The SEC filed charges in the Eastern District of Texas seeking permanent injunctions, disgorgement and penalties in a litigated case against Brothers Saumil and Poorvesh Thakkar and their affiliated entities, who raised more than $12 million in a fund that was formed to invest in real estate projects. Certain investors were also given the opportunity to purchase membership units of the fund manager. Fund marketing materials contained detailed descriptions or projects they were targeting or purportedly already acquired for the fund, projected development timelines, as well as potential returns under different scenarios. Misrepresentations included statements about properties that were under contract for the fund, leasing percentages for development projects, project costs, the Thakkar family’s investment in the fund, and fund transactions with entities owned and controlled by the Thakkar brothers. Funds that are raised by individuals and entities as an extension of their existing business activities and/or real estate holdings are ripe for abuse. Where those parties raising such funds recognize that such activity requires registration or filing as an investment adviser, compliance staff should closely scrutinize activities for potential conflicts and ensure fulsome disclosures regarding affiliated transactions. Those who engage in such activities without registering or filing as an adviser clearly present red flags for regulators and could easily constitute offering fraud for unsuspecting investors.