A press release from the U.S. Attorney’s Office:
INVESTMENT ADVISOR AND REAL ESTATE DEVELOPER CHARGED WITH CAUSING $5.5 MILLION LOSS TO 25 INVESTORS IN $9 MILLION FRAUD SCHEME
CHICAGO ― A former securities broker and his associate in a real estate business that converted apartments into condominiums were indicted for allegedly fraudulently raising more than $9 million from approximately 25 investors and misappropriating a substantial portion of the money, resulting in a loss of at least $5.5 million.
Malarz, 48, formerly of Lake Forest, and Lin, 39, of Palatine, were each charged with three counts of wire fraud in an indictment returned yesterday by a federal grand jury. Lin will be arraigned on date to be determined in U.S. District Court, while Malarz is a fugitive and is believed to be living in Poland.
According to the charges, Lin was a branch office manager of a securities broker-dealer in Itasca and also an officer of Malarz Equity Investments LLC (MEI), which was managed by Malarz and sold condominiums after purchasing apartment buildings and converting the units.
Lin recruited investors for Malarz and MEI from his securities firm’s client pool. I
n some cases, Lin allegedly convinced his clients to take out home equity loans or liquidate their brokerage investments to generate money to invest with MEI.
Between November 2005 and April 2010, Malarz and Lin fraudulently offered and sold investments in promissory notes and obtained loans personally secured by Malarz, while making false representations about the risks involved in investing and lending money to MEI, the charges allege.
Specifically, they made false representations about:
- the solvency and financial condition of MEI and Malarz
- the expected and actual returns on investments and loans, the ways the investors’ funds would be used
- Malarz’s ability to personally guarantee the investments and loans, according to the indictment.
Malarz allegedly misappropriated approximately $2 million for his personal use, including funds to pay
- outside business expense
- travel and living expenses, such as
- credit card
- home mortgage bills
- a Mercedes automobile
Malarz and Lin allegedly paid hundreds of thousands of dollars from investors’ funds to Lin’s wife, often in amounts approximating 10 percent of the funds that Lin brought to MEI.
Lin used these funds to pay personal expenses, including
- credit card
- home equity loan payments
The indictment seeks forfeiture of alleged fraud proceeds totaling at least $5.5 million as well as Lin’s residence in Palatine and additional homes in Palatine and Barrington.The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Securities and Exchange Commission, which filed its own civil enforcement action against the defendants, provided assistance.
The government is being represented by Assistant U.S. Attorney Rachel Cannon.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or an alternative fine totaling twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
An indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.