Aequitas Capital LawsuitThe Frankowski Firm is investigating potential claims against Aequitas Capital Management of Lake Oswego, Oregon. The Securities and Exchange Commission has brought charges against Aequitas and three of its top executives for allegedly running a $350 million Ponzi scheme.

The SEC allegations claim that, since 2014, Aequitas defrauded investors into thinking they were investing in a portfolio of investments in the healthcare, education, transportation, or consumer credit sectors. In reality, however, the vast majority of investor funds were used to pay Aequitas’ redemptions and interest to prior investors and pay for lucrative salaries, a private jet and pilots, and expensive dinner and golf outings for prospective investors.

The scheme began to implode in May 2014 when Corinthian Colleges, a for-profit education provider, defaulted on obligations to an Aequitas-owned LLC, resulting in significant cash flow shortages for the firm. Rather than reduce their expenses or increase operating income, Aequitas used investor funds to try to keep their insolvent company afloat. By the end of 2015, Aequitas owed investors $312 million with virtually no operating income to repay them.

Aequitas Management, LLC was the parent company of the entire Aequitas enterprise, which consists of a web of subsidiary Aequitas LLCs and corporations. Aequitas was able to appear financially viable by keeping an intercompany loan on its books that counted as its largest asset, even though Aequitas executives knew that Aequitas lacked the assets to repay the loan.

By early 2016, the balance on the intercompany loan exceeded $180 million and the Aequitas enterprise began to collapse. The various Aequitas companies announced employee layoffs, the Aequitas Commercial Finance, LLC announced that it could no longer meet its obligations to investors and Aequitas hired an outside consulting firm to wind-down the business. In March 2016, the Securities and Exchange Commission filed charges against Aequitas and its executives detailing its factual allegations against Aequitas.

Via its action, the SEC is seeking to permanently enjoin Aequitas and its executives from further Securities Act violations, bar the firm and its executives from the securities industry, and force Aequitas to pay monetary penalties and return their alleged ill-gotten gains at an amount to be determined by the SEC’s investigation.

If you or someone you know lost money as the result of an investment made directly Aequitas or an investment in Aequitas recommended by another broker, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.