The Securities and Exchange Commission charged M. “Shi” Shailendra with making false representations to investors, misappropriating money, and acting as an unregistered broker. Shailendra was selling interests in his Interstate North 5 Acres fund known as Shi Six. He was purportedly using the money to acquire distressed real estate. Instead, he was pocketing most of the capital.
Shailendra had plans to create a massive real estate empire built with capital from the Indian community. His plans got derailed by the 2008 financial crisis and his own misdeeds.
According to news reports, the unraveling of his misdeeds has been happening for several years. Shi Investments One sued the Shailendra Group back in early 2011 for the diversion of investor funds to personal accounts and other self-dealing.
It’s good that the SEC caught him, but it seems that his investors had already grabbed him. Among the SEC’s penalties, Shailendra was ordered to disgorge over $2 million in ill-gotten gains and penalties. But the SEC waived that amount based on his inability to pay.
The fund is handed over to investors to try and regain whatever capital may remain. From the accusation in the complaint it sounds like most of the investors’ capital went to Shailendra for personal use or to fund affiliate transactions.
At a minimum, Shailendra is permanently barred from association with any broker-dealer, investment adviser or other firm under the jurisdiction of the SEC. However, lots of real estate investment operates outside that jurisdiction.
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