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Texas REIT Plummets Following Ponzi Allegations

Stock in United Development Funding IV has gone into a free fall following a report published on an investor website that alleged the real estate investment trust has operated for years like a Ponzi scheme. Harvest Exchange, an online professional network for investors, published an anonymous post about UDF called "A Texas-Sized Scheme: Exposing the Darkest Corner of the REIT Business, United Development Funding," which currently controls $1.3 billion of assets in various REITS, including UDF IV. Based out of the Dallas-Fort Worth area, UDF IV was a nontraded REIT that listed on the NASDAQ in June 2014. It was sold to investors from 2009 to 2013 at $20 per share. “The UDF umbrella exhibits characteristics emblematic of a Ponzi scheme,” according to the Harvest posting. Those characteristics include new capital used to fund distributions to existing investors and subsequent UDF companies providing significant liquidity to earlier vintage UDF companies, allowing them to pay earlier investors. Once the funding of [...]

By |December 14th, 2015|Fraud, Press Releases & News, SEC|
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AR Capital Halts Creation Of New Nontraded REITs

AR Capital, the massive real estate investment trust sponsor established by Nicholas Schorsch, will cease creating and selling new alternative investment products. “As a result of regulatory and market uncertainty affecting capital raising for both new and existing offerings in the direct investment industry,” AR Capital will stop taking new investor funds for the programs by the end of this year, according to a company statement. These programs include Business Development Corporation of America II, ARC Healthcare Trust III, New York City REIT II, ARC Hospitality Trust and ARC Global Trust II. William Kahane, co-owner of AR Capital, noted the Department of Labor's proposed fiduciary standard and new client account statement pricing standards for nontraded REITs and other alternative investments as reasons for AR Capital's decision to withdraw from the market it used to control. This decision comes mere days after the commonwealth of Massachusetts charged Realty Capital Securities ("RCS") with fraudulently gathering proxy votes to support real estate deals sponsored [...]

By |November 17th, 2015|Press Releases & News|
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Cetera Stops Selling AR Capital REITs

Cetera Financial Group, which is a network of retail brokerages owned by RCS Capital Corporation, has stopped selling ARC-branded real estate investment trusts and other alternative investments. All ten of Cetera's broker-dealers ceased the sale of all AR Capital products until a review of the products is completed. AR Capital products are distributed by Realty Capital Securities, which is a wholesaling broker-dealer also owned by RCS Capital Corporation. Cetera's cessation of sales came the day after Massachusetts charged RCS with fraudulently rounding up proxy votes to support real estate deals sponsored by AR Capital, which is owned by Nick Schorsch and William Kahane. In an administrative complaint, Massachusetts Secretary of the Commonwealth William Galvin claimed agents of RCS impersonated shareholders and cast fake votes for investment programs sponsored by AR Capital. Executives at other independent broker-dealers claim that major clearing firms and other broker-dealers could possibly suspend sales of AR Capital products later this week following the fraud charges against RCS. Joseph [...]

By |November 16th, 2015|Press Releases & News|
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FINRA Fines Six IBDs For Failing To Discount Large REIT Sales

Voya Financial Advisors Inc., Transamerica Financial Advisors Inc. and four other independent broker-dealers failed to give clients appropriate discounts on large sales of nontraded real estate investment trusts and business development companies. In turn, FINRA fined the six over $500,000 combined. The fines comes as part of FINRA's crackdown on firms not properly giving their customers particular discounts, called breakpoint discounts. Discounts are available on sales of particular nontraded REITs, usually when the sale is for more than $500,000. According to a number of prospectuses for nontraded REITs, the price of a REIT is normally ten dollars per share with a seventy cent commission to the broker, but for sales between $501,000 and $1 million, the price can drop to $9.90 per share with the commission falling to sixty cents. The six firms “failed to identify and apply volume discounts to certain customers' eligible purchases of non-traded REITs and BDCs, resulting in customers paying excessive sales charges,” according to the FINRA [...]

By |October 15th, 2015|FINRA, Press Releases & News|
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