- The move comes weeks after the Securities and Exchange Commission filed an investigation into the Indian American and his company.
Almost two months after a fraud case was launched against Bay Area real estate developer Sanjeev Acharya, a federal court has authorized a receiver to seize control of his properties and operations. Earlier this month, U.S. District Court Judge Susan Illston ordered Receiver David Stapleton of Stapleton Group to take over all the assets of Acharya and his company, the Mercury News reported.
On Dec. 21, 2020, the Securities and Exchange Commission filed an emergency action against Acharya and his company, SiliconSage Builders LLC, aka SiliconSage Builders, in connection with an alleged $119 million fraudulent offering. The case is filed in the U.S. District Court for the Northern District of California. The complaint charges SiliconSage Builders and Acharya with violating the antifraud provisions of the federal securities laws.
Acharya is accused of cheating several South Asian Americans in Northern California, according to the SEC complaint. It further alleges that Acharya financed projects for his company “in part by selling retail investors promissory notes and membership interests in entities that loaned money to the projects.” The complaint says “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.”
According to the SEC complaint, SiliconSage Builders and Acharya raised money from approximately 250 retail investors, most of whom were members of the Northern California South Asian community. He falsely described his company’s business as “profitable” and promised investors exorbitant returns. The complaint further alleges that from 2016 to 2019, all but one of SiliconSage Builders’ projects had significant cost overruns and did not generate enough money to pay investors the promised returns.
“Acharya, as alleged in the complaint, misled investors into believing the payments they received were derived from SiliconSage Builders’ profits when, in reality, SiliconSage Builders and Acharya had used new investor funds to pay earlier investors,” the SEC complaint says. The complaint also alleges that Acharya misled investors as to the amount of money the company was attempting to raise and falsely told investors they could redeem their investments despite there being insufficient funds to meet redemption requests.
This January, Acharya filed for bankruptcy “in an attempt to reorganize his finances,” the Mercury News reported. Citing documents filed with the U.S. Bankruptcy Court, the report said that in the Chapter 11 bankruptcy case, Acharya stated he had incurred “at least $100 million and as much as $500 million in debts.”
In a report on Acharya’s Chapter 11 filing, San Jose Inside traced his rise in the Bay Area real estate industry. “Acharya rose to prominence by courting Silicon Valley politicians and leveraging his prominence to woo members of the South Asian community with promises of double-digit annual returns,” the report said.
Prior to entering real estate, Acharya was a software engineer. In 2007, he bought an old home in Sunnyvale. He planned to subdivide it into two units, the San Jose Inside report said. Acharya wanted to live in one unit and rent the other.
But after banks tightened up lending, Acharya had to reach out to friends to fund his project. “I reached out to friends and their friends to ask if they wanted to invest,” he told the Silicon Valley Business Journal in 2014. “I raised $425,000 in two weeks.” He finished the project in 2011, “sold both lots and quit tech to pursue his new calling, the San Jose Inside report said.
Eventually his company began garnering media attention “for skirting conventional financing and maintaining control of everything from entitlement, to design and construction,” the San Jose Inside report said. Acharya became known for his community outreach and also for his accessibility and friendship with local politicians. “Acharya spent much of his energy similarly convincing public officials as his vision grew more ambitious. Politicians eager for housing development and campaign money eagerly vouched for the real estate neophyte.” He also donated to local politicians’ campaigns.