An Indian-origin business owner’s dance studio in New Jersey recently became the target of a fraud probe in New Jersey, United States of America. On February 25, the American state’s Attorney General Jennifer Davenport issued a formal statement about the NJ Bureau of Securities taking emergency action to halt the “further sale of unregistered securities in a nationwide investment scheme” linked to Arya International, a South Asian dance academy based in Morris County.
Indian-origin business owner ordered to cease and desist in New Jersey
The Bureau has since issued a Summary Cease and Desist Order against Mystical Stars, LLC, formerly Arya International Inc, and its owner Rupal K Patel. The major development comes after New Jersey authorities’ investigation discovered that Patel and her Arya International banner targeted friends and family of the studio’s students across the US.
As a result, US officials have accused her and her business of raising over $5.4 million from 74 investors, including 48 residents in the states, through unregistered securities sales.
Who is Rupal Patel?
New Jersey’s Attorney General lists Rupal Patel as the owner, CEO, director and sole shareholder of Arya International, which is a self-described “charitable dance and entertainment organisation” offering dance instruction classes throughout the US.
According to the official news release, the Bureau’s investigation found that Patel and Arya started selling registered securities linked to the dance academy “in the form of promissory notes issued by Arya International (“Unregistered Arya Securities”)” from March 2016 onwards.
Despite not being registered to sell securities in New Jersey, Patel is said to have marketed unregistered securities as safe investments with a 10 to 20% return personally guaranteed by Arya International and the Indian-origin owner, as per the official release. NJ Attorney General’s revelations further disclosed that some investors were thereafter even tempted to push their children’s college savings towards the fraudulent venture.
Jeremy E Hollander, Acting Director of the Division of Consumer Affairs, said Rupal Patel made the most of her position as the head of Arya International “to shamelessly prey on and financially exploit friends and families of her students.”
Meanwhile, Acting Bureau Chief Keith A Alt stated, “By operating outside the regulatory framework of the securities industry, Patel and Arya International misled investors and withheld critical information that investors needed—and were legally entitled to receive—in order to make informed investment decisions.”
Charges against Indian-origin New Jersey business owner
On top of making untrue statements of material fact in connection with the offer and sale of the Unregistered Arya Securities, Patel and her business are said to have guaranteed new investors a full return of their investment plus interest upon maturity of the Unregistered Arya Securities. As per US officials, she did this despite the inability to pay earlier investors.
This, in part, was attributed to Arya International reportedly borrowing at least $1,960,452 through factoring agreements with merchant cash advance companies between 2020 and 2023.
Patel is further accused of stating in a 2022 investor solicitation email that the Arya Dance Academy had expanded after COVID, even though the academy shut down for three years between 2020 and 2023.
Other bombshell accusations clouding Patel’s case include that investment in the Unregistered Arya Securities were personally guaranteed by her and Arya International between 2020 and 2023 despite Arya International having run out of money and that it was not generating new revenue through classes since it had shut down during the pandemic.
According to the Bureau’s investigation, Patel and Arya Internal even failed to disclose fact to certain investors, including that they had regularly failed to pay investors when their promissory notes matured.
Moreover, they owed at least $1,960,452 to merchant cash advance companies to which it had assigned an interest in many of its receivables, as per New Jersey’s press release. Arya International is also believed not to have filed certain state tax returns or not paid certain state taxes from 2010 through 2023.
The New Jersey Attorney General’s statement adds further, “Arya International’s corporate charter was reversed by the New Jersey Department of Treasury, Division of Taxation on June 1, 2021, and as a result, the company immediately lost its good standing and legal authority to operate in the State of New Jersey.
“The Unregistered Arya Securities were not registered with the Bureau, exempt from registration, or federally covered and Patel was not registered with the Bureau as an agent to sell securities as required by law.”
And so, New Jersey authorities have since concluded that Patel and Arya International violated the New Jersey Uniform Securities Law by:
- Offering and selling unregistered securities
- Employing a device, scheme, or artifice to defraud certain investors of their investments in Arya International
- Making untrue statements of material fact and omitting to disclose material facts to certain investors in connection with the offer, sale, or purchase of the Unregistered Arya Securities
- Engaged in acts, practices, or courses of business that operated as a fraud and/or deceit upon investors.
Patel is also being held accountable for violating the law by acting as an unregistered agent of Arya International in effecting transactions in securities in and from New Jersey and Arya International employed an agent without registration.