Legal: SEC charges fund managers with defrauding investors in $12M fund

Two fund managers allegedly used false contract claims, inflated leasing figures, and undisclosed self-dealing to raise investor capital. 

The Securities and Exchange Commission has charged Saumil Thakkar, Poorvesh Thakkar, and two affiliated entities with securities fraud in connection with a private real estate investment fund that raised more than $12 million from dozens of investors. 

The action, filed February 18 in the Eastern District of Texas, alleges the brothers misled investors from December 2017 through September 2020 while soliciting capital for the PASMAA GP Investment Fund, LLC. The fund offered limited liability company units at $50,000 each and drew approximately 48 investors across at least six states, several of whom were clients of the brothers' tax preparation business serving high-net-worth clients in the Dallas-Fort Worth area. 

The charges center on a pattern of alleged misrepresentations in the fund's offering materials, investment summaries, investor emails, and verbal solicitations. 

Among the most striking allegations: the brothers told investors that Park Plaza Tower, a commercial building in Dallas, was "currently under contract" for sale to the fund. According to the SEC, the brothers and their affiliates had only a limited right to make an offer on the property — and that offer, made in October 2017, was rejected by the building's owner within two weeks. Neither the fund nor any affiliated entity ever entered into a contract or possessed any right to purchase the building. Despite this, the SEC alleges the brothers continued making the claim in investment summaries distributed as late as June 2018. 

The SEC also alleges the brothers overstated pre-leasing percentages for two development projects — the Mustang Square Project and the Alma Project — both involving new commercial construction. According to the agency, neither the fund nor the manager were parties to any leases for the retail portion of the Mustang Square Project when those claims were made. For the Alma Project, the SEC alleges the project had at most 50,000 square feet of office space pre-leased beginning in March 2018, meaning earlier claims were false and later claims were overstated. Separately, the agency alleges the brothers overstated leasing levels across multiple properties in emails to prospective investors, with no signed leases in place for the referenced spaces except arguably for a theater component claimed to be 70 percent leased. The Mustang Square Project's acquisition costs were also allegedly understated by more than $1 million in pro forma financial statements contained in investment summaries shared with prospective investors. 

Perhaps the most consequential allegations for the advisory and fund management community involve related-party transactions. The SEC says the fund's private placement memorandum disclosed only a general possibility of conflicts of interest — while the brothers had already entered into undisclosed agreements with their own affiliated companies. 

In December 2017, Saumil Thakkar allegedly signed a development services agreement with Thakkar Development Group, controlled by Poorvesh Thakkar, making it the developer for the fund's real estate projects — despite the firm having no development experience. Approximately 99 percent of the fund's capital was raised after this agreement was executed, yet it was never disclosed to investors. Separately, PASMAA Theater Investment, LLC, a wholly-owned subsidiary of the fund, entered into a property management agreement with Drawstring Realty Management, LLC, owned by Saumil Thakkar and his wife, also without disclosure. Between June 2018 and September 2021, these affiliated entities were paid at least $2.2 million in fees from investor funds. 

When investors raised concerns about undisclosed fees during a conference call in or around October 2019, the brothers attempted to amend the fund's Company Agreement to authorize the arrangements, including a retroactive annual 2 percent fee on all committed capital raised by the fund dating back to September 2017. Investors did not agree to the amendment. According to the SEC, more than $1.4 million in fees were nonetheless paid to the affiliated development firm after the proposed amendment failed. 

The SEC further alleges the brothers told prospective investors that their family would commit between $3 million and $3.5 million to the fund. In reality, members of the Thakkar family and their related companies subscribed to approximately $1.2 million — less than half the stated amount. 

The agency is seeking permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and a bar preventing both brothers from participating in any securities offering, except for personal account transactions. The Alma and Mustang Square Projects remain dormant and incomplete. 

No findings of liability have been made. A jury trial has been demanded. 

The case serves as a pointed reminder that the SEC remains focused on disclosure failures and undisclosed conflicts in private fund offerings — an area of enforcement that carries significant implications for fund managers and the advisors who allocate client capital to these vehicles.