SEC v. M. "Shi" Shailendra, No. 1:14-CV-02465-TCB, Northern District of Georgia (Aug. 1, 2014) — Complaint

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION,
Plaintiff,
v.
M. "SHI" SHAILENDRA,
Defendant.
Civil Case No.
COMPLAINT
Plaintiff United States Securities and Exchange Commission (the "Commission") alleges
as follows:
SUMMARY OF ALLEGATIONS
1. This case involves material misstatements and misappropriation of investors'
funds by defendant
M. "Shi" Shailendra ("Shailendra") in connection with the offer and sale of
membership interests in Interstate North 5 Acres, LLC f/k/a Shi Investments Six, LLC ("Shi
Six"), a real estate investment vehicle that Shailendra controlled and shares
of which were sold
as a means to invest in newly acquired distressed real estate.
2. From at least 2008 through 2012, Shailendra raised capital for and managed
investment vehicles that invested in real estate, principally in the suburbs
of Atlanta, Georgia.
Shailendra solicited and sold securities in these vehicles primarily to Atlanta-based doctors
of
Indian or Middle Eastern descent, who placed great trust in him because of his heritage, his
1

prominence in the Indian-American community, his political connections, and his purported
willingness to risk his own money in the investment vehicles he managed.
3. Shailendra solicited investments and sold securities in Shi Six through oral and
written misrepresentations. In contravention
of representations that he made to investors,
Shailendra used his position
of trust and confidence to benefit himself by, among other things,
a. failing to fund his equity interests in the limited liability company but
nonetheless allocating ownership to himself as
if he had done so;
b. misappropriating investor cash for himself; and
c. using investor money to support his pre-existing, affiliated deals that were
in need
of cash.
4. By knowingly or recklessly engaging in this and other conduct described herein,
Shailendra violated, and unless restrained and enjoined will continue to violate, Section 17(a)
of
the Securities Act of 1933 ("Securities Act") [15 USC§ 77q(a)] and Sections 10(b) and 15(a)
of the Securities Exchange Act of 1934 ("Exchange Act") [15 USC§§ 78j(b) and 78o(a)] and
Rule 10b-5 thereunder
[17 CF.R. § 240.10b-5].
JURISDICTION AND VENUE
5. This Court has jurisdiction over this action pursuant to Sections 20(b ), 20( d), and
22(a)
ofthe Securities Act [15 USC§§ 77t(b), 77t(d)(l), and 77v(a)], Sections 21(d), 21(e),
and 27
ofthe Exchange Act [15 USC§§ 78u(d), 78u(e), and 78aa], and 28 U.S.C. § 1331.
6. Venue in this district is proper under Section 22(a) of the Securities Act [15
USC§ 77v(a)], Section 27 ofthe Exchange Act [15 USC§ 78aa], and 28 U.S.C. § 1391(b).
7. Shailendra is  a resident of Jonesboro, Georgia, and certain of the transactions,
acts, practices, and courses
of business constituting the violations alleged herein occurred within
2

the Northern District of Georgia and elsewhere, and were effected, directly or indirectly, by
making the use
of the means, instruments or instrumentalities of transportation or
communication in interstate commerce, or
of the mails, or the facilities of a national securities
exchange.
DEFENDANT
8. M. Shailendra, also known as "Shi Shailendra," age 69, resides in Jonesboro,
Georgia.
Shailendra served and continues to serve as the Manager
of Shi Six and, as noted in the
private placement memorandum, "has ultimate authority in all matters affecting the business and
affairs"
of Shi Six. As the managing member of Shi Six, Shailendra held exclusive
responsibility for soliciting investors, selling membership interests in Shi Six, communicating
with investors concerning this investment vehicle, and managing its operations.
OTHER RELEVANT PERSONS AND ENTITY
9. Interstate North 5 Acres, LLC f/k/a Shi Investments Six, LLC is a Georgia
limited liability company. During the relevant time period and to this day, Shailendra serves
as
its managing member. Shi Six's principal place of business is in Atlanta, Georgia.
FACTUAL ALLEGATIONS
10. During the third quarter of 2008, Shailendra set up Shi Six to invest in newly
acquired distressed real estate resulting from the financial crisis. Shailendra approached a
number
of potential investors and told them that Shi Six would be investing in real estate,
discounted and distressed because
of the financial crisis, which he would flip in three to five
years at sizable profits.
11. Shailendra described Shi Six to some investors as a real estate investment fund.
The private placement memorandum that Shailendra distributed and by which he offered limited
liability company units for Shi Six explicitly stated that Shi Six "was formed to invest in
3

opportunistic transactions within a diverse portfolio of real estate investments .... " In the private
placement memorandum, Shailendra further represented that Shi Six did "not own any
investments as
of [December 1, 2008]."
12. Shailendra also provided certain Shi Six investors with an operating agreement
that he signed and which described, among other things, how Shailendra would manage Shi Six
and its money. Shailendra promised to manage the affairs
of Shi Six with the other investors
remaining passive, and each investor would receive profits based on the number
of membership
interests he owned pro rata to the total number
of issued and outstanding membership interests.
Shailendra also solicited investors orally. To add legitimacy to Shi Six, Shailendra even told at
least one investor that a prominent financier and former politician would be investing
$15 million to $20 million in Shi Six.
13. The bulk of solicitations and sales by Shailendra of membership interests in Shi
Six occurred between October 2008 and February 2009.
14. Shailendra orally told certain investors that he would place his own funds at risk
by investing in Shi Six. Shailendra authorized and distributed an operating agreement and
private placement memorandum for Shi Six in which he represented that shares in Shi Six would
be sold for $250,000 each. Shailendra claims to have advanced approximately $500,000 in
earnest money deposits, equal to two shares, and recorded his ownership in the books and
records
of Shi Six. In October 2008, Shailendra reimbursed himself $500,000 for the earnest
money deposit by depositing two
$250,000 checks from Investor A directly into his personal
bank account. Due to the withdrawal
of all the funds he previously invested in Shi Six,
Shailendra should have reduced his recorded interest to zero, while crediting ownership for two
4

shares to Investor A, but he never did so. Shailendra nonetheless continued to misrepresent
himself to potential investors as a current investor in Shi Six.
15. Shailendra misappropriated substantial sums from Shi Six as investor cash flowed
into the entity. Between October 2008 and November 2009, Shailendra misappropriated
approximately $2,586,935
ofthe funds invested in Shi Six.
16.
On October 14, 2008, Investor B wrote Shailendra a check for $500,000,
representing an investment in two shares
of Shi Six. Shortly thereafter, on October 23 and 28,
2008, Shailendra transferred $295,000 and $200,000
of the proceeds of this investment into his
personal bank account.
17. Between December 22, 2008 and December 29, 2008, Shailendra accepted a total
of $600,000 in investments for Shi Six from Investors C and D. On January 2, 2009, Shailendra
misappropriated
$600,000 from Shi Six by transferring the funds to his personal bank account.
18. Also on January 2, 2009, Shailendra accepted a $250,000 investment from
Investor E.
Once
Investor
E's check for $250,000 cleared on January 5, 2009, Shailendra
misappropriated the $250,000 by transferring the funds to his personal bank account.
19. In total, the January 2, 2009 and January 5, 2009 misappropriations (the "Affiliate
Transfers") amounted to $850,000.
20.
Shailendra misappropriated investors' funds through these Affiliate Transfers
because he needed $850,000 to make payments
on an affiliate's loan. On October 1, 2008, prior
to raising most of Shi Six's capital, Shailendra caused Shi Six to enter into an agreement
whereby it would transfer $850,000 into another limited liability company,
21 14th Street Two-
Thirds LLC
("21
14th Street Two-Thirds"), no later than February 2009. Shailendra solely
owned
21 14th Street Two-Thirds and served as its managing member. In tum, 21 14th Street
5

Two-Thirds held Shailendra's personal ownership interest in a co-tenancy (the "Co-Tenancy")
that owned a parcel of land in which Shailendra had previously invested. Shailendra served as
the Managing
Partner
of the Co-Tenancy. In return for later providing $850,000 of Shi Six's
money,
21 14th Street Two-Thirds sold a portion of its interest in the Co-Tenancy to Shi Six.
Shailendra signed the sale agreement
on behalf of both Shi Six and 21 14th Street Two-Thirds.
21. After entering into this venture with these Shailendra affiliates
on October 1, 2008
and obligating Shi Six to invest in an affiliated entity
by February 2009, Shailendra continued to
falsely represent to investors that Shi Six would not enter into joint ventures with,
or purchase
investments from, Shailendra
or his affiliates. Shailendra made these representations orally and
in writing. For example, in the Shi Six operating agreement, Shailendra represented that
5.15 Transactions with Affiliates. The Company shall not enter
into
joint ventures with, purchase investments from or sell
investments to Managers
or their Affiliates.
1
In the private placement memorandum for Shi Six, Shailendra made the same
misrepresentations.
22. Shailendra knew
or was reckless in not knowing that Shi Six would enter into a
joint venture with affiliates and purchase an investment from an affiliate because he entered into
the transactions with the affiliate before soliciting most investors in Shi Six. Shailendra
The Shi Six Operating Agreement defined an affiliate as follows:
"With respect to any
Person, (i) in the case
of an individual, any Relative of such Person, (ii) any officer, director,
trustee, partner, member, manager, employee or holder
of ten percent ( 1 0%) or more of any class
of the voting securities of or equity interest in such Person; (iii) any corporation, partnership,
limited liability company, trust
or other entity controlling, controlled by or under common
control with such Person; or (iv) any officer, director, trustee, partner, member, manager,
employee
or holder of ten percent ( 1 0%) or more of the outstanding voting securities of any
corporation, partnership, limited liability company, trust or other entity controlling, controlled by
or under common control with such Person."
6

ultimately made these Affiliate Transfers on January 2, 2009 and January 5, 2009-after raising
the majority
of Shi Six's capital from investors-pursuant to the pre-existing agreement.
23. In continuing his scheme to defraud investors, on January
20, 2009, Shailendra
accepted
$250,000 for Shi Six from Investor
F. Shailendra acknowledged in writing to this
investor that his $250,000 payment would be for the acquisition
of one membership unit in Shi
Six. Days later, Shailendra instead misappropriated Investor
F's money for his own benefit by
transferring it to a personal bank account. Moreover, despite his written acknowledgment
of its
intended purpose, Shailendra failed to record Investor
F' s investment in the books and records of
Shi Six. Years later, when Investor F asked about his investment, Shailendra told Investor F that
the investor never actually had an investment in Shi Six. This statement directly contradicted
Shailendra's original representation to Investor F when selling the limited liability company unit
that the person was making an investment in Shi Six and Shailendra's acceptance oflnvestor
F's
check that was made payable to Shi Six. Thereafter, Shailendra suggested that Investor F treat
the $250,000 as a personal loan that Shailendra promised to repay with interest
of 20 percent per
annum. Shailendra, however, failed to pay fully the purported loan's principal or any
of the
accrued interest.
24. On June 18, 2009, Investor H wrote a $250,000 check to Shi Six for a share
of the
company. Shailendra then deposited the check into a personal bank account.
25. On February
3, 2009, Shailendra obtained a total of$175,000 for Shi Six from
Investor C and Investor
G. Also on February 3, 2009, Shailendra diverted $177,000 of investor
monies from Shi Six to his personal bank account. Shailendra continued to misappropriate Shi
Six's capital during
2009, including using Shi
Six capital to pay interest on personal or Affiliate
loans.
7

FIRST CLAIM FOR RELIEF
Violations of Exchange Act Section lO(b) and Rule lOb-S Thereunder
[15 U.S.C. §  78j(b) and 17 C.F.R. § 240.10b-5]
26. Paragraphs 1 through
25 are realleged and incorporated herein by reference.
27. By his conduct alleged above, Shailendra, in connection with the purchase or sale
of securities, by the use of the means and instrumentalities of interstate commerce and/or by the
use
ofthe mails, directly or indirectly: (a) employed devices, schemes, or artifices to defraud; (b)
made untrue statements
of material fact and omitted to state material facts necessary in order to
make the statements made, in light
of the circumstances under which they were made, not
misleading; and (c) engaged in acts, practices, or courses
of business which have been or are
operating
as a fraud or deceit upon other persons, including purchasers and sellers of such
securities.
28. In engaging in such conduct, Shailendra acted with scienter, that is, with intent
to
deceive, manipulate, or defraud or with a severely reckless disregard for the truth.
29. By reason
of the foregoing, Shailendra has violated (and unless enjoined will
continue to violate)
Section 10(b)
ofthe Exchange Act [15 USC§ 78j(b)] and Rule 10b-5
thereunder
[17 C.F.R. § 240.10b-5].
SECOND CLAIM FOR RELIEF
Violations of Securities Act Section 17(a)(l)
[15
U.S.C.
§ 77q(a)(1)]
30. Paragraphs 1 through 29 are realleged and incorporated herein by reference.
31. By his conduct alleged above, Shailendra, in the offer or sale
of securities, by the
use
of the means and instrumentalities of interstate commerce and/or by the use of the mails,
directly or indirectly, has employed devices, schemes, and/or artifices to defraud.
32. In engaging in such conduct, Shailendra acted with scienter, that is, with intent to
deceive, manipulate, or defraud or with a severely reckless disregard for the truth.
8

33. By reason ofthe foregoing, Shailendra has violated (and unless enjoined will
continue to violate) Section 17(a)(l)
ofthe Securities Act [15 US. C.§ 77q(a)(1)].
THIRD CLAIM FOR RELIEF
Violations
of Securities Act Sections 17(a)(2) and 17(a)(3)
[15
U.S.C. §§ 77q(a)(2) and 77q(a)(3)]
34. Paragraphs 1 through 33 are realleged and incorporated herein by reference.
35. By his conduct alleged above, Shailendra, in the offer or sale
of securities, by the
use
of the means and instrumentalities of interstate commerce and/or by the use of the mails,
directly or indirectly, has obtained money or property by means
of untrue statements of material
fact or omissions to state material facts necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading; and/or has engaged in
transactions, practices, or courses
of business which have been operating as a fraud or deceit
upon purchasers
of securities.
36. By reason
of the foregoing, Shailendra has violated (and unless enjoined will
continue to violate) Sections 17(a)(2) and 17(a)(3)
ofthe Securities Act [15 US. C.§§ 77q(a)(2)
and 77q(a)(3)].
THIRD CLAIM FOR RELIEF
Violations
of Exchange Act Section lS(a)
[15
U.S.C. §  78o(a)]
37. Paragraphs 1 through 36 are realleged and incorporated herein by reference.
38. By engaging in the conduct described above, Shailendra has acted
as a broker and
has made use
of the mails and other means or instruments of interstate commerce to effect
transactions in securities, or to induce or attempt to induce the purchase or sale
of securities,
without being registered in accordance with Section 15(b)
of the Exchange Act [ 15 US. C.
§  78o(b)].
9

39. By reason of the foregoing, Shailendra has violated (and unless enjoined will
continue to violate) Section 15(a)
ofthe Exchange Act [15 USC §  78o(a)].
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court enter a judgment:
A. making findings of fact and conclusions of law that Shailendra committed the
alleged violations;
B. permanently enjoining Shailendra and his agents, servants, employees, attorneys,
and all persons in active concert
or participation with him, and each of them, from further
violations
of Section 17(a) ofthe Securities Act [15 USC§ 77q(a)] and Sections lO(b) and
15(a)
ofthe Exchange Act [15 USC§§ 78j(b) and 78o(a)] and Rule lOb-5 thereunder;
C. permanently enjoining Shailendra from directly
or indirectly, including, but not
limited to, through any entity owned
or controlled by participating in the issuance, purchase,
offer,
or sale of any security, including, but not limited to, engaging in activities for purposes of
inducing or attempting to induce the purchase or sale of any security; provided, however, that
such injunction shall not prevent Shailendra from purchasing or selling securities listed
on a
national securities exchange for his own personal account;
D. ordering Shailendra to disgorge his ill-gotten gains, derived directly
or indirectly
from the conduct complained
of herein, together with prejudgment interest thereon;
E. ordering Shailendra to pay appropriate civil monetary penalties pursuant to
Section 20(d)
ofthe Securities Act [15 USC §  77t(d)] and Section 2l(d)(3) ofthe Exchange
Act
[15 USC§ 78u(d)(3)];
F. ordering Shailendra to relinquish to Shi Six any interest Shailendra has or claims
to have in Shi Six, and any obligations from Shi Six that Defendant claims are owed to him;
10

G. ordering Shailendra to comply with an undertaking to resign his position as
Manager and Managing Member
of Shi Six within thirty (30) days;
H. ordering Shailendra to comply with an undertaking to provide the new Managing
Member
of Shi Six with a signed document relinquishing any interest Defendant has or claims to
have in Shi Six, and any obligations from Shi Six that Defendant claims are owed to him, within
thirty (30) days;
I. retaining jurisdiction of this action in accordance with the principles of equity and
the Federal Rules
of Civil Procedure to implement and to carry out the terms of all orders and
decrees that may be entered
or to entertain any suitable application or motion for additional relief
within the jurisdiction
of the Court; and
J. granting such further relief as the Court may deem appropriate.
Dated: July
31,2014
Of Counsel:
Charles D. Stodghill
Scott
W. Friestad
Amy L. Friedman
Corey
A. Schuster
Respectfully submitted,
Is/ M Graham Loomis
M. Graham Loomis
(Ga. Bar No. 457868)
U.S. SECURITIES AND EXCHANGE COMMISSION
950 East Paces Ferry, N.E., Suite 900
Atlanta,
GA 30326-1382
Telephone: (404) 842-7622
E-mail: [email protected]
Counsel for Plaintiff
US. Securities and Exchange Commission
U.S. SECURITIES AND EXCHANGE COMMISSION
1 00 F Street, N .E.
Washington, DC 20549
11

Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 1 of 11

UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF GEORGIA 

UNITED STATES SECURITIES 
AND EXCHANGE COMMISSION, 

Plaintiff, 

v. 

M. "SHI" SHAILENDRA, 

Defendant. 

Civil Case No. 

COMPLAINT 

Plaintiff United States Securities and Exchange Commission (the "Commission") alleges 

as follows: 

SUMMARY OF ALLEGATIONS 

1. This case involves material misstatements and misappropriation of investors' 

funds by defendant M. "Shi" Shailendra ("Shailendra") in connection with the offer and sale of 

membership interests in Interstate North 5 Acres, LLC f/k/a Shi Investments Six, LLC ("Shi 

Six"), a real estate investment vehicle that Shailendra controlled and shares of which were sold 

as a means to invest in newly acquired distressed real estate. 

2. From at least 2008 through 2012, Shailendra raised capital for and managed 

investment vehicles that invested in real estate, principally in the suburbs of Atlanta, Georgia. 

Shailendra solicited and sold securities in these vehicles primarily to Atlanta-based doctors of 

Indian or Middle Eastern descent, who placed great trust in him because of his heritage, his 

1 



Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 2 of 11

prominence in the Indian-American community, his political connections, and his purported 

willingness to risk his own money in the investment vehicles he managed. 

3. Shailendra solicited investments and sold securities in Shi Six through oral and 

written misrepresentations. In contravention of representations that he made to investors, 

Shailendra used his position of trust and confidence to benefit himself by, among other things, 

a. failing to fund his equity interests in the limited liability company but 

nonetheless allocating ownership to himself as if he had done so; 

b. misappropriating investor cash for himself; and 

c. using investor money to support his pre-existing, affiliated deals that were 

in need of cash. 

4. By knowingly or recklessly engaging in this and other conduct described herein, 

Shailendra violated, and unless restrained and enjoined will continue to violate, Section 17(a) of 

the Securities Act of 1933 ("Securities Act") [15 USC§ 77q(a)] and Sections 10(b) and 15(a) 

of the Securities Exchange Act of 1934 ("Exchange Act") [15 USC§§ 78j(b) and 78o(a)] and 

Rule 10b-5 thereunder [17 CF.R. § 240.10b-5]. 

JURISDICTION AND VENUE 

5. This Court has jurisdiction over this action pursuant to Sections 20(b ), 20( d), and 

22(a) ofthe Securities Act [15 USC§§ 77t(b), 77t(d)(l), and 77v(a)], Sections 21(d), 21(e), 

and 27 ofthe Exchange Act [15 USC§§ 78u(d), 78u(e), and 78aa], and 28 U.S.C. § 1331. 

6. Venue in this district is proper under Section 22(a) of the Securities Act [15 

USC§ 77v(a)], Section 27 ofthe Exchange Act [15 USC§ 78aa], and 28 U.S.C. § 1391(b). 

7. Shailendra is a resident of Jonesboro, Georgia, and certain of the transactions, 

acts, practices, and courses of business constituting the violations alleged herein occurred within 

2 



Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 3 of 11

the Northern District of Georgia and elsewhere, and were effected, directly or indirectly, by 

making the use of the means, instruments or instrumentalities of transportation or 

communication in interstate commerce, or of the mails, or the facilities of a national securities 

exchange. 

DEFENDANT 

8. M. Shailendra, also known as "Shi Shailendra," age 69, resides in Jonesboro, 

Georgia. Shailendra served and continues to serve as the Manager of Shi Six and, as noted in the 

private placement memorandum, "has ultimate authority in all matters affecting the business and 

affairs" of Shi Six. As the managing member of Shi Six, Shailendra held exclusive 

responsibility for soliciting investors, selling membership interests in Shi Six, communicating 

with investors concerning this investment vehicle, and managing its operations. 

OTHER RELEVANT PERSONS AND ENTITY 

9. Interstate North 5 Acres, LLC f/k/a Shi Investments Six, LLC is a Georgia 

limited liability company. During the relevant time period and to this day, Shailendra serves as 

its managing member. Shi Six's principal place of business is in Atlanta, Georgia. 

FACTUAL ALLEGATIONS 

10. During the third quarter of 2008, Shailendra set up Shi Six to invest in newly 

acquired distressed real estate resulting from the financial crisis. Shailendra approached a 

number of potential investors and told them that Shi Six would be investing in real estate, 

discounted and distressed because of the financial crisis, which he would flip in three to five 

years at sizable profits. 

11. Shailendra described Shi Six to some investors as a real estate investment fund. 

The private placement memorandum that Shailendra distributed and by which he offered limited 

liability company units for Shi Six explicitly stated that Shi Six "was formed to invest in 

3 



Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 4 of 11

opportunistic transactions within a diverse portfolio of real estate investments .... " In the private 

placement memorandum, Shailendra further represented that Shi Six did "not own any 

investments as of [December 1, 2008]." 

12. Shailendra also provided certain Shi Six investors with an operating agreement 

that he signed and which described, among other things, how Shailendra would manage Shi Six 

and its money. Shailendra promised to manage the affairs of Shi Six with the other investors 

remaining passive, and each investor would receive profits based on the number of membership 

interests he owned pro rata to the total number of issued and outstanding membership interests. 

Shailendra also solicited investors orally. To add legitimacy to Shi Six, Shailendra even told at 

least one investor that a prominent financier and former politician would be investing 

$15 million to $20 million in Shi Six. 

13. The bulk of solicitations and sales by Shailendra of membership interests in Shi 

Six occurred between October 2008 and February 2009. 

14. Shailendra orally told certain investors that he would place his own funds at risk 

by investing in Shi Six. Shailendra authorized and distributed an operating agreement and 

private placement memorandum for Shi Six in which he represented that shares in Shi Six would 

be sold for $250,000 each. Shailendra claims to have advanced approximately $500,000 in 

earnest money deposits, equal to two shares, and recorded his ownership in the books and 

records of Shi Six. In October 2008, Shailendra reimbursed himself $500,000 for the earnest 

money deposit by depositing two $250,000 checks from Investor A directly into his personal 

bank account. Due to the withdrawal of all the funds he previously invested in Shi Six, 

Shailendra should have reduced his recorded interest to zero, while crediting ownership for two 

4 



Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 5 of 11

shares to Investor A, but he never did so. Shailendra nonetheless continued to misrepresent 

himself to potential investors as a current investor in Shi Six. 

15. Shailendra misappropriated substantial sums from Shi Six as investor cash flowed 

into the entity. Between October 2008 and November 2009, Shailendra misappropriated 

approximately $2,586,935 ofthe funds invested in Shi Six. 

16. On October 14, 2008, Investor B wrote Shailendra a check for $500,000, 

representing an investment in two shares of Shi Six. Shortly thereafter, on October 23 and 28, 

2008, Shailendra transferred $295,000 and $200,000 of the proceeds of this investment into his 

personal bank account. 

17. Between December 22, 2008 and December 29, 2008, Shailendra accepted a total 

of $600,000 in investments for Shi Six from Investors C and D. On January 2, 2009, Shailendra 

misappropriated $600,000 from Shi Six by transferring the funds to his personal bank account. 

18. Also on January 2, 2009, Shailendra accepted a $250,000 investment from 

Investor E. Once Investor E's check for $250,000 cleared on January 5, 2009, Shailendra 

misappropriated the $250,000 by transferring the funds to his personal bank account. 

19. In total, the January 2, 2009 and January 5, 2009 misappropriations (the "Affiliate 

Transfers") amounted to $850,000. 

20. Shailendra misappropriated investors' funds through these Affiliate Transfers 

because he needed $850,000 to make payments on an affiliate's loan. On October 1, 2008, prior 

to raising most of Shi Six's capital, Shailendra caused Shi Six to enter into an agreement 

whereby it would transfer $850,000 into another limited liability company, 21 14th Street Two­

Thirds LLC ("21 14th Street Two-Thirds"), no later than February 2009. Shailendra solely 

owned 21 14th Street Two-Thirds and served as its managing member. In tum, 21 14th Street 

5 



Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 6 of 11

Two-Thirds held Shailendra's personal ownership interest in a co-tenancy (the "Co-Tenancy") 

that owned a parcel of land in which Shailendra had previously invested. Shailendra served as 

the Managing Partner of the Co-Tenancy. In return for later providing $850,000 of Shi Six's 

money, 21 14th Street Two-Thirds sold a portion of its interest in the Co-Tenancy to Shi Six. 

Shailendra signed the sale agreement on behalf of both Shi Six and 21 14th Street Two-Thirds. 

21. After entering into this venture with these Shailendra affiliates on October 1, 2008 

and obligating Shi Six to invest in an affiliated entity by February 2009, Shailendra continued to 

falsely represent to investors that Shi Six would not enter into joint ventures with, or purchase 

investments from, Shailendra or his affiliates. Shailendra made these representations orally and 

in writing. For example, in the Shi Six operating agreement, Shailendra represented that 

5.15 Transactions with Affiliates. The Company shall not enter 
into joint ventures with, purchase investments from or sell 
investments to Managers or their Affiliates. 1 

In the private placement memorandum for Shi Six, Shailendra made the same 

misrepresentations. 

22. Shailendra knew or was reckless in not knowing that Shi Six would enter into a 

joint venture with affiliates and purchase an investment from an affiliate because he entered into 

the transactions with the affiliate before soliciting most investors in Shi Six. Shailendra 

The Shi Six Operating Agreement defined an affiliate as follows: "With respect to any 
Person, (i) in the case of an individual, any Relative of such Person, (ii) any officer, director, 
trustee, partner, member, manager, employee or holder of ten percent ( 1 0%) or more of any class 
of the voting securities of or equity interest in such Person; (iii) any corporation, partnership, 
limited liability company, trust or other entity controlling, controlled by or under common 
control with such Person; or (iv) any officer, director, trustee, partner, member, manager, 
employee or holder of ten percent ( 1 0%) or more of the outstanding voting securities of any 
corporation, partnership, limited liability company, trust or other entity controlling, controlled by 
or under common control with such Person." 

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ultimately made these Affiliate Transfers on January 2, 2009 and January 5, 2009-after raising 

the majority of Shi Six's capital from investors-pursuant to the pre-existing agreement. 

23. In continuing his scheme to defraud investors, on January 20, 2009, Shailendra 

accepted $250,000 for Shi Six from Investor F. Shailendra acknowledged in writing to this 

investor that his $250,000 payment would be for the acquisition of one membership unit in Shi 

Six. Days later, Shailendra instead misappropriated Investor F's money for his own benefit by 

transferring it to a personal bank account. Moreover, despite his written acknowledgment of its 

intended purpose, Shailendra failed to record Investor F' s investment in the books and records of 

Shi Six. Years later, when Investor F asked about his investment, Shailendra told Investor F that 

the investor never actually had an investment in Shi Six. This statement directly contradicted 

Shailendra's original representation to Investor F when selling the limited liability company unit 

that the person was making an investment in Shi Six and Shailendra's acceptance oflnvestor F's 

check that was made payable to Shi Six. Thereafter, Shailendra suggested that Investor F treat 

the $250,000 as a personal loan that Shailendra promised to repay with interest of 20 percent per 

annum. Shailendra, however, failed to pay fully the purported loan's principal or any of the 

accrued interest. 

24. On June 18, 2009, Investor H wrote a $250,000 check to Shi Six for a share of the 

company. Shailendra then deposited the check into a personal bank account. 

25. On February 3, 2009, Shailendra obtained a total of$175,000 for Shi Six from 

Investor C and Investor G. Also on February 3, 2009, Shailendra diverted $177,000 of investor 

monies from Shi Six to his personal bank account. Shailendra continued to misappropriate Shi 

Six's capital during 2009, including using Shi Six capital to pay interest on personal or Affiliate 

loans. 

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FIRST CLAIM FOR RELIEF 
Violations of Exchange Act Section lO(b) and Rule lOb-S Thereunder 

[15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5] 

26. Paragraphs 1 through 25 are realleged and incorporated herein by reference. 

27. By his conduct alleged above, Shailendra, in connection with the purchase or sale 

of securities, by the use of the means and instrumentalities of interstate commerce and/or by the 

use ofthe mails, directly or indirectly: (a) employed devices, schemes, or artifices to defraud; (b) 

made untrue statements of material fact and omitted to state material facts necessary in order to 

make the statements made, in light of the circumstances under which they were made, not 

misleading; and (c) engaged in acts, practices, or courses of business which have been or are 

operating as a fraud or deceit upon other persons, including purchasers and sellers of such 

securities. 

28. In engaging in such conduct, Shailendra acted with scienter, that is, with intent to 

deceive, manipulate, or defraud or with a severely reckless disregard for the truth. 

29. By reason of the foregoing, Shailendra has violated (and unless enjoined will 

continue to violate) Section 10(b) ofthe Exchange Act [15 USC§ 78j(b)] and Rule 10b-5 

thereunder [17 C.F.R. § 240.10b-5]. 

SECOND CLAIM FOR RELIEF 
Violations of Securities Act Section 17(a)(l) 

[15 U.S.C. § 77q(a)(1)] 

30. Paragraphs 1 through 29 are realleged and incorporated herein by reference. 

31. By his conduct alleged above, Shailendra, in the offer or sale of securities, by the 

use of the means and instrumentalities of interstate commerce and/or by the use of the mails, 

directly or indirectly, has employed devices, schemes, and/or artifices to defraud. 

32. In engaging in such conduct, Shailendra acted with scienter, that is, with intent to 

deceive, manipulate, or defraud or with a severely reckless disregard for the truth. 

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Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 9 of 11

33. By reason ofthe foregoing, Shailendra has violated (and unless enjoined will 

continue to violate) Section 17(a)(l) ofthe Securities Act [15 US. C.§ 77q(a)(1)]. 

THIRD CLAIM FOR RELIEF 
Violations of Securities Act Sections 17(a)(2) and 17(a)(3) 

[15 U.S.C. §§ 77q(a)(2) and 77q(a)(3)] 

34. Paragraphs 1 through 33 are realleged and incorporated herein by reference. 

35. By his conduct alleged above, Shailendra, in the offer or sale of securities, by the 

use of the means and instrumentalities of interstate commerce and/or by the use of the mails, 

directly or indirectly, has obtained money or property by means of untrue statements of material 

fact or omissions to state material facts necessary in order to make the statements made, in light 

of the circumstances under which they were made, not misleading; and/or has engaged in 

transactions, practices, or courses of business which have been operating as a fraud or deceit 

upon purchasers of securities. 

36. By reason of the foregoing, Shailendra has violated (and unless enjoined will 

continue to violate) Sections 17(a)(2) and 17(a)(3) ofthe Securities Act [1 5 US. C.§§ 77q(a)(2) 

and 77q(a)(3)]. 

THIRD CLAIM FOR RELIEF 
Violations of Exchange Act Section lS(a) 

[15 U.S.C. § 78o(a)] 

37. Paragraphs 1 through 36 are realleged and incorporated herein by reference. 

38. By engaging in the conduct described above, Shailendra has acted as a broker and 

has made use of the mails and other means or instruments of interstate commerce to effect 

transactions in securities, or to induce or attempt to induce the purchase or sale of securities, 

without being registered in accordance with Section 15(b) of the Exchange Act [ 15 US. C. 

§ 78o(b)]. 

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Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 10 of 11

39. By reason of the foregoing, Shailendra has violated (and unless enjoined will 

continue to violate) Section 15(a) ofthe Exchange Act [15 USC § 78o(a)]. 

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that the Court enter a judgment: 

A. making findings of fact and conclusions of law that Shailendra committed the 

alleged violations; 

B. permanently enjoining Shailendra and his agents, servants, employees, attorneys, 

and all persons in active concert or participation with him, and each of them, from further 

violations of Section 17(a) ofthe Securities Act [15 USC§ 77q(a)] and Sections lO(b) and 

15(a) ofthe Exchange Act [15 USC§§ 78j(b) and 78o(a)] and Rule lOb-5 thereunder; 

C. permanently enjoining Shailendra from directly or indirectly, including, but not 

limited to, through any entity owned or controlled by participating in the issuance, purchase, 

offer, or sale of any security, including, but not limited to, engaging in activities for purposes of 

inducing or attempting to induce the purchase or sale of any security; provided, however, that 

such injunction shall not prevent Shailendra from purchasing or selling securities listed on a 

national securities exchange for his own personal account; 

D. ordering Shailendra to disgorge his ill-gotten gains, derived directly or indirectly 

from the conduct complained of herein, together with prejudgment interest thereon; 

E. ordering Shailendra to pay appropriate civil monetary penalties pursuant to 

Section 20(d) ofthe Securities Act [15 USC § 77t(d)] and Section 2l(d)(3) ofthe Exchange 

Act [15 USC§ 78u(d)(3)]; 

F. ordering Shailendra to relinquish to Shi Six any interest Shailendra has or claims 

to have in Shi Six, and any obligations from Shi Six that Defendant claims are owed to him; 

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Case 1:14-cv-02465-TCB   Document 1   Filed 07/31/14   Page 11 of 11

G. ordering Shailendra to comply with an undertaking to resign his position as 

Manager and Managing Member of Shi Six within thirty (30) days; 

H. ordering Shailendra to comply with an undertaking to provide the new Managing 

Member of Shi Six with a signed document relinquishing any interest Defendant has or claims to 

have in Shi Six, and any obligations from Shi Six that Defendant claims are owed to him, within 

thirty (30) days; 

I. retaining jurisdiction of this action in accordance with the principles of equity and 

the Federal Rules of Civil Procedure to implement and to carry out the terms of all orders and 

decrees that may be entered or to entertain any suitable application or motion for additional relief 

within the jurisdiction of the Court; and 

J. granting such further relief as the Court may deem appropriate. 

Dated: July 31,2014 

Of Counsel: 

Charles D. Stodghill 
Scott W. Friestad 
Amy L. Friedman 
Corey A. Schuster 

Respectfully submitted, 

Is/ M Graham Loomis 
M. Graham Loomis 
(Ga. Bar No. 457868) 
U.S. SECURITIES AND EXCHANGE COMMISSION 

950 East Paces Ferry, N.E., Suite 900 
Atlanta, GA 30326-1382 
Telephone: (404) 842-7622 
E-mail: [email protected] 
Counsel for Plaintiff 
US. Securities and Exchange Commission 

U.S. SECURITIES AND EXCHANGE COMMISSION 

1 00 F Street, N .E. 
Washington, DC 20549 

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