SEC Accuses Dallas-Based Firm Of Defrauding Investors
Executives at Dallas-based real estate firm Nanban Ventures have written a letter to investors addressing allegations of fraud leveled against them by the Securities and Exchange Commission.
The company said it is cooperating with the SEC and feels confident it has the resources to make investors whole. The team is also in the process of retaining forensic accountants to document financial transactions and is working with lawyers to protect investor interests, the letter dated Monday says.
“We are working around the clock to clear up this confusion,” executives said in the letter. “If we find ourselves unable to do so, we will vigorously contest the allegations.”
The SEC obtained a temporary restraining order, asset freeze and other emergency relief to prevent Nanban’s founders — Gopala Krishnan, Manivannan Shanmugam and Sakthivel Palani Gounder — from allegedly continuing to defraud investors.
The commission’s complaint says the defendants raised $130M from more than 360 investors, primarily members of the Indian community in the DFW area, by misrepresenting returns.
The defendants then used the funds to pay off other investors while keeping a significant portion for themselves, according to the complaint.
“To raise additional investments and keep their fraudulent enterprise afloat, the defendants have been overstating the profitability of the investments and paying investors and themselves millions of dollars in fake profits using, in substantial part, other investor funds,” the complaint alleges.
Nanban Ventures didn't immediately respond to Bisnow’s request for comment.
Investors were recruited through the Nanban Foundation, a nonprofit launched by the three founders in 2020 aimed at helping people achieve financial freedom, the SEC complaint says. Investors were told their money would be invested using GK Strategies, a proprietary options trading platform that Krishnan claimed “never loses money and outperforms the stock market.”
More than $116M was raised between 2020 and September 2021 for four hedge funds, all of which underperformed the S&P 500. Investors raised a stink about the poor returns, prompting founders to close the remaining hedge funds and return their money with a small profit.
The founders then pivoted to Nanban Ventures, a venture capital firm that would not only trade money using GK Strategies but also invest in real estate and startup tech companies. They went on to raise nearly $90M, according to the complaint, and were continuing to solicit investors as recently as July.
“Nanban” is a Tamil word meaning friend, according to the complaint.
The company has invested in three North Texas developments, according to its website. It also raised $50M in pre-seed funding to assist in the launch of Homz, a Dallas-based development company with plans to build 50 attainable housing communities.
The complaint seeks permanent injunctions, repayment of illegally obtained gains with prejudgment interest, and civil penalties from all three founders. It also asks that the judge prohibit the founders from acting as officers or directors of a public company and requests a jury trial.
