The state charged a Cape Cod man with civil fraud for allegedly running a real estate scheme in which he took more than $1.2 million from 25 Massachusetts investors.
According to a complaint filed Monday by Secretary of State William F. Galvin’s office, James R. Cruise Jr., of Centerville, sold unregistered promissory notes to investors through his company, The Austin Group, over two decades. While promising to pay investors an interest rate of up to 15 percent, Cruise actually used the money they gave him to buy real estate, the state said.
Cruise, in an interview, said the business of borrowing money from people to finance his real estate deals worked for many years, until financial markets weakened and he was unable to keep making interest payments to his investors.
“I issued the promissory notes. I did not know they were against the law,’’ Cruise, 55, said. But he acknowledged he owes investors money as the state maintains.
“You can’t blame them for being upset,” he said.
In testimony before the state securities division, which Galvin oversees, Cruise told investigators he sometimes used investors’ funds to pay personal bills and other expenses. He also said he used new investors’ money to pay prior investors, a practice that Galvin’s office likened to running a Ponzi scheme.
According to the complaint, Cruise amassed at least 25 properties in Massachusetts, New Hampshire, and Texas once valued at over $18 million.” Cruise said he has since sold some of the properties, and that he lost his own home to foreclosure.
The state is seeking a cease-and-desist order against Cruise and Austin Group, as well as an accounting of all proceeds from the alleged wrongdoing, an offer to compensate investors, and an administrative fine.