Securities and Exchange Commission(SEC), charged NRI Sanjeev Acharya
For $100 million in investments-Ponzi scheme from NRI Community
New York, January 06, 2021
At around Christmas time, U.S. Securities and Exchange Commission (SEC) charged NRI Real estate developer Sanjeev Acharya, founder and CEO of Sunnyvale-based SiliconSage Builders (SSB) with a “Ponzi-like” fraud involving more than $100 million in investments from about 250 private, mostly NRI Community.
NRIpress.club/Ramesh/ A.Gary Singh
U.S. Securities and Exchange Commission (SEC) reported:
- $119 million securities offering fraud perpetrated primarily against members of the South Asian community in Northern California by defendant Sanjeev Acharya and his real estate development company, defendant SiliconSage Builders, LLC aka Silicon Sage Builders (“Silicon Sage Builders” or “SSB”) (collectively the “Defendants”).
- Acharya and Silicon Sage Builders develop real estate projects in the Bay Area. The Defendants financed the projects in part by selling retail investors promissory notes and membership interests in entities that loaned money to the projects. Acharya marketed these investments to South Asian friends and family and then sought referrals, expanding his investor base to over three hundred investors in the Northern California South Asian community.
- Since at least August 24, 2016, Silicon Sage Builders and all but one of its real estate development projects have not been profitable, because the property sales generated by its business have not generated enough cash to either return investor capital, pay returns to investors, or provide any income to Silicon Sage Builders. Nevertheless, since August 24, 2016, SSB has raised approximately $119,246,755 from approximately 250 investors through a continuous series of misrepresentations and omissions and other deceptive conduct:
- Acharya falsely described Silicon Sage Builders and all of its real estate projects as efficient, successful, and profitable when, in fact, from 2016 to 2019, all but one of his projects had significant cost overruns and did not generate enough revenue to cover the overruns, leaving SSB with mounting, undisclosed liabilities to investors, totaling over $18 million by 2019;
- Acharya falsely described the interest payments paid to certain investors as derived from SSB’s profits across all projects when, in fact, SSB used new investor funds to make these payments;
- Acharya falsely told investors that they could redeem their capital in one of the funds after one year when, in fact, since 2018, Acharya has repeatedly declined capital redemption requests from certain investors because he did not have funds sufficient to meet the redemption requests; and
- The offering materials for one of the funds falsely described the size of one of the offerings, whose returns were to be derived from SSB’s aggregated profits, as between $7 million and $11 million, when, in fact, at one point, Acharya raised over $50 million in the offering. The actual size of the offering also far exceeded the limits set forth in theoffering materials, which stated that “the total capital contributions raised by [the Fund] at any given point of time shall not exceed 50% of the reserves and projected profits, over a 2 year window, of Silicon Sage Builders.”
Sanjeev Acharya violated the antifraud requirements of the federal securities laws. Specifically: Defendants violated Sections 17(a)(1)-(a)(3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)] and Section 10(b) of the Securities
Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d), 78u(e), and 78aa] and Rules 10b5(a)-(c) thereunder.
The SEC requests, among other things, that the Court: (i) preliminarily enjoin Defendants from further violating the federal securities laws as alleged in this complaint; (ii) order an
accounting, asset freeze, and preservation of documents as to each of the Defendants and appoint a permanent receiver over Silicon Sage Builders and its subsidiaries and affiliates; (iii) permanently enjoin Defendants from further violating the federal securities laws as alleged in this complaint; (iv) order Defendants to pay disgorgement with prejudgment interest; and (v) order Defendants to pay civil monetary penalties based upon these violations.
Silicon Sage Builders is a California limited liability company formed by Sanjeev Acharya in 2011 with its principal place of business in Sunnyvale, California.
SSB is one of many affiliated companies owned and controlled by Sanjeev Acharya that, together, develop real estate projects in the Bay Area under the name “Silicon Sage.” SSB is not registered with the Commission in any capacity and it has not registered any offering of its securities.
- Sanjeev Acharya resides in Sunnyvale, California. Acharya founded Silicon Sage and is the CEO, owner, and manager of all of the Silicon Sage entities. Acharya does not hold any securities licenses and is not registered with the Commission in any capacity.
- SiliconSage Bridge Fund, LLC (the “Bridge Fund” or “SSBF”) is a California limited liability company formed in 2014 with its principal place of business in Sunnyvale, California. The Bridge Fund purportedly loans money to Silicon Sage–a filiated companies for the purpose of their development of real estate properties. The Bridge Fund has not registered with the Commission in any capacity and it has not registered any offering of its securities. Acharya is the manager of the
13. SiliconSage Construction, Inc. (“SSC”) is a California company formed in 2011 with a principal place of business in Sunnyvale, California. SSC is one of several affiliated companies owned and controlled by Acharya that develop real estate projects in the Bay Area and is part of “Silicon Sage” (together with SSB, and the following defined below: SS Homes, SS Inc. and the Case 3:20-cv-09247 Document 1 Filed 12/21/20 Page 4 of 27
Investors were offered high rates of return, ranging from 18% to 23% per annum, to be
paid once the project was completed from the proceeds of the sale. Any residual profits would go to
Altogether, as of October 27, 2020, Defendants have received approximately $97,547,296 from equity investors, with at least $63,442,436 raised since August 24, 2016.
Bridge Fund. In 2014, Acharya formed the Bridge Fund. Investors in the Bridge
Fund purchased membership interests in the Bridge Fund pursuant to subscription and operating
As of October 2020, the Bridge Fund has $19.58 in its bank account, and owes the Bridge Fund investors approximately $40 million.
Promissory notes. Beginning in October 2017, Defendants began offering promissory notes as an additional form of investment in Silicon Sage.
- The duration and size of the notes varied from 1-24 months and between $10,000 to over $1 million.
50. Generally, the Builder LLC promised to pay the note back, with a range of interest Case 3:20-cv-09247 Document 1 Filed 12/21/20 Page 8 of 27 COMPLAINT 8
For each form of investment, investors’ fortunes were tied to Silicon Sage’s and investors were entirely reliant on Defendants’ efforts to earn returns. . The Silicon Sage promissory notes are also a security in the form of a note.
60. The promissory notes were an investment in a business enterprise. The promissory notes were issued to raise money to complete real estate projects, at high rates of return. Defendants sold approximately 97 notes to at least 63 investors in California, Nevada, Texas, New York, Georgia.
From August 24, 2016 to October 6, 2020, over $26 million in liabilities were owed to the Bridge Fund for exited and abandoned projects. 65. Defendants found that podium builds required different expertise and began incurring significant construction cost overruns.
COMPLAINT 12 was incurring significant cost overruns that were being covered with the Bridge Fund, notes, and SVIP, Class W.
Nor did he tell any investors that the few arguably profitable projects Silicon Sage did
have – according to Acharya, four slab on grade projects (Connemara, Fair Oaks, Menlo Park, Evandale), Alexis, Mathilda 1, and Washington – had not generated enough profits to cover the
overages, pay back the Bridge Fund, Class W, or notes, or generate income for SSB. He also did not disclose the efficiency problems associated with the larger podium projects. Additionally, Acharya did not tell investors that, together with SSC, he owed mounting liabilities to the Bridge Fund, Class W, and the promissory note holders. It would have been an important to a reasonable investor to know that Silicon Sage Builders was unprofitable because, among other things, it affected the safety and security of investors’ funds, how the funds were used, and the promised returns.2. Defendants Misrepresented the Bridge Fund’s Use of Funds Since at least 2016, the Bridge Fund Subscription Agreement, signed by Acharya, stated that the Bridge Fund returns would be “derived from aggregated profits earned by [SSB] and various other limited liability companies affiliated with SSB.”
The Bridge Fund Operating Agreement stated that the “purpose of the [Bridge Fund] is to lend funds to Silicon Sage Affiliated Entities for the purpose of their development of residential and/or mixed use projects on real properties owned by those companies and to hold such priority in right of repayment as stated in promissory notes executed by those other companies, and to engage in any and all other activities as may be necessary or advisable in connection with the foregoing,” and that the Bridge Fund would “engage in no other type of business and it shall have no other purpose.” These statements were all false because funds raised from Bridge Fund investors were used to pay other Bridge Fund investors’ interest. It would have been an important to a reasonable investor to know that the Bridge Fund was paying returns with new investor funds because, among other things, it affected the safety and
security of investors’ funds, how the funds were used, and the promised returns. Case 3:20-cv-09247 Document 1 Filed 12/21/20
COMPLAINT 13 Defendants Misrepresented the Investors’ Ability To Redeem Their Bridge Fund Interests 107. Acharya told Bridge Fund investors that they could redeem their capital after one year, after which investors could give notice and request return of principal, which would be processed after an additional 90 days.
But, beginning in 2018 and throughout 2020, Acharya declined redemption requests from some investors, and therefore knew, from 2018 on, at the time he was making these redemption statements to new investors that they were misleading. It would have been an important to a reasonable investor to know that the Bridge Fund had refused investors’ redemption requests because, among other things, it affected the safety and security of investors’ funds, how the funds were used, and the promised returns. Defendants Misrepresented the Size of the Bridge Fund Offering From at least 2016 through the present, the offering materials stated that the Bridge Fund offering was for between $7 million and $11 million. The offering materials also provided that “the total capital contributions raised by [the Bridge Fund] at any given point of time shall not exceed 50% of the reserves and projected profits,
over a 2 year window, of Silicon Sage Builders.” At times, however, the size of the offering greatly exceeded the offering materials and
subscription agreement limitations, increasing to over $50 million at the end of 2019. It would have been an important to a reasonable investor to know that the Bridge Fund had raised far more than represented because, among other things, it affected the safety and security of investors’ funds, how the funds were used, and the promised returns G. Defendants Engaged – and are Engaging – in Deceptive Conduct Rather than reveal the true financial state of Silicon Sage to investors, since at least March 2020, Acharya engaged – and is engaging – in conduct designed to enable him to continue raising money and to discourage existing investors to withdraw their funds or to swap their interests for different Silicon Sage investments. Case 3:20-cv-09247 Document 1 Filed 12/21/20 Page 14 of 27
COMPLAINT 14. Defendants Blame the Pandemic Instead of Disclosing The Financial Problems
Beginning in or around March 2020, Acharya began warning of a short-term “liquidity” problem purportedly stemming from the COVID-19 pandemic, urging new investments. On March 18, 2020, Acharya emailed the investors that: “there is a short term impact
on inflow of new investors’ monies because of stock market crash. We are encouraging investors who have liquid cash to invest in short or long term basis in the company” and “looking for every investor who can help with new investments.” Without mentioning any pre-COVID problems, he concluded that, “in the big scheme of things our current sales are in good shape… we have a bright future and great things happening in terms of building the company.” In that same month, he told an investor that, despite the COVID-19 pandemic, the business was “all good,” and that Acharya was still paying interest on the Bridge Fund, but had a short term cash need. The same month, however, Acharya asked certain Bridge Fund investors to defer their interest payments for up to six months in exchange for an increase in the interest they would supposedly receive at the end of the period. In none of these communications did Acharya disclose the existing cost overruns and unprofitable or abandoned projects, nor the use of Bridge Fund monies to pay investor interest, or refusal to honor Bridge Fund redemptions.In or around May 26, 2020, Acharya informed the Bridge Fund investors by email that he could not make interest payments or honor redemption requests for three months, attributing this
solely to cash flow issues from the pandemic.
Acharya disclosed none of the existing pre-COVID financial problems in this email. Starting in June 2020, Acharya began hosting video investor calls. In a June 9, 2020 investor presentation, Acharya told investors that, with regard to the
“COVID-19 General Business Impact,” “[th]e biggest impact is that the investments from investors
dried up since March 2020. Not because of any SiliconSage concerns.”Acharya continued to solicit new equity and note investors in June and July 2020. Case 3:20-cv-09247 Document 1 Filed 12/21/20 Page 15 of 27
COMPLAINT 15 For example, he solicited approximately $250,000 from one new equity investor in June and July 2020, continuing to represent that he had 11 profitably-exited projects, specifically identifying the Crown Court, Monroe, Saratoga, and Franklin projects, among others, and had paid his investors their returns out of Silicon Sage’s profits.
Acharya took in over $17 million between March 18, 2020 and October 27, 2020, across all Silicon Sage’s projects, including new monies and funds rolled over or exchanged from investors’ other Silicon Sage investments—including over $1 million for the Bridge Fund. Acharya took in approximately 30 new Silicon Sage investors since March 2020.
2. Defendants Shift the Blame for the Financial Problems from the Pandemic to Past Mistakes. Beginning in late June 2020, Acharya began attributing Silicon Sage’s financial difficulties to causes other than the pandemic. At a June 23, 2020 investor meeting, Acharya acknowledged that Bridge Fund interest payments were impacted by the lack of new investor money, stating that “the biggest challenge in reopening Bridge Fund is figuring out consistent cash flow for Bridge Fund interest payments in a sustainable manner.”
At that same meeting, Acharya offered Bridge Fund investors the option of rolling their investment over to Alum Rock or to Osgood 2 as a down payment for a future condo—an option some investors elected.
In July 2020, a few investors volunteered to liaise with Acharya and met with him several times. During these meetings, Acharya admitted to this investor group that:
- a. all of his past projects except one had not been profitable—and that he had not made any money;
- b. the Bridge Fund had in fact already raised $45 million – not $7 or 11 million as advertised;
- c. Silicon Sage had no cash and that all the funds raised from investors had been spent;
d. he had no investor money left despite having raised $20 million for Alum Rock, even though the project had not yet purchased all of the real estate. After one of the investor volunteers (“Investor 1”) conveyed this information to a broader group of investors, Acharya tried to suppress the information from circulating to the broader
investor group. For example, on July 28, 2020, Acharya emailed the investors saying that the information conveyed by Investor 1 was the view of just that investor, not the investor volunteers as a
whole. Acharya said that he had “deliver[ed] many initial projects on time and at or near budget,” that he had “made some execution delay mistakes resulting in cost overruns as I scaled up Silicon Sage to much larger projects....” and that there was “no  swindling involved.”
Acharya then called Investor 1 and offered him cash for his Bridge Fund investment if he left “quietly.” When Investor 1 declined, Acharya offered to give the same deal to the Investor 1’s friends, saying he had many investors who trusted him and that he could get the money. When Investor 1 declined again, Acharya offered him a condo. On or about July 19, 2020, Acharya invited another investor to swap his existing interest for an equivalent interest in another property, claiming that he was “getting new investors”
and had “millions of dollars coming in.” When the investor said this would be tantamount to a Ponzi scheme, Acharya replied that as the manager, he could do whatever he wanted. Beginning in August 2020, Acharya began to attribute Silicon Sage’s financial difficulties to past “mistakes.” In an August 4, 2020 investor call, he identified “cost control issues which I am responsible for and that a “constant criticism of [his] operations was that [he] ha[d] not been forthcoming on project finances and project issues,” and stated that he was “making changes to this.”
. On an August 14, 2020 investor call, when asked why he had not been more transparent with investors, he said that he agreed that transparency would have helped, saying, “I should have done it. Back then, maybe my thinking was that everybody’s returns will come... So … I really didn’t bother to get into details, but what I was not thinking, what my mistake was that I wasn’t
Case 3:20-cv-09247 Document 1 Filed 12/21/20 Page 17 of 27
For example, in a presentation to investors on September 25, 2020, Acharya stated “[e]quity investors are funding the gap money needed to keep … [a] project going,” that “Bridge Fund Investors are welcome to join the effort,” and that the “[g]ap fund will be Senior Note to Equity and will have attractive returns.” . In an October 16, 2020 presentation to investors, he stated that he “need[ed] to raise $1m for” a project to get to a conclusion and that “[t]here is an immediate need for liquidity” for that project. Despite his promises of transparency, Acharya continues to provide inconsistent and contradictory financial information to new and existing investors. . As recently as October 5, 2020, Acharya has orally discouraged at least one investor from bringing their concerns to the SEC.H. Defendants Knew, Or were Reckless in not Knowing, They Were Making Materially Misleading Statements and Engaging in Deceptive Conduct Defendants knew, or were reckless in not knowing, that their representations regarding
Case 3:20-cv-09247 Document 1 Filed 12/21/20 Page 19 of 27 COMPLAINT 19
the profitability of Silicon Sage and all of its real estate projects, the source of the interest payments paid to Bridge Fund investors, the ability to redeem Bridge Fund investments, and the amount of the Bridge Fund offering were false at the time he made them.
Defendants knew, or were reckless in not knowing, that they engaged in a scheme to defraud by making these false statements, and by making Ponzi payments, when using new Bridge Fund money to pay existing investors’ interest and by downplaying the crisis facing the business while asking investors to contribute new capital, roll over existing investments, and defer interest payments.
Acharya controls Silicon Sage. He owns and manages all of the Silicon Sage companies, is the CEO of the enterprise, and he does all of the fundraising.
Acharya has admitted his responsibility for the company’s cost overruns and to knowing certain projects were unprofitable “in the middle of construction” when he was “committed to finishing them.” Acharya has continued raising money based on these false representations in 2020, even after he knew he was denying redemption requests and deferring owed interest.