The managers of a Lafayette investment fund accused of defrauding hundreds of investors, many of them elderly, will pay a fine of more than $5 million, the Securities and Exchange Commission announced Monday.
The settlement comes more than a year after the agency filed a lawsuit against the managers of The Mortgage Fund LLC, claiming they defrauded investors by secretly using the fund's assets to rescue an older fund that had collapsed. The managers, who include Walter Ng, a well-known East Bay investment manager, his son Kelly Ng and Bruce Horwitz, a pediatrician who lives in Orinda, also lured investors by making false claims about the performance of the fund, according to the SEC.
The fines and penalties are just a fraction of the $85 million investors deposited into the fund and will result in payments of roughly $10,000 to each creditor, pennies on the dollar from their initial investment.
"It's just a slap in the face," said Nanci Dommes, a Danville resident, who along with her husband, John, lost about $700,000 after investing in Mortgage Fund-08. The loss includes Nanci Dommes' IRA account and proceeds from the sale of John Dommes' dental business. The couple now struggle to pay the bills, after planning on using the investment to supplement their Social Security payments and savings.
A class-action lawsuit also accuses Horwitz and the Ngs of defrauding an additional 1,500 investors in another fund, known as R.E. Loans, which is now bankrupt. Kelly Ng and Walter Ng were found guilty earlier this year of structuring payments for the purposes of evading reporting requirements. Kelly Ng was sentenced to 18 months in prison while his 84-year-old father received home detention and a $1,000 fine.
As part of the just-announced settlement, Kelly Ng will pay $1 million, Horwitz will pay $725,000 and the Mortgage Fund LLC will pay the rest. Walter Ng has not been fined in the matter because he has declared bankruptcy, but that proceeding has not been discharged, meaning creditors can still pursue actions against him.
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