Feds: NJ developers ran major Ponzi scheme that defrauded thousands
Federal prosecutors have accused two North Jersey developers of running a $650 million Ponzi scheme that cheated roughly 2,000 investors — as well as scheming to dodge $26 million in taxes.
Thomas Nicholas Salzano, 64, of Secaucus, and Rey Grabato, 43, of Hoboken, were both charged in an 18-count indictment unsealed on Wednesday, U.S. Attorney Philip Sellinger said.
They each face conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, wire fraud, and conspiracy to defraud the U.S., stemming from activities with National Realty Investment Advisors, a high-profile company in Secaucus.
Salzano, publicly known as Nick, additionally faced five counts of subscribing to false tax returns and two counts each of aggravated identity theft and tax evasion.
He was arrested on Wednesday while Grabato, who also is a citizen of the Philippines, remained at large, according to Sellinger.
The former head of sales for NRIA has already admitted to his role in the scheme.
On Thursday, Arthur Scuttaro, 62, of Nutley, pleaded guilty in Newark federal court to conspiracy to commit securities fraud.
Scuttaro was slated for sentencing on Feb. 23, 2023.
In June, state prosecutors issued a cease-and-desist against NRIA. It specifically named Salzano, Grabato, Scutarro and another NRIA executive, D. Coley O’Brien, of Southampton, New York.
The same month, the company began Chapter 11 bankruptcy proceedings.
The fraud involved selling securities – in the form of membership units in a real estate investment fund known as the NRIA Fund – to people across the country, including 380 investors in New Jersey, state prosecutors said.
President in name only
Grabato was president of NRIA while Salzano was the firm’s shadow chief executive officer, according to federal prosecutors. In reality, Salzano ran the day-to-day operations and gave directions to Grabato, as they ripped off investors over a four-year span, funneling a large amount of the millions into a lavish lifestyle for the duo and their relatives.
From February 2018 through January, Salzano and Grabato used lies, elaborate false advertising campaigns and phony documents to cheat investors and potential investors of the NRIA Fund, even holding meetings and presentations, prosecutors said.
Salzano concealed his true role calling the shots because of a prior guilty plea to cheating small businesses out of state through a Newark-based telecommunications company, prosecutors said. He put a luxury townhome and high-end cars in Grabato’s name and paid for them with investor cash.
Shore weekends, no-show job, erectile meds
More investor funds were squandered on expensive dinners, extravagant birthday parties, erectile dysfunction medications and payments to both Salzano’s current wife and ex-wife, according to court filings.
At least $91,000 alone went to “a resort on the New Jersey shore” to pay for vacations and annual elaborate weekend-long birthday parties for Salzano, which included a banquet and hotel rooms for dozens of guests, including Grabato.
The Jersey Shore personal vacations were marked down on checks as “Required business meetings” And “National Realty Sales Convention.”
Salzano’s wife was given a salary of between $3,000 to $7,000 per week for a no-show job, from mid-2017 until January, according to court documents.
Salzano and Grabato also schemed to cheat the IRS from collecting $26 million in outstanding taxes Salzano owed to the U.S. Treasury — lying, opening shell company bank accounts and creating fake paper trails, prosecutors said.
In a separate civil action announced Thursday, the Securities and Exchange Commission filed a complaint on Thursday against Salzano, Grabato, Scuttaro and others based on the allegations underlying the Ponzi scheme in the federal case.
Both Salzano and Grabato face up to 20 years in prison and a $5 million fine if convicted of federal securities fraud alone.
The wire fraud conspiracy and wire fraud counts are both punishable by a maximum penalty of 20 years in prison and a $250,000 fine.
FBI Special Agent in Charge James Dennehy said it was a “cautionary tale” for would-be investors to research and watch for red flags before handing over hard-earned savings.
“Slick pamphlets, flashy commercials, and ads that feature celebrities do not add up to the most important element – credibility,” Dennehy said.
Sellinger said “their criminal tactics were straight out of the Ponzi scheme playbook so that they could cheat their investors and line their own pockets.”