Silicon Sage top executive blames coronavirus for real estate woes
Coronavirus-linked woes have unleashed a “liquidity crisis” for Bay Area real estate properties owned by Silicon Sage Builders, the company and its top executive Sanjeev Acharya stated in court papers for a fraud case filed by the Securities and Exchange Commission.
Acharya and Silicon Sage Builders warned that the SEC has launched a “rush to judgment” in the fraud case that the securities regulators filed against the real estate firm and its principal owner Acharya.
The SEC’s “precipitous filing” of the complaint “increases the immediate risk to investors” who have bought stakes in Silicon Sage’s development endeavors, according to documents Acharya and his company filed with the U.S. District Court.
“Defendants currently face a liquidity crisis caused in part and worsened by a global pandemic,” Silicon Sage Builders and Acharya stated in court papers filed on Dec. 28.
The court filings mark the first extensive statements by Acharya or Silicon Sage after the SEC filed a complaint against them on Dec. 21 that alleged wide-ranging fraud by the
real estate executive and his development firm.
The SEC has accused Silicon Sage Builders and Acharya of a series of fraudulent actions over a period of roughly four years beginning in 2016. The SEC claimed that the fraud might have impacted an estimated 250 people who invested a combined $119.2 million in the company’s projects.
The securities regulators are seeking preliminary and permanent injunctions, the appointment of a receiver over Silicon Sage Builders, asset freezes, and financial penalties against the defendants, as well as an order prohibiting the destruction of documents and accounting, federal court documents show.
Acharya and Silicon Sage responded in the court papers that the SEC is unfairly attempting to liqui
date the company.
“After two months of investigation, and without any direct allegation of misappropriation in its complaint, the SEC proposes nothing less than the dissolution of a business built over nine years,” Silicon Sage and Acharya stated in the court papers.
The fraudulent activity allegedly orchestrated by Acharya and Silicon Sage Builders began around August 2016, according to the complaint that the SEC filed on Dec. 21 in the U. S. District Court for Northern California.
“Since at least August 24, 2016, Silicon Sage Builders and all but one of its real estate development projects have not been profitable,” the SEC complaint alleges.
However, Silicon Sage and Acharya have raised considerably less than the $119 million that the SEC alleged in its fraud complaint, according to a declaration filed by Polly Tsai,
controller of Silicon Sage.
“From March 18, 2020 to September 9, 2020, SiliconSage raised approximately $4 million in funds from individual investors,” Tsai stated in court papers. “Since September 9, 2020, SiliconSage raised less than $ 400,000 from two investors.”
The development firm and Acharya have been seeking to remedy the liquidity woes that confront the company’s projects.
“Silicon Sage attempted to negotiate refinancing and other financial workouts with existing lenders and sophisticated institutional investors,” Silicon Sage stated in the court records.
Acharya and the company urged the federal court to approve a sufficiently relaxed schedule for the fraud case so that Silicon Sage can solve the liquidity woes.
“Interests of the individual investors can be best protected by thoughtful management of ongoing construction projects hob
bled by the pandemic,” Silicon Sage and Acharya said in the legal filing. “These interests … would be severely compromised by any fire sale triggered by the SEC’s overly aggressive actions,” Acharya and Silicon Sage added in the court documents.
In meetings with investors around August 2020, Acharya appeared to acknowledge that he had made some errors over the years, according to the SEC complaint.
Acharya said he should have been more transparent with investors, the regulatory agency’s complaint stated.
“I should have done it,” Acharya said at an investment meeting. “Back then, maybe my thinking was that everybody’s returns will come. So … I really didn’t bother to get into details. My mistake was that I wasn’t thinking about a downside scenario.”