Is this Fraud or Creative Financing?

[William Kyle Walker]

I came a across a syndication deal that sounds a little fishy. At first it loos like the sponsor is putting in $440,0000 but after further DD it looks like he has no skin in the game at closing. He is raising $7.7m for an $11M purchase. He is charging a 1% acquisition fee and I am okay with that. The fishy sounding part is where the other $330,0000 is coming from. This is an off market deal. The sponsor is a licensed broker. He negotiated with the seller to pay him a 3% commission and just told them to inflate the purchase price to pay for it. I know he has $100,000 because he put that up as the earnest money deposit. He will be making ~$20,000 per year for an asset management fee on top of his equity position. 

Is this an acceptable practice? Is this violating any SEC regs?