SEC Accuses Silicon Valley Developer of Scamming Investors

SiliconSage Builders drummed up $119 million by promising big payoffs for investors. But the Sunnyvale company’s professed optimism belied a troubling reality.

In a claim lodged this week in federal court, the U.S. Securities and Exchange Commission (SEC) describes how all but one of the developer’s projects in the past few years blew over budget and failed to garner much in the way of returns.

Sanjeev Acharya.

According to the regulatory agency, SiliconSage owner Sanjeev Acharya defrauded 250 investors—most from the South Asian community—to the tune of $119 million by weaving “a continuous series of misrepresentations and omissions and other deceptive conduct.”

“Acharya falsely described SiliconSage Builders and all of its real estate projects as efficient, successful and profitable,” the SEC complaint reads, “when, in fact, from 2016 to 2019, all but one of his projects had significant cost overruns and did not generate enough revenue to cover the overruns, leaving [the company] with mounting, undisclosed liabilities to investors totaling over $18 million by 2019.”

Per the SEC, Acharya paid old backers with money from new investors and lied about the funds being interest payments derived from the company’s profits. The CEO told investors that they could redeem their capital in one fund after a year, the SEC continued, but went on to repeatedly decline requests to take him up on that commitment.

The SEC lawsuit also accuses Acharya of misrepresenting the offerings for one fund as up to $11 million, when in fact he raised more than $50 million.

“The actual size of the offering,” the claim states, “also far exceeded the limits set forth in the offering materials, which stated that ‘the total capital contributions raised by [the fund] at any given point of time shall not exceed 50 percent of the reserves and projected profits over a two-year window, of SiliconSage Builders.”

A request for comment from SiliconSage wasn’t returned by press time.

Development Disrupted

The fraud claim stands to impact a number of pending projects in the South Bay.

Acharya had several developments in the pipeline, including an urban village that proposed to bring a hotel, community farm, entertainment center, shops, offices and homes to San Jose’s North Side.

Even amid the firm’s financial woes, which this year Acharya began blaming on the pandemic, SiliconSage continued to snap up real estate.

In October, one of the firm’s subsidiaries shelled out $9 million for a two-and-a-half-acre parcel by 2101 Alum Rock Ave. in San Jose’s East Side, where he sought to build 800 residential units alongside stores and eateries. Acharya called the project called Sunset @ Alum Rock and touted it as a chance to breathe new life into the storied ethnic enclave.

Right down the street, still another SiliconSage development was making some headway.

The Little Portugal Gateway mixed-use project won the city’s approval to raze three commercial buildings to make way for a six-story apartment building with an underground parking garage on a 0.9-acre site.

At first the projects met with resistance from denizens of Little Portugal, a district mostly populated by Latino residents and minority-owned mom-and-pop shops, offices and restaurants. It’s also one of the only parts of San Jose where developers can speed through the city’s planning process thanks to a quirk in the zoning code that allows them to bypass rezoning permits, community meetings and City Council approval.

To make way for the 800-unit apartment complex, SiliconSage initially proposed demolishing buildings occupied by dozens of small businesses. But over the course of a year or so, the company began ceding to some of the demands made by the community, which wanted to see a public park and a marketplace to accommodate at least some of the businesses the project threatened to displace.

“I was very, very hopeful,” says Jesus Flores, a local entrepreneur and head of the Latino Business Foundation Silicon Valley. “We were making progress.”

Some family-owned businesses had already been displaced when SiliconSage bought the Sunset @ Alum Rock site, Flores says, and others were waiting to find out if they’d get a lifeline through relocation assistance.

Then came the SEC complaint.

Now, it looks like SiliconSage’s acquisitions in the economically embattled East Side neighborhood will remain empty for who knows how long.

“Since this developer already purchased several properties along the corridor, those are now vacant and this situation can stop the construction of the two developments,” Flores says. “It may take years to find a developer that may want to take on those projects.”

What’s Next?

The SEC is asking the court for preliminary and permanent injunctions to stop SiliconSage in its tracks. It also wants to place the company under a receivership, freeze its assets and prevent it from destroying any records.

Alka Patel, the associate regional director for the SEC’s Los Angeles office, said the agency brought the charges to protect retail investors.

“As we alleged in our complaint,” he wrote in an announcement of the case earlier this week, “wrongdoers sometimes prey on the trust of members of their communities to raise funds for their fraudulent schemes.” He added: “Affinity frauds are particularly harmful to retail investors, and this case demonstrates the SEC’s commitment to pursuing such schemes and protecting retail investors.”

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @jennwadsworth.

18 Comments

  1. Ain’s so easy building the place you live in, is it?

    I am not so smart, but I don’t see the part where Mr Acharya pocketed massive funds or redirected them to a sibling’s consultancy firm. Sounds like maybe a bit of overconfidence, a lot of inexperience in dealing with the inefficiency of San Jose, and a narcissist tendency to not look foolish.

    Making, building, owning, running anything is hard. San Jose, with all of its regulation and schoolmarm-ary of its city council members, making, building, owning and running anything is near impossible. Only a fool would even try.

    You want lower rents, you want to own your own home and build equity for your kids and grandkids, a lot of Mr. Acharyas are going to have to try and fail. Perhaps he broke the law, we will see, but these projects failing to make a profit should beg the question, what are you doing wrong in getting people a break in housing costs.Or maybe that is the idea, that you never will?

  2. > Acharya called the project called Sunset @ Alum Rock and touted it as a chance to breathe new life into the storied ethnic enclave.

    A “storied ethnic enclave”?

    Seriously?

    If journalism doesn’t work out for you, Jennifer, I see a bright future for you in real estate sales.

    “A partial view of the ocean”.

  3. I have been defrauded twice. One of these frauds was investigated by the SEC, and the other by the San Francisco FBI. Both big time frauds were committed by Indian businesses. I am not Indian. I have learned in India corruption and bribery are everyday bread. I will never engage in any business with Indians.

  4. Fexxnist, “one did me wrong, all must be bad” is a false argument. Insert the name of a preferred ethnic or cultural group in place of “Indian” (South Asian) to see the overt racism in your comment pop.

    Individuals defrauded you, which is wrong, but an ethnic group did not.

  5. SJI reports the alleged wrongdoing of one real estate developer but ignores the apparent actions of San Jose Water Chief Administrative Officer Andrew Walter, the Cupertino Chamber PAC, and real estate developer Peter Pau to subvert democracy by pouring money on a marketing campaign after reporting deadlines had closed. All in support of an effort to misrepresent both a resident initiative of sensible growth and Peter Pau’s initiative to sell a disaster of office towers as “housing and community benefits” to uninformed voters in a San José adjacent city.

    But office towers (towers of anything) are so 2019. What’s the exit strategy, Peter Pau?

    Reported 12/21/2020:

    https://sanjosespotlight.com/state-watchdog-fines-san-jose-water-executive-cupertino-political-committee-for-campaign-violations/

  6. We do not need more housing blocks that look like prisons. From the windows you have a view of the neighbor’s bedroom or bath. And how do you like your neighbor’s cooking smells?
    But, it sounds like these hapless investors will take a bath with the overruns.

  7. Wow. This is when the caste system meets vulture capitalism.
    Throw in the Scam demic. I mean Scammy liccardo. And we will need a century to recover.

  8. Dear Community,

    The City has cheated the Community with a cheater.

    How is it that Carrasco missed this.

    The Community set up to address this and zero happened from City Hall.

    We asked, no begged for a REAL URBAN VILLAGE PLAN WITH PROTECTIONS FROM DEVELOPERS.

    Carrasco and Planning have failed us for the Developer to make changes to our Community. Changes that will not include our Families but put cash in a crooks pocket.

    A 5 page Urban Village Zoning Change is nothing compared to the100 ton250 Page Urban Village Plans written by Planning.

    The Foxes are in our City Hall Hen House.

    And the East Valley is getting eaten alive by City Hall Department Heads that ignor our Community.

    In Community Spirit,
    Danny

  9. KEEPINITREAL, I give a sh!t about your opinion and you adding the racism. One did not do me wrong. One did hundreds wrong and this is why the SEC got involved. It was after this, I did my homework. A private investigator from LA found the crooks. I got my money back. Indians are known for these types of grand White collar crimes the same way Mexico has the top and most dangerous drug lords. I love Mexico and the Mexican people not the drug lords. The SEC case was done by a female Indian woman. She lives in Orange County. Indian crooks are known for these crimes the same way Mexican drugs lords are known for their drug crimes. Some drug dealers invaded one of my properties in Mexico. I know better how to deal with these criminals than the Indian ones. I have given $$$ in bribes in Mexico. Some people just see racism everywhere. It is funny, the Indian woman who did me and other hundreds wrong also said not to touch the investment for a year. She used this time to get the money, filed for chapter 11, and then moved to England for years. The private investigator found the attorneys from Nevada that helped her with the scam. This is how I got my money back. Other people did not get anything back. India and Mexico are known for their corruption. Mexicans are aware of this problem. I am not sure about Indians’ awareness. I can say Mexican drug lords and Indians crooks because that is my own expert with big time scams and crimes! “La burra no era arisca, la hicieron” corazón!

  10. [email protected] this is the email of the guy from SEC that investigated my case. Contact him if you become victim of these types of crimes. If it is a crime that involves the internet, contact the San Francisco FBI.

  11. If you think this was the “only one”, or just one bad apple. Think again.

    He was just acting out the “MODEL”

    I still remember all the infomercials and the get rich scams regarding real estate and apartments that is STILL going on in the state.

    In fact I see adds on youtube all the time regarding trying to get people to get into the housing and apartment business. It is all a Ponzi and marketing scam.

  12. Another interesting quote:

    “It may take years to find a developer that may want to take on those projects.”

    I think a follow-up question to Mr. Flores into what may be the reason no one wants to take on these projects is warranted. Is the land is too expensive, but seems to me the land may now be acquired at a discount. The properties being tied up in the complaint? Not sure the SEC needs Mr. Acharya to hold onto the property to try this case. Mr. Flores, what do you mean by this statement, because from a community perspective it is at least half the story here.

    The other being, don’t invest in these exclusive “REIT” and bridge funding deals. This is a complicated business and handing your money over to anyone and with no say on the project is a gamble. If you want to be in the Real Estate business, start small. Do as much of the work yourself as possible, and only contract out what you can’t do or it is too operationally inefficient to do.

    That means you do the demo (anyone can do that), you paint the walls, you screen the tenants and learn fair housing law, shop for loans yourself don’t use brokers, you keep the books and learn what things cost, you fix the toilets with your own hands until you understand what’s going on in the unit. Buying, selling, and renting are best done by your own person. It is a complicated job, a ton of laws, and a ton of things that can go wrong.

    Development is a players club, and if you are not a player you are likely the mark. Only go to development once you really know what you are doing, it is a vast oxygen-less desert you won’t likely survive. You will likely blow up at least once even if you know what you are doing. Everything always takes longer and cost more than estimated predict, and when even one person and a CEQA suit has a say in stopping the project indefinitely, blowing up is a high probability end state.

    The complaint is pretty clear that he intentionally over-subscribed these projects if proven seem conclusive he is toast. He also over ran his budget after what looked like successful smaller projects, but that could be explained by inexperience and overconfidence when transitioning to larger “podium” projects, this happens all the time. The question local leaders and land use managers must ask is, what are the real world costs to develop, is San Jose and California making it too expensive to develop, and if so, is that best?

  13. SJ,

    There are so many ways to get federal and state funding to subsidize housing development when you are going to provide housing that is affordable. On top of that, local governments do have plenty of programs to cut costs for that group as well.

    The sacrifice is that you are not going to get unlimited return on investment, the benefit is greatly reduced risk of loss. The problem is that this industry has been only looking to achieve short term profits and the loss of long term adequate numbers of housing being built.

    But it makes sense, a chronic undersupply means a “sellers” or “rentors” market. Thus you wind up with what we have today.

    Now most people that are the “preferred” customers are moving out of CA because it simply costs too much to be here, and they can work for their “Tech” companies away from the office now. You are going to see a massive foreclosure market in 2021.

    The ONLY way to prevent this is to either build enough housing right now, or simply go away and never look back at CA again. This problem started in 1970 in CA and the PRIVATE housing sector made promises that if the State behaved itself, the state would get what it wanted. That was the basis of the Costa Hawkins and the Ellis Acts. Boy did that turn out to be a big “SCAM”.

  14. Usha Villarreal is a female Indian and big time scammer. She currently owns with her husband several senior residential facilities in Orange County, Golden Coast Senior Living. Of courses she has used her business for LC for Green Cards Jobs at a big scale under the “international talent” some Indian CEOs have used to bring international workers to the US. She has also been investigated by the SEC in the past. She and her husband have made millions scamming people for a period of 45+ years. Her husband is the son of hardworking Mexicans. He was a successful professional. He met Usha in one of his trips to India (job related). They married soon after meeting for first time. Soon after, they engaged in big time scams including scamming husband’s own relatives, most of them wealthy professionals. The scams have not stopped. According to their relatives, Usha uses these senior places to take the homes of seniors with no close relatives. Usha appears in all scam documentation and legal business, used for laundry according to relatives, as CEO and her husband as Vice President, assistant. Usha Villarreal is for sure a World Talented scammer! Per her own request, the LC for Green Card Jobs has been removed from the business’ website and legal documentation. Usha and her husband were involved in the scam I was one of hundreds of defrauded people. The LA investigador found everything about her and her husband. Usha was a licensed nurse in Indian. She uses her nursing title for the scams. I have documentation with her name and her husband’s name too!

  15. Anyone who does not realize that Silicon Valley’s gold rush is in real estate, is not paying attention. What we should be asking is why did the feds prosecute this one while JEff Rosen prosecuted what clearly was an SEC matter invovling attorneys Valerie Houghton, LIz Goodley , David Lively and former real estate agent Terry Houghton. Rosen dragged that out 5 years and dismissed last month,. noting Terry Houghton has scammed taxpayers for his IDO defense. In the South Bay , Intero has held Patty Filice out as their broker associate for over 20 years, turns out she is not. Rosen and John Chase have done nothing, and DRE not funded to address. So looks like the feds should just camp out here for while when it comes to Santa Clara County Real Estate !

  16. Susan, Jeff Rosen is and will die being Jeff Rosen. There is no hope for change about ROSEN. Dragging cases and then “dismissed” is his trade mark when protecting those he cares about, attorneys, judges, public officials, law enforcement, and other influential individuals in the county with political ties! We need to recall this [email protected] [email protected] Jeff Rosen!

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