One of the largest landlords in the U.S. has been charged with using money raised through private securities offerings to satisfy his obligations to earlier investors in “a Ponzi scheme-like manner.”

The U.S. Securities and Exchange Commission said Robert C. Morgan, whose Rochester, N.Y.-based real estate empire that stretches across 14 states and includes 36,000 apartments, used at least $15.6 million of $80 million raised from investors for fraudulent loan payoffs.

Other money allegedly went toward making the 11% interest payments on investor loans.

“Defendants misused [investor] assets in this manner because Morgan’s multifamily business empire was in constant need of cash,” the SEC said in a civil securities fraud complaint filed on Tuesday.

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In a related criminal case, the Department of Justice announced Wednesday that Morgan had been indicted on charges of defrauding lenders and insurers of nearly $500 million. The Buffalo News said it is believed to be one of the biggest mortgage fraud cases since the Great Recession.

“This type of fraud strikes at the very heart of the banking industry,” James P. Kennedy, U.S. Attorney for the Western District of New York, said.

Morgan’s organization has been under federal investigation for providing false information to lenders to obtain commercial mortgages. His nephew Kevin Morgan and others were indicted in May 2018 and his son Todd is named as a defendant in the superseding indictment announced on Wednesday.

The SEC complaint focuses on the money raised through private securities offerings that entities affiliated with Morgan used to acquire or operate multifamily residential properties. Because the properties did not generate sufficient cash flow to either service or repay both the secured lenders and investors, Morgan allegedly used investor assets as “a single, fraudulent slush fund.”

According to The Wall Street Journal, “The Morgan case is being followed closely by the real-estate industry because many of Mr. Morgan’s apartment loans flowed through government mortgage giants Fannie Mae and Freddie Mac, which bought and repackaged them into securities purchased by investors.”

The criminal charges against Morgan carry a maximum penalty of 30 years in prison.

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