Real estate fund adviser to pay $9.7M for deceiving investors

A settlement between a former investment fund adviser and his real estate firms has resulted in a payment of $9.7 million to settle allegations of misleading investors. Tom Vukota, the founder of Vukota Capital Management and VCM Global Asset Management, set up these firms in 2010 and they acquired numerous apartment buildings and hotels, including the Miramar Apartments and Stratford at Lowry in Denver.

Vukota, now residing in the Bahamas, controlled each property through a fund and sold shares in these funds to investors. By 2021, he had 14 funds under his belt, each one managing an apartment building. Among these properties were four in Colorado Springs – the Villages at Woodmen, Chestnut Springs Apartments, Wind River Place, and Residence at Austin Bluffs. These Colorado Springs assets were considered top performers in VCM’s portfolio. In early 2021, Vukota made a decision to buy out other investors’ shares in these funds without fully disclosing the facts to investors, resulting in misleading communication as identified by the U.S. Securities and Exchange Commission.

The SEC found that the buyout letters sent to investors were deceptive as they omitted essential information, failing to provide a complete picture of the Colorado Springs funds. Vukota allegedly concealed his role as the buyer, the substantial profits each fund was about to receive, and falsely reported that the apartments were experiencing losses. Investors were not informed about the favorable appraisals of these buildings.

As a result of his actions, the SEC concluded that Vukota received approximately $5.6 million in illicit profits by purchasing investors’ shares at undervalued prices. The SEC’s lawsuit against Vukota, Vukota Capital Management, and VCM Global Management accused them of breaching investment adviser and security laws. Apart from the buyout scheme, Vukota also allegedly arranged for the funds to provide below-market rate loans to VCM without informing investors and falsely asserted that his funds had undergone audits.

Following the lawsuit, Vukota reached a settlement with the SEC, neither admitting nor denying any wrongdoing but agreeing to pay $9.7 million to the government. Lawyer Sam Lieberman at the Sadis firm in New York, representing Vukota, declined to comment on the matter. This story was originally published by BusinessDen.