Real Estate Developer Sentenced To 6 Years In Prison For Defrauding Investors Out Of $58 Million In

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https://www.justice.gov/usao-sdny/pr/real-estate-developer-sentenced-6-years-prison-defrauding-investors-out-58-million

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Friday, April 5, 2019

Real Estate Developer Sentenced To 6 Years In Prison For Defrauding Investors Out Of $58 Million In Years-Long Real Estate Investment Scheme

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL D’ALESSIO was sentenced to 72 months in prison for operating a years-long scheme to defraud investors in his luxury real estate development projects in Manhattan, the Hamptons, Westchester, and elsewhere, and for making false claims and concealing assets in connection with his bankruptcy case. D’ALESSIO pled guilty on November 8, 2018, before U.S. District Judge Jesse M. Furman, who imposed today’s sentence.
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D’ALESSIO, a real estate developer and general contractor, served as the president and chief executive officer of a real estate investment and development firm specializing in the design, construction, and management of both residential and commercial real estate properties (“Company-1”). D’ALESSIO and Company-1 developed, and purported to develop, luxury residential real estate properties in Manhattan, the Hamptons, Westchester, and elsewhere.

D’ALESSIO typically followed the same pattern in each real estate investment project: he sought investments by offering for sale shares in a newly formed limited liability company (“LLC”) named after the location of the parcel of real estate to be developed and sold (the “Target Property”). In exchange for a purchase of shares in the LLC, D’ALESSIO promised a guaranteed monthly interest payment and a share in the profits from the sale of the Target Property. In soliciting investors, D’ALESSIO made numerous representations to potential investors, including that investor funds would be used only to develop the relevant Target Property and to cover related business expenses of the relevant LLC.

However, in reality, from 2015 through April 2018, D’ALESSIO misappropriated investor funds for his own use and benefit, and made other material misrepresentations. For example, in the case of a purported luxury condominium development on the Upper East Side, D’Alessio represented to investors that the building would be delivered to him vacant. In reality, however, and as D’Alessio knew, the property was inhabited by rent-controlled tenants who could not be easily evicted. In contrast to his representations of a speedy development project and a viable investment opportunity, no substantial changes could be made to the property while those tenants remained in occupancy.

Upon receiving investor funds, D’ALESSIO typically channeled those funds through a series of bank accounts held in the names of shell companies owned and controlled by D’ALESSIO. D’ALESSIO then used much of those investor funds for his own benefit, including to pay off debts and prior investors, and to fund significant gambling and other personal expenses. D’ALESSIO took steps to conceal his fraud, including deceiving investors regarding the progress of various real estate projects and using money raised from investors to make monthly payments to investors in different projects in the manner of a Ponzi scheme. D’ALESSIO defrauded investors out of approximately $58 million.
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