documents filed in the U.S. District Court for the Northern District of California pointed to one particularly egregious juncture in 2020: Acharya’s Bridge Fund owed $40 million to investors, but had just $19.58 in its bank account.

According to an article in the Mercury News, Acharya and Silicon Sage responded in the court papers that the SEC was unfairly attempting to liquidate the company.

“After two months of investigation, and without any direct allegation of misappropriation in its complaint, the SEC proposes nothing less than the dissolution of a business built over nine years,” Silicon Sage and Acharya stated in the court papers, according to the Mercury News report.

In another grievous incident, SEC said that Acharya raised $20 million to develop a complex near Alum Rock in San Jose, but never actually bought the land.

He used the COVID-19 pandemic as an excuse to secure almost $20 million from 30 new investors, according to the documents, which stated that later that year, Acharya stopped paying monthly interest payments to existing investors, citing the pandemic and a substantial drop in revenue. He asked investors to defer their monthly interest payments for six months, and also ignored calls from funders who sought a return of their initial investment, SEC said.

Uday Bellary, one of eight investors who provided a declaration to the SEC, said he was introduced to Acharya by a friend and invested $1.1 million over two years into a development project in Fremont and into the Bridge Fund. In 2017, Bellary, an accountant, worked in Acharya’s office part-time. In his SEC declaration, Bellary said he observed that investor funds were often misclassified and co-mingled.

Bellary testified that he told Acharya in 2017 that he was concerned that the businessman was running a Ponzi scheme. “Acharya got very angry and told me he knows what a Ponzi scheme is and that he wasn’t running one,” he said, adding that he did not argue with him.

Bellary was fired in 2018. In 2019, the accountant told Acharya he wanted to redeem his capital investment. At the time of the SEC action, Bellary had received none of his money back.

Sushil Warrier, who met Acharya through friends in 2017, said in his SEC declaration that he had invested $660,000 with the developer. When the note came due, Acharya advised him to roll over the funds into another project. When Warrier asked for his investment to be returned, Acharya allegedly told him to wait, as he was getting a flush of money from new investors.

“I told him that I did not think he could give me other investors’ money because that would be tantamount to a Ponzi scheme. He replied that because he was the manager, he could do whatever he wanted. I did not take his deal because I thought it was improper,” testified Warrier in his declaration.

Acharya is a well-known figure around town in Northern California’s South Bay Area: several leaders of non-profit organizations told India-West that Acharya had made large pledges to their organizations, which were sometimes funded, but often not.

A man who answered the phone at Acharya’s cell number told India-West he was not Acharya but promised to relay a message; he identified himself as Ajay and said he was involved with the company, but could not speak on its behalf. Acharya had not returned the call by press time Dec. 29. A previous call also went unanswered.

Shaivali Desai, director of Silicon Sage Builders, did not respond to India-West’s requests for comment.

According to court documents, between 2013 and 2020, Acharya raised more than $163 million from 300 people — largely through his friends and then their friends — to develop apartment complexes in Fremont, Sunnyvale, and San Jose, California.

Acharya promised his investors staggering returns of 23 percent per annum on funds invested for specific projects, and 15 percent return per annum for funds invested in his Bridge Fund, which were used across multiple projects. He promised to pay investors monthly dividend interest, and presented a “rosy picture” of the company’s overall financial health, said several Indian Americans in declarations to the SEC. But in fact, none of Acharya’s projects — except one — ever generated profit. At least five projects were abandoned, while Acharya allegedly continued to fund them: these include a development on Seely Road in San Jose, which incurred a total $20 million in liability; a development in Sunnyvale, which incurred a $14 million liability; a project in Morgan Hill, which ran a $20 million liability; a Decoto Road, Fremont development, which incurred a $7 million liability; and a development near the Newpark Mall in Newark, which incurred a $13 million liability.

Four other projects developed by Acharya exited with $41 million in loss, collectively, according to SEC court filings.

But Acharya continued to portray SSB as financially healthy, in conversations with potential investors. He did not inform them about his abandoned projects, his cost over-runs or his multi-million dollar debt, said the court documents. He encouraged existing investors to roll over their investments into new projects, or to accept a condominium at a new development in lieu of the return of their principal and interest.

Acharya also paid monthly interest to investors using money from other investors, as alleged by the SEC.

The Mercury News report said that Acharya and Silicon Sage Builders warned that the SEC has launched a “rush to judgment” in the fraud case that the securities regulators filed against the real estate firm and Acharya.

The SEC’s “precipitous filing” of the complaint “increases the immediate risk to investors” who have bought stakes in Silicon Sage’s development endeavors, according to documents Acharya and his company filed with the U.S. District Court, it said.

“Defendants currently face a liquidity crisis caused in part and worsened by a global pandemic,” Silicon Sage Builders and Acharya stated in court papers filed on Dec. 28, according to the Mercury News report.

In declarations to the SEC, several investors testified that they had used their wives’ retirement accounts to make their investments, buoyed by promises of 23 to 28 percent interest per annum.

In a call with investors on Aug. 4, Acharya finally admitted that none of his projects — except one — had generated profits. He also acknowledged that he knew he had caused a lot of hardships to people.

Alka Patel, Associate Regional Director of the SEC's Los Angeles regional office, said in a press statement: "Wrongdoers sometimes prey on the trust of members of their communities to raise funds for their fraudulent schemes. Affinity frauds are particularly harmful to retail investors, and this case demonstrates the SEC's commitment to pursuing such schemes and protecting retail investors."

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