Executives at Dallas-based real estate company Nanban Ventures wrote a letter to investors regarding fraud allegations by the Securities and Exchange Commission.
The company said it is cooperating with the SEC and is confident it has the resources to reassure investors. The team is also in the process of hiring a forensic accountant to record financial transactions and is working with lawyers to protect investors' interests, it said in a letter dated Monday.
“We are working around the clock to resolve this confusion,” executives said in the letter. “If we determine that this is not possible, we intend to vigorously contest the allegations.”
Headquarters of the Securities and Exchange Commission, Washington, DC
SEC takes temporary steps to stop Nanban founders Gopala Krishnan, Manivannan Shanmugam, and Sakthivel Palani Gounder from allegedly continuing to defraud investors. Obtained restraining orders, asset freezes, and other emergency relief measures.
According to the commission's complaint, the defendants raised $130 million from more than 360 investors, primarily members of the DFW area's Indian community, by misrepresenting profits.
The defendants then used the funds to repay other investors and kept most of the money for themselves, according to the complaint.
“In order to raise additional investment and keep the fraudulent business afloat, the defendants exaggerated the profitability of their investments and used significant portions of other investors’ funds to generate false profits for investors and themselves. The lawsuit alleges,
Nanban Ventures did not immediately respond. BisnowThis is a comment request from .
The SEC complaint says the investors were recruited through the Nanban Foundation, a nonprofit organization founded by three founders in 2020 with the goal of helping people achieve financial freedom. Investors were told their money would be invested using GK Strategies, a proprietary options trading platform that Mr. Krishnan claimed would “never lose money and outperform the stock market.” .
From 2020 to September 2021, four hedge funds raised more than $116 million, all of which underperformed the S&P 500 Index. Investors disputed the poor returns, prompting the founders to close down their remaining hedge funds and return their money with meager profits.
The founders then pivoted to Nanban Ventures, a venture capital firm that not only uses GK Strategies to trade funds, but also invests in real estate and emerging technology companies. They went on to raise nearly $90 million and continued to solicit investors as recently as July, according to the complaint.
According to the complaint, “Nanban” means friend in Tamil.
The company has invested in three developments in North Texas, according to its website. It also raised $50 million in pre-seed funding to help launch Homz, a Dallas-based development company with plans to build 50 affordable housing communities.
The complaint seeks a permanent injunction, repayment of illegally obtained profits with prejudgment interest, and civil penalties against all three founders. It also asks a judge to bar the founders from serving as officers or directors of public companies and to require a jury trial.
