Securities Arbitration Lawyer Blog

David Lerner Associates Customers Seek Up to $1 Million in Damages for Energy 11, Energy 12, and Spirit of America Energy Fund (SOAEX) Investments

Published on: September 28, 2023 | by Iorio Altamirano

An elderly couple in their upper 80s filed a FINRA arbitration claim against David Lerner Associates, Inc. (“David Lerner Associates”) to recover losses and damages of up to $1 million. The couple, represented by securities arbitration law firm Iorio Altamirano LLP, alleges that David Lerner Associates recommended an unsuitable investment strategy to invest and concentrate a significant portion of their retirement savings and net worth into risky and high-commission energy-sector securities that were proprietary to David Lerner Associates, Inc.: (1) Energy 11, L.P. (“Energy 11”); (2) Energy Resources 12, L.P. (“Energy 12”); and the Spirit of America Energy Fund (“SOAEX”).

The arbitration claim also alleges that David Lerner Associates and its broker, Robert Rasbach, misrepresented and omitted material information about the investment strategy and the energy investments, including:

That investing in Energy 11 and Energy 12 involved a “high degree of risk” and was only appropriate for investors willing and able to assume the risk of a “speculative, illiquid, and long-term investment.”

Navigating FINRA Arbitration: A Closer Look at Securities Dispute Resolution

Published on: September 26, 2023 | by Iorio Altamirano

Introduction

When disputes arise between investors and brokerage firms, they are usually resolved through arbitration. The Financial Industry Regulatory Authority (FINRA) offers a streamlined and cost-effective dispute resolution forum for resolving disputes in the securities industry. In this blog post, we’ll take a deep dive into FINRA arbitration, its key features, benefits, and what you should know if you find yourself involved in a securities-related dispute.

Understanding FINRA Arbitration

GWG’s Bankruptcy Plan Goes into Effect; GWG L Bonds Canceled

Published on: August 2, 2023 | by Iorio Altamirano

On August 1, 2023, GWG Holdings, Inc.’s Chapter 11 bankruptcy plan (the “Plan”) went into effect.

As part of the Plan, GWG will be liquidated, and two liquidating trusts have been created: (i) the Wind Down Trust and (ii) the Litigation Trust.

As a result of the Plan going into effect, all securities issued by GWG, including GWG L Bonds, were canceled. L Bondholders received “New Series A1 WDT Interests” in the Wind Down Trusts.

GWG Bankruptcy Update (July 14, 2023): The Residual Value of the GWG L Bonds Remain Suspect as Beneficient Receives a Wells Notice from the SEC

Published on: July 14, 2023 | by Iorio Altamirano

On June 20, 2023, the United States Bankruptcy Court for the Southern District of Texas entered an Order confirming GWG’s Further Modified Second Joint Chapter 11 Plan (the “Chapter 11 Plan”).

GWG has disclosed that they are targeting July 31, 2023, as the effective date for the Plan.

As part of the Chapter 11 Plan, GWG will no longer operate as an ongoing concern. Instead, the Chapter 11 Plan provides that the GWG will be liquidated, and two liquidating trusts will be created: (i) the Wind Down Trust and (ii) the Litigation Trust.

Former GPB Capital Executive Pleads Guilty to Wire Fraud

Published on: June 7, 2023 | by Iorio Altamirano

On Tuesday, June 6, 2023, Jeffrey Lash, a former executive of GPB Capital Holdings, pleaded guilty to one count of wire fraud in federal court in Brooklyn, NY.

In 2021, a federal grand jury brought criminal charges against Lash, David Gentile (founder and owner of GPB Capital), and a third individual, Jeffry Schneider. The charges are related to their management of the company, which has been described as a “Ponzi-like scheme.” In February 2021, the SEC also charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.7 billion from over 17,000 investors, many of whom were retirees.

The criminal complaint alleged that Mr. Gentile, Mr. Lash, and Mr. Schneider used new money invested by retail investors to cover the promised 8% returns to prior investors, yet failed to disclose the source of the distributions to investors.

Former Morgan Stanley Broker Michael R. Neill Suspended

Published on: May 10, 2023 | by Iorio Altamirano

The Financial Industry Regulatory Authority (“FINRA”) has suspended former Morgan Stanley broker Michael R. Neill from the securities industry for one month and fined him $5,000. Mr. Neill consented to the suspension after FINRA alleged that Mr. Neill violated FINRA Rules 4511 and 2010 by altering representative codes for 219 trades from January 2014 through March 2018, causing Morgan Stanley to maintain inaccurate books and records.

Origination of the Matter

This case originated from FINRA’s review of the Form U5 (Uniform Termination Notice for Securities Industry Registration) that was filed by Morgan Stanley after it terminated Mr. Neill.

Centaurus Financial Sanctioned and Fined by Regulators for Supervisory Failures for the Second Time in Three Months

Published on: May 10, 2023 | by Iorio Altamirano

In a recent regulatory case, on May 5, 2023, the Financial Industry Regulatory Authority (FINRA) Office of Hearing Officers imposed sanctions on Centaurus Financial, Inc. and its financial advisor Donnie Ingram for engaging in unsuitable and unethical practices, as well as supervisory failures. Centaurus Financial, Inc. was censured and ordered to pay a $50,000 fine and $388,962 in restitution to harmed customers. Donnie Ingram was suspended from association with any FINRA member firm in any capacity for six months, fined $15,000, and ordered to pay $388,962 in restitution to harmed customers. The sanctions were the result of Ingram’s unsuitable recommendations to customers to purchase Unit Investment Trusts (UITs), Bluerock Residential Growth REIT Inc. (BRG), and MacKenzie Realty Capital, Inc. (MAC) at higher costs when there were lower cost options available.

Earlier this year, in February 2023, Centaurus Financial also agreed to pay a $750,000 civil penalty after the SEC charged the firm in connection with the unsuitable recommendation of variable interest rate structured products to retail customers. The SEC’s order found that Centaurus failed to implement, and its branch manager failed to follow, Centaurus’ customer-specific suitability procedures and that Centaurus violated the broker-dealer books and records provisions of the federal securities laws. The SEC’s order found that Centaurus violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) and Section 17(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 17a-4(e)(5), 17a-4(f)(2), and 17a-3(a)(17)(i)(B)(3) thereunder. The SEC concluded that Centaurus failed reasonably to supervise the firm’s brokers.

Financial institutions like Centaurus Financial, Inc. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as recommendations to purchase alternative investments, such as GWG L Bonds, UITs, and REITS, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Whistleblower Award Alert: The SEC Awards Record $279 Million to Whistleblower

Published on: May 5, 2023 | by Iorio Altamirano

The Securities and Exchange Commission (“SEC”) announced a whistleblower award of roughly $279 million to a whistleblower who provided information to the SEC, leading to a successful regulatory enforcement action by the SEC and another federal agency. This is the largest amount the SEC has ever awarded to a whistleblower, more than doubling the $114 million the SEC awarded to a whistleblower in October 2020.

Top 10 SEC Whistleblower Awards:

$279 million – May 5, 2023

What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan

Published on: April 22, 2023 | by Iorio Altamirano

On April 21, 2023, United States Bankruptcy Judge Marvin Isgur approved GWG’s Disclosure Statement that will be sent to creditors to vote on GWG’s Chapter 11 Plan (the “Plan”). The approval of the Disclosure Statement comes one year and one day after GWG filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas.

The Plan will now be sent to creditors, including L Bondholders, to accept or reject the Plan. GWG’s Plan is essentially an “orderly” liquidation. If the Plan is accepted, GWG will be liquidated in accordance with the terms of the Plan. If the Plan is rejected, GWG will likely be liquidated in accordance with Chapter 7 of the United States Bankruptcy Code. Either way, GWG will be liquidated and will not continue as a business. Creditors will need to decide which path of liquidation will be more favorable to them.

We believe that it is highly unlikely that L Bondholders will obtain a quick and full recovery through either the Chapter 11 Plan or a Chapter 7 liquidation.

GWG Bankruptcy Update (April 17, 2023): Liquidation Options Become Clearer as Recovery for Bondholders Remain Uncertain

Published on: April 17, 2023 | by Iorio Altamirano

**Update: April 22, 2023** On April 21, 2023, the Bankruptcy Court approved GWG’s further revised Disclosure Statement for its Second Amended Reorganization Plan. The Plan will now be sent to creditors, including L Bondholders, to accept or reject the Plan. For more information, please visit our most recent blog post: What L Bondholders Need to Know About GWG Holdings, Inc.’s Chapter 11 Plan.

Original Post:

GWG Bankruptcy Update (April 17, 2023): Liquidation Options Become Clearer as Recovery for Bondholders Remain Uncertain

Securities Arbitration Lawyers Blog