OC investor faces criminal probe for alleged house-flip fraud

John Kralik, a real estate investor that the Securities and Exchange Commission alleged misused funds designated for fix-and-flip deals, is now at the center of a federal criminal probe. 

The U.S. Attorney’s Office is conducting a federal criminal investigation “related to the same conduct” as the SEC’s allegations, according to court records. 

“Mr. Kralik now faces both this civil action and the looming threat of a criminal indictment,” his lawyers said in a memo this week. 

Last month, the SEC charged Newport Beach-based Kralik and his firm JKV Capital for allegedly lying to investors and misappropriating their money. From 2017 through this year, Kralik funneled more than $1.6 million of investor cash into a Mercedes-Benz, paying off his home mortgage and a vacation in Mexico, the SEC alleged in its complaint.

That money was supposed to go to buy distressed homes, renovate them and flip them for a profit — a goal Kralik had told potential investors in prospectuses and memos, according to the SEC. 

While the criminal probe is ongoing, attorneys for Kralik and his firm have asked the federal court overseeing the SEC’s civil case for a 120-day pause. 

An attorney for Kralik did not respond to a request for comment. A representative for the U.S. Attorney’s Office declined to comment. 

In February, Kralik declined to provide testimony to the SEC, after finding out about “the possibility of criminal prosecution.” 

Kralik raised money through Regulation D, a securities rule that lets investors fundraise without regulatory oversight. But the SEC dinged Kralik for not doing what he told investors he would. 

Instead, money allegedly went to his mortgage, a waterfront social club, a vacation in Cabo San Lucas and a nanny for his children.