SEC v. Walter Ng, Kelly Ng, Bruce Horwitz, and The Mortgage Fund, LLC, Case No. C 13-0895 NC (N.D. Cal.). On February 28, 2013, the SEC announced fraud charges against Bay Area real estate fund managers Walter Ng, his son Kelly Ng, and Bruce Horwitz with fraud in connection with their real estate fund, Mortgage Fund ‘08 LLC (“MF08”). They raised more than $85 million during an 18-month period. The SEC alleges that the Ngs and Horwitz touted the MF08 fund during the 2008 financial crisis as an opportunity for conservative investments underwritten by commercial real estate loans secured by deeds of trust. However, the Ngs and their advisory firm, The Mortgage Fund LLC, transferred money raised by MF08 to their earlier real estate fund, R.E. Loans LLC (“R.E. Loans”), so that they could afford distributions to investors in that fund. The SEC also alleges that the Ngs and Horwitz made false claims about MF08’s and R.E. Loans’s performance. They failed to tell investors that both R.E. Loans and MF08 started experiencing substantial borrower defaults in 2008. At the same time, the Ngs and Horwitz kept assuring investors that R.E. Loans and MF08 were performing well and were safe and secure. The SEC charged the Ngs with violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act. Bruce Horwitz is charged with violating Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder. Lastly, the SEC charged the Mortgage Fund with violating Sections 206(1) and (2) of the Advisers Act. The SEC is seeking seeks injunctive relief, disgorgement, and civil monetary penalties.
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