Written by The White Law Group• August 24, 2023• 3:57 pm• Investment Loss Recovery, Securities Fraud Articles

Ex-KBS Realty Advisors Exec Pleads Guilty to $2.7 Million Fraud

KBS Realty Advisors Former Chief Auditor Faked Invoices in Fraud Scheme

According to a press release on August 21, 2023, The U.S. Department of Justice announced that the former chief auditor of KBS Realty Advisors has confessed to stealing around $2.7 million from the company.

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From 2008 to January 2022, Aggarwal reportedly worked in the internal auditing department of the Newport Beach-based KBS Realty Advisors and climbed the corporate ladder to become the department’s director. From January 2012 and continuing until January 2022, Aggarwal allegedly used his position at KBS to embezzle the company’s money.

Aggarwal’s alleged scheme consisted of hiring six vendors connected to his family and friends, who then submitted fake bills for services that were never performed. KBS Realty Advisors paid these invoices, to the tune of approximately $2,729,718, money that was funneled into Aggarwal’s bank account. His alleged deceptions were discovered during an internal audit. He reportedly resigned from KBS in January 2022 after the company began investigating the invoices, according to the announcement.

A sentencing hearing is scheduled for January 2024 at which time Aggarwal will face a statutory maximum sentence of 20 years in federal prison. He has agreed to pay the money to the company.

KBS Realty Advisors – Non-traded REIT Manager

KBS and its affiliates manage seven non-traded real estate investment trusts (REITs). According to the company in a press release, KBS “proactively reimbursed the affected REITs for any amounts inappropriately charged to them, and for the costs the REITs incurred in the joint audit committees’ investigation.”

The White Law Group has filed many claims over the years involving the improper sales of KBS REITs to investors. KBS REITs are complex investment products and not suitable for all investors.

KBS Real Estate Investment Trusts in 2023

In March 2023, KBS REIT II reportedly sold Union Bank Plaza at a 50% loss. KBS Real Estate Investment Trust II (KBS REIT II) – Liquidation Plans

In January 2023, KBS REIT III suspended “ordinary redemptions” under the company’s share redemption program. The suspension is reportedly a direct result of the ongoing challenges affecting commercial office buildings. The board has also lowered its distribution rate, according to the filing. The company stated in filings with the SEC that it is critical to preserve capital given the “current state of the markets.” See: KBS REIT III Suspends “Ordinary Redemptions”

Non-Traded REITs – Complex Investment Products

Non-traded REITs are complex investment products. do not trade on a public exchange like traditional stocks. Instead, they are sold through private offerings. As a result, there is no established secondary market for these investments, making it difficult for investors to sell their shares before the REIT’s liquidation event, which typically occurs after several years. They often have lock-up periods, during which investors are prohibited from selling their shares. These lock-up periods can extend for several years, further restricting liquidity and preventing investors from accessing their capital when needed.

While some non-traded REITs offer periodic share redemption programs, allowing investors to sell their shares back to the REIT at predetermined intervals, these programs often have limitations. Redemption requests may be subject to certain criteria, such as minimum holding periods, limited redemption amounts, or suspension of the program during specific periods.

Non-traded REITs do not have readily available market prices like publicly traded securities. Instead, their valuations are typically determined through appraisals or estimated net asset values (NAVs). These valuations can be subjective and may not accurately reflect the current market conditions or the true value of the underlying real estate assets, potentially impacting investors’ ability to gauge their investment’s liquidity.

Typically, non-traded REITs also have substantial upfront fees and ongoing management fees, which can erode investor returns. These fees, combined with the lack of liquidity, can make it challenging for investors to exit their investment without incurring significant costs.

FINRA Arbitration Attorneys

Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Brokerage firms that fail to do so may be held responsible for any losses in a FINRA arbitration claim.

Experienced securities fraud attorneys can help you through the FINRA arbitration process. The intricacies of FINRA arbitration can be challenging to navigate, and a skilled attorney with expertise in securities law can significantly enhance your prospects of a successful outcome.

With over 30 years of securities law experience, the attorneys at The White Law Group can help you to recover your investment losses. The firm’s attorneys have recovered over $50,000,000 on behalf of investors since 2010. Our firm has handled over 700 FINRA arbitration cases across the country.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington. We represent investors across the country in claims against their brokerage firms. For more information on the firm and its representation of investors, visit http://whitesecuritieslaw.com.