NJ Affordable Homes dupes 1,200 investors

In court documents released last week, the Security and Exchange Commission revealed investors had given $123.3 million to the alleged Ponzi scamming firm — up more than three times from the SEC’s original $40 million estimate. So why isn’t the owner behind bars? Read on to find out. 

New financial data has been disclosed about the alleged Ponzi scamming firm, NJ Affordable Homes.  

When the Security and Exchange Commission (SEC) filed suit against the investment company last year, it quoted about 500 people had given $40 million to the firm with the promise of 15 percent returns. However court documents released last week sing a different, more disturbing tune.  

According to The Star-Ledger, by September 2005, when the SEC took control of the company, it found that more than 1,200 investors had given NJ Affordable and its owner, Wayne Puff, $123.3 million.  

Since then, the company has been placed in bankruptcy and a detailed accounting was performed of the firm’s books and records, the newspaper reported. According to court papers, the trustee overseeing the case filed asking a judge to impose a $67.5 million default judgment against Puff, 58.  

NJ Affordable operated a Ponzi scheme in which money was generated from new investors to pay old investors, who were promised interest rates. According to the newspaper, between 1994 and 2005, the company promised $91.4 million in interest to investors but paid out only $67.4 million in both principal and interest.  

The company incurred cumulative losses through the years by buying and selling unprofitable properties. In July, the trustee sued Puff, saying he took millions from the business and masterminded the scheme, the newspaper reported. 

Puff has yet to respond to the complaint and so far, as not been charged for any crime. However, court papers filed when two NJ Affordable workers pleaded guilty to charges identified Puff as a co-conspirator. 

Settlement proposal

The trustee has set up a system to help more than 150 investors settle their lawsuits, and ask to transfer their mortgage liens from the investors’ names to the company’s estate.  

According to The Star-Ledger, the proposal groups the investors: those who get less than 50 percent of their original investment back; those who got 50 percent or more back; and those who got back their entire investment, plus some. 

The trustee will dismiss his lawsuit against them in exchange for the investors waiving their right to any interest in specific properties, the newspaper reported. The settlement would allow some investors to file claims for state recovery, while others will not be able to.  

For those who were paid back more than they invested, another option would require them to repay NJ Affordable’s estate 65 percent of whatever they received beyond their principal, the newspaper reported.  

Will it do any good?

While some feel the arrangement is fair, others disagree.  

In early December, investors were vying for a class action suit against NJ Affordable after the company began suing them to have the mortgage liens of their invested homes transferred to the company’s estate.   

Attorney Lindsey Taylor argued in court filings that the trustee offers no explanation “as to how the proposed settlements are fair and reasonable,” the newspaper reported.