A New York real estate developer admitted in court last week that he ran a luxury real estate Ponzi scheme that defrauded investors out of $58 million over several years.
According to the U.S. Attorney’s Office for the Southern District of New York, Michael D’Alessio pleaded guilty in a federal court last week to running a real estate fraud scheme involving luxury development projects in Manhattan, the Hamptons, Westchester, and other locations, and to lying about his assets after declaring bankruptcy.
According to court documents, D’Alessio served as the president and CEO of an unnamed real estate investment and development firm that supposedly specialized in the design, construction, and management of both residential and commercial real estate properties.
In each development project, D’Allesio tended to follow the same pattern: he solicited investments in the projects by offering shares in a newly formed limited liability company that was named after the location of the project.
In exchange for some number of shares in the newly formed LLC, D’Alessio promised investors a guaranteed monthly interest payment and a share in the profits from the sale of the property in question.
In the course of doing that, D’Alessio told investors that their money would be used only for the development of the property in question.
But that wasn’t actually the case.
According to court documents, from at least 2015 through April 2018, D’Alessio misappropriated investor funds for his own use, and made other material misrepresentations about his business.
D’Alessio would typically move investors’ funds through a series of bank accounts that were in the name of shell companies he owned and controlled. With the money moved, D’Alessio took much of the money for his own benefit, using it to pay off debts and prior investors, and to fund significant gambling and other personal expenses.
According to the U.S. Attorney’s Office, D’Alessio took several steps to conceal the fraud, including “deceiving investors regarding the progress of various real estate projects and using money raised from investors to make monthly payments to investors in different projects in the manner of a Ponzi scheme.”
All total, D’Alessio defrauded investors out of approximately $58 million.
On top of that, earlier this year, D’Alessio went into involuntary bankruptcy and subsequently submitted bankruptcy documentation that fraudulently omitted money and property belonging to his estate, and made a false declaration under penalty of perjury concerning his money and property.
And last week, D’Alessio pleaded guilty to one count of committing wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and one count of concealing assets from a bankruptcy court, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.
“Real estate developer Michael D’Alessio admitted today to misappropriating investor funds intended for specific luxury development projects by funneling them into shell accounts he controlled,” Manhattan U.S. Attorney Geoffrey Berman said.
“In typical Ponzi-like fashion, D’Alessio comingled over $58 million of investor funds and used them to cash out early investors, cover debts, and pay his own personal gambling debts,” Berman added. “When D’Alessio eventually went into bankruptcy, he perpetrated yet another fraud by trying to conceal assets. Today this fraudster has taken responsibility for his actions and faces time in a considerably less luxurious property – federal prison.”
