The U.S. Securities Exchange Commission has asked a federal judge to place hundreds of acres in some of North Texas’ fastest-growing counties for residential construction into receivership pending the unraveling of court proceedings involving land deals that government prosecutors allege are fraudulent.
Dallas real estate developer Tim Barton, president of JMJ Development and CEO of investment firm Carnegie Development, faces federal charges for allegedly bilking more than $26 million from Chinese nationals who were told they were investing in suburban land development deals for housing communities to supposedly be built in Parker, Kaufman, Tarrant and Johnson counties.
Barton faces nine felony counts including securities fraud, wire fraud and conspiracy to commit wire fraud, according to an indictment signed by a federal grand jury foreman on Sept. 20. The previously sealed indictment was unsealed Friday and announced by U.S. Attorney for the Northern District of Texas Chad Meacham on Monday.
In a separate legal action, the SEC accused Barton, veteran Texas homebuilder Stephen Wall and Chinese businessman Haoquiang Fu, also known as Michael Fu, of operating a fraudulent real estate investment offering. The three worked together to persuade investors to buy securities issued by companies the three controlled then allegedly “misappropriated nearly all investor funds,” according to an SEC lawsuit filed Friday in the Northern District.
The SEC has requested the appointment of a receiver, according to a motion filed by the agency Monday. Receiverships are cases in which a judge appoints a third party to locate and potentially liquidate properties in order to pay a judgment.
“The property interests could potentially result in a meaningful recovery for investors,” the motion says. “However, there is a substantial risk to the value of the property interests if a steward is not put in place to protect them.”
“The SEC respectfully requests the Court to appoint a receiver over the Barton-controlled entities to determine the value of the property interests (and any other assets) and to secure, preserve, and potentially monetize that value for the benefit of defrauded investors.”
Barton, assisted by Wall and Fu, raised roughly $26 million related to the proposed real estate developments in North Texas from more than 100 investors, most of whom were Chinese nationals, according to the SEC lawsuit.
Barton has pleaded not guilty to the charges. He remains free on an appearance bond.
The Business Journal received an emailed statement through a spokesperson saying that Barton and JMJ Development are “committed to vigorously addressing both the SEC and FBI allegations in concert with their counsel Richard Roper of Holland & Knight.”
“The parties’ aim is to reach an expedient resolution to all matters pending,” according to the statement.
The SEC is seeking a receiver over entities Barton controlled. Fu marketed the investments to Chinese investors and misused investor funds to pay himself undisclosed fees and commissions, and Wall lent his name to the project and helped to provide inflated land prices in investment offerings pitched to investors, according to the SEC’s motion for receivership.
The SEC is seeking the appointment of a receiver for Wall 7, Wall 9, Wall 10, Wall 11, Wall 12, Wall 16, Wall 17, Wall 18 and Wall 19, which are separate limited liability companies and single-purpose entities that list Carnegie Development as the managing member of each entity. Each Wall entity has its own investment offering and property location. Specific numbers deemed unlucky in Chinese culture were avoided in the investment names, according to the indictment.
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