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Investigations

BREIT Investor Losses Investigated by Bakhtiari & Harrison

Bakhtiari & Harrison is investigating potential claims on behalf of investors who purchased BREIT through their financial advisor or brokerage firm. BREIT REIT, launched by Blackstone, was initially presented as a stable investment option with the potential for steady income and capital preservation. Its appeal was especially strong among retirees looking for low-risk investment opportunities. The marketing materials highlighted BREIT’s diversified real estate portfolio, professional management, and the potential for consistent returns. Despite its initial promise, BREIT has faced several challenges that have impacted its performance.

SREIT Investor Losses Investigated by Bakhtiari & Harrison

Bakhtiari & Harrison is investigating potential claims on behalf of investors who purchased SREIT through their financial advisor or brokerage firm. The $10 billion fund, managed by Barry Sternlicht-led Starwood Capital Group, invests in various real estate sectors, including multi-family and industrial properties. These investments have been heavily impacted by high interest rates and concerns over loan defaults, contributing to investor losses.

Sanford Bernstein/Alliance Bernstein Options Advantage Fund Losses

Bakhtiari & Harrison represents investors that have suffered losses due to investment in the Sanford Bernstein/Alliance Bernstein Options Advantage Fund. Bernstein brokers solicited its clients to invest in a new complex options strategy titled “Options Advantage” described as “seeking incremental return in a low yield environment.” It is alleged that instead of what was presented, Bernstein, utilizing its discretion, speculated on the direction of markets via the purchase and sale of call and put options on the S&P 500, which became a series of risky bets on the direction the market indexes utilizing the leverage of margin.

Emerson Equity Sale of GWG L Bonds

Bakhtiari & Harrison is investigating potential claims on behalf of investors who purchased L Bonds of GWG Holdings Inc. (GWGH), through representatives of Emerson Equity LLC. Representatives of Emerson Equity allegedly recommended the L Bonds as safe with a 5% interest rate which was suitable and appropriate for retired and other conservative income investors. L Bonds were actually speculative income paying investments due to the distressed financial condition of the issuer of the bonds.

iCap Equity Investor Losses

On September 29, 2023, iCap Equity, LLC and its associated entities sought Chapter 11 bankruptcy protection in the Eastern District of Washington. This move followed the departure of iCap’s CEO and the cessation of investor interest payments back in March. This bankruptcy action encompasses 26 affiliated companies. According to the filing, iCap’s assets ranged from $50 million to $100 million, while its liabilities fell between $100 million and $500 million. This implies a precarious situation for investors, as it signals the likelihood of significant unpaid liabilities in the event of liquidation.

Master Limited Partnerships

Master limited partnerships, or MLPs, have become big business and more prevalent in investor portfolios over the past couple of years. They provide investor exposure to the growing oil and gas infrastructure of America, and they come with attractive distributions for investors seeking dividend income and capital flows.

GPB Capital Holdings Losses

Bakhtiari & Harrison is investigating the brokerage firms and sale practices regarding the sale of GPB Capital Holdings investments in high risk private placements. GPB Capital Holdings is a New York-based investment firm that offered nine different private placements: GPB Automotive Portfolio, LP; GPB Cold Storage LP; GPB Holdings, LP; GPB Holdings II, LP; GPB Holdings III, LP; GPB Holdings Qualified, LP; GPB NYC Development, LP; and GPB Waste Management Fund, LP.

Asset Allocation

Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The recent market volatility has exposed imprudent allocations in accounts that have resulted in significant losses to many investors. When asked about why account values have dropped, brokers often respond by blaming it on the market instead of recognizing that inappropriate allocations are actually to blame.

SPACs (Special Purpose Acquisition Company)

A special purpose acquisition company is a shell company set up by investors with the purpose of raising money through an IPO to acquire another company.

Adjustable Rate Certificates of Deposit (CDs) and Steepeners

Bakhtiari & Harrison announces that the firm is investigating financial service firms that recommended adjustable rate Certificates of Deposit or Steepeners to their clients. The firm believes that Steepeners, adjustable rate Certificates of Deposit and other structured notes may have been marketed to investors as low risk fixed income options. Many investors were likely not adequately informed of the risk involved in purchasing and holding these products.

Oil and Gas Investment Schemes

Oil and gas investment scams are alive and well. High oil prices have created a heightened interest in investments in energy-related business ventures. Most oil and gas investment opportunities, while involving varying degrees of risks to the investor, are legitimate in their marketing and responsible in their operations. However, as in many other investment opportunities, it is not unusual for unscrupulous promoters to attempt to take advantage of investors by engaging in fraudulent practices.

Timary Delorme and Wedbush Securities Inc.

It was announced by the Securities and Exchange Commission’s Division of Enforcement that Wedbush Securities, Inc. has instituted administrative proceedings pursuant to Section 15(b) of the Securities Exchange Act of 1934. The charges against Wedbush Securities Inc. are for failing to properly supervise employee Timary Delorme after the broker-dealer ignored numerous red flags indicating that Delorme was involved in a long-running pump-and-dump scheme targeting retail investors. Delorme agreed to settle fraud charges stemming from the same scheme.

The Woodbridge Group of Companies, LLC

Woodbridge Wealth, a California-based firm, sells structured financial products to investors, often through intermediary brokers. Woodbridge has reportedly raised over $1 billion by selling investors instruments known as First Position Commercial Mortgages (“FPCMs”). Woodbridge’s FPCM sales have resulted in certain actions and/or investigations by regulators, including state regulators in Pennsylvania, Michigan, Massachusetts, and Colorado, as well as the U.S. Securities and Exchange Commission (“SEC”).

Merrill Lynch Market-Linked Notes

Market-Linked Notes were recommended by Merrill Lynch financial advisors to customers as a stable source of income. In many instances, Market-Linked Note investments tracked oil prices, energy pipelines, or commodity baskets and have resulted in significant investor losses.

Aequitas Capital Investigation

Recent news reports revealed that Aequitas, blaming “liquidity challenges”, cash flow issues, and a shortage of new investments, has failed to repay investors on schedule and has suspended any repayment of investors’ Aequitas private notes. These recent news reports also revealed sudden, massive layoffs by Aequitas, as well as investigations of Aequitas by the Securities and Exchange Commission and the federal Consumer Financial Protection Bureau.

Third Avenue Focused Credit Fund

Third Avenue Management LLC has parted ways with Chief Executive Officer David Barse after the collapse of the company’s Focused Credit bond fund. The collapse of Third Avenue’s Focused Credit Fund jolted Wall Street and renewed worries about the difficulty of trading securities on the U.S. bond market. The blow-up of the Focused Credit Fund was the biggest mutual fund failure since the financial crisis.

Morgan Stanley’s Recommendations of Cobalt International Energy and Seadrill Ltd.

Bakhtiari & Harrison is investigating potential claims of unsuitability and over-concentration relating to Morgan Stanley Smith Barney’s recommendations of Cobalt International Energy and Seadrill Ltd. The share prices of Cobalt and Seadrill have dramatically dropped in the preceding months causing substantial monetary losses to holders of these stocks.

Wells Fargo’s High Pressure Sales Culture

On May 5, 2015 Los Angeles City Attorney Mike Feuer announced the filing of a lawsuit against Wells Fargo for allegedly opening unauthorized customer accounts. The lawsuit, filed by City Atty. Mike Feuer, alleged that the bank’s high-pressure sales culture set unrealistic quotas, spurring employees to engage in fraudulent conduct to keep their jobs and boost the company’s profits.

Business Development Companies (BDCs)

The latest “hot” product being offered from Wall Street to Main Street investors is an investment in Business Development Companies (BDCs). Unfortunately, many financial advisors have pitched these products to their retail clients without having conducted the necessary due diligence on them or, of equal importance, without having an informed appreciation for the potential pitfalls of BDCs as their higher yields are typically also associated with significantly higher risks – many of which are being concealed from investors.

REITs – Real Estate Investment Trusts

With the collapse of the housing markets and real estate sector, REIT fraud has become more apparent. Investors are bringing claims against their brokerage firm or financial advisors that recommended unsuitable or fraudulent REITs that were Ponzi schemes or for failing to disclose the high fees and commissions associated with the sale of REIT investments.

JP Morgan Chase’s Sale of Proprietary Mutual Funds

After the 2008 financial crisis allegations have surfaced that JP Morgan Chase turned to ordinary investors to make up for profits lost by the bank. Some current and former brokers say it emphasized its sales over clients’ needs. Financial advisers say they were encouraged, at times, to favor JPMorgan’s own products even when competitors had better-performing or cheaper options.

Reverse Convertibles

Brokerage firms and banks have been issuing and marketing complex investments known in the industry as “structured products” to individual investors. Among these structured investment products are “reverse convertibles,” which are popular in part because of the high yields they offer. Also known as “revertible notes” or “reverse exchangeable securities”, these instruments are sold under a variety of proprietary names that may or may not use the term “structured” to describe the product. Reverse convertibles are debt obligations of the issuer that are tied to the performance of an unrelated security or basket of securities. Although they are sometimes described as debt instruments, they are more complex than traditional bonds and involve elements of options trading. Reverse convertibles expose investors to heightened risks not associated with bonds.

TICs – Tenant In Common Investments

A Tenant in Common property (“TIC”) allows the seller of real estate to qualify for a 1031 tax free exchange of the property sold in exchange for an ownership interest in another investment property. Brokerage firms have begun selling fractional ownership interests in real estate to persons who have recently sold or are considering the sale of an appreciated piece of property as an alternative investment vehicle that preserves the tax free status of a property exchange.

State Street Bank and Trust Company and State Street Global Advisors, Inc.

Assets in State Street’s five bond mutual funds were down sharply in 2007. As of October 2007 assets in the five funds suffered losses of 43% for 2007. The funds were marketed to institutional investors as safe, conservative investments. Investors in the funds included non-profit organizations, private and public sector pension funds and other instructional investors.

Subprime Investments

Recent turmoil in the credit markets has begun to expose the lack of disclosure and in some cases misleading sales presentations made by brokerage firms to their customer regarding the sale of Mortgage Backed Securities (MBS) or Asset Backed Securities (ABS).