Phony real estate fund scammed NJ investors out of $650M, feds say
The U.S. District Court of New Jersey handed down an indictment against two men for allegedly swindling investors across the state out of $650 million using a real estate Ponzi scheme that promised high returns with low commitments, but the company never saw a dime in profits, eventually toppling under its own burden to pay out victims.
Nicholas Salzano, 64, of Secaucus, and Rey Grabato, 43, who maintained residence in Hoboken and the Philippines, were charged in an 18-count indictment announced Wednesday with fraud and conspiracy violations. Meanwhile, Salzano also faces accusations of aggravated identity theft and tax evasion in federal court, according to the U.S. Attorney's Office.
A third conspirator, Arthur S. Scuttaro, 62, of Nutley, pleaded guilty to conspiracy and is scheduled to be sentenced on Feb. 23, federal attorneys said.
“This case should serve as a cautionary tale to the consumer,” said James Dennehy of the FBI. “Become familiar with the red flags that can alert you to a fraud; don’t let dollar signs cloud your judgment; and remember the old adage that if it sounds too good to be true, it probably is."
Salzano ran National Realty Investment Advisors, a supposed development investment firm founded in Delaware in 2016, but hid his true role as CEO under various false titles that presented him as an independent consultant, attorneys allege in the indictment.
He worked with Scuttaro and Grabato, who acted as president of NRIA, and the three are accused of accepting investments on real estate developments in Philadelphia and New Jersey that returned little to no profits, and concealing the scheme by offering up to $100 million in monthly distributions to investors that were, in reality, nothing more than money taken from new victims as a means to further the fraud, the U.S. Attorney's Office says.
Meanwhile, to prevent the hoax from buckling under its own lack of returns, investors were pressured into accepting bonuses in the form of new stakes in the portfolio, thus keeping investor money in the company's account and drawing out the time until further payments were due.
But those funds were simply shifted among various shell companies, as Salzano spent the money on opulent dinners, parties and payments to his wife and an unnamed romantic partner, attorneys say.
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Victims were allegedly lured into the phony ventures, such as the River Run apartment project in North Bergen, with promises of limited 5% investments in the overall development costs, supposedly being fronted by NRIA, limiting investors' supposed losses should the projects go sideways, according to the indictment.
The NRIA website contains previous updates on that development, claiming it was set to go before the Planning Board in 2021 but required re-submittal. However, an employee of the North Bergen zoning office said Friday that there were no records of a development at 8709 River Road being heard by the township's board in 2021 or 2020.
In his role, Grabato helped Salzano set up shell companies to hide the source of the funds, handing Salzano envelopes of cash and allowing Salzano to put luxury townhomes and cars in his name, attorneys say.
Salzano dodged more than $1.6 million in tax liabilities, according to his indictment.
As a result of these federal criminal allegations, the Securities and Exchanges Commission has filed civil charges against Salzano, Grabato and Scuttaro.
Salzano and Grabato could face five to 20 years in prison for each fraud and conspiracy charge and fines ranging from $100,000 to $250,000, if they are found guilty.
Furthermore, Salzano could be sentenced to a mandatory two-year prison term if convicted of aggravated identity theft, which must be served consecutively to any other sentence imposed.
This article originally appeared on NorthJersey.com: Ponzi scheme of phony real estate fund scammed NJ investors, feds say
