Private Placements

Published on: October 25, 2017

Atlas Resources 28-2010 L.P. Investors May Have Arbitration Claims

Oil Rig Daytime Investors in Atlas Resources 28-2010 L.P. (“Atlas 28-2010” or, the “Partnership”) may be able to recover investment losses through FINRA arbitration. Atlas 28-2010 is a Delaware limited partnership formed on April 1, 2010, with Atlas Resources, LLC serving as its Managing General Partner and Operator (“Atlas Resources” or “MGP”). Atlas Resources is an indirect subsidiary of Titan Energy, LLC (“Titan”). According to publicly available SEC filings, Titan is an independent developer and producer of natural gas, crude oil, and natural gas liquids, with operations throughout the United States.

As part of its business, Titan sponsors and manages certain investment partnerships, including Atlas 28-2010. As an oil and gas partnership, Atlas 28-2010 has drilled and currently operates wells located in Pennsylvania, Indiana, and Colorado. Atlas 28-2010 seeks to earn revenue through operation of its wells, which produce natural gas. The Partnership raised investor capital through a private placement offering governed by Regulation D (“Reg D”) of the federal securities laws, allowing for the sale of unregistered (or exempt) securities.

Investing in a private placement carries significant risk, and for this reason, is typically only available to accredited investors (in general, to be accredited an investor must have an annual income of $200,000 or joint annual income of $300,000, for the last two years, or alternatively, have a net worth in excess of $1 million, either jointly or with a spouse). One risk with private placements involves their high cost; many oil and gas limited partnerships have high expense ratios, making the investment a risky proposition from the outset. Up-front expenses may be as high as 7-10%, in addition to due diligence fees that may range from 1-3%. Furthermore, oil and gas private placements are risky because of the extreme volatility associated with the underlying commodity: oil. Due to recent sharp declines in the oil and gas market (crude oil has significantly declined in price from recent highs in 2014), many oil and gas limited partnerships are now teetering at the brink of default.

Published on: October 24, 2017

Investors in ATEL 14 LLC May Have Arbitration Claims

by InvestorLawyers

Money on Fire Investors in ATEL 14 LLC (“ATEL 14,” or the “Company”), or a similar illiquid investment product, may be able to recover losses on their investment through FINRA arbitration, or in some instances, securities litigation. The attorneys at Law Office of Christopher J. Gray, P.C. possess considerable experience in representing aggrieved investors who have lost money due to unsuitable recommendations to purchase inappropriate securities, including illiquid non-traded investment products that do not trade on a national securities exchange.

According to publicly available SEC filings (from March 2017), ATEL 14 was formed as a California LLC in April 2009, for the purpose of funding equipment financing and acquiring equipment to engage in equipment leasing and sales activities. The Company’s primary investment objective is to acquire investments primarily in low-technology, low-obsolescence equipment such as the core operating equipment used by companies in the manufacturing, mining, and transportation industries. ATEL 14 conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”) at a price of $10 per Unit. As of December 31, 2016, cumulative gross contributions to ATEL 14 (net of distributions paid and syndication costs) totaled $83.7 million – as of this same date, 8,316,662 Units were issued and outstanding.

Recently, Units of ATEL 14 were listed for sale on Central Trade & Transfer – which provides a secondary market for certain illiquid investments including private placements in LLCs such as ATEL 14 – for $3.10 per Unit. It would appear this pricing represents a significant loss for many investors who purchased Units through the IPO at $10 per Unit. Additionally, investors in ATEL 14 may not have fully appreciated the risk associated with the 9% sales commission brokers earned for recommending purchase of ATEL 14 Units to their clients.

Published on: October 16, 2017

FINRA Hearing Panel Fines Carolina Financial Securities, LLC For Promissory Note Sales

by InvestorLawyers

FINRA fined Carolina Financial Securities, LLC (“CFS”) of Brevard, North Carolina $60,000 and served it with a Letter of Caution in a case involving allegations that CFS made material misrepresentations and omissions in connection with the sale of securities. FINRA also found that that the firm recommended securities- certain senior secured notes- to customers without conducting an investigation that was sufficient to provide a reasonable basis for determining that the notes were suitable for any investor. Further, FINRA found that CFS made false and misleading communications to the public by distributing offering materials that contained false statements. Finally, FINRA found that CFS failed to enforce the firm’s own Written Supervisory Procedures (WSPs) by in connection with permitting brokers employed by CFS to sell the subject secured notes.

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Many retail investors may buy into non-conventional investments such as the subject notes without first being fully informed of the risks. As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommedation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in non-conventional investments, including promissory notes. Depending on the facts and circumstances, investors may be able to recover their losses in FINRA arbitration or litigation. Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

Published on: October 12, 2017

Enervest Ltd. Private Equity Funds Plummet in Value

by InvestorLawyers

On July 16, 2017, the Wall Street Journal published an article – From $2 Billion to Zero: A Private-Equity Fund Goes Bust in the Oil Patch – discussing the financial distress besetting Houston based EnerVest Ltd. (“EnerVest”), a private equity firm focused on energy investments. Essentially, the article discussed how falling oil prices (to a then current price of $45 per barrel of crude) had worked against the fund managers at EnerVest, who had borrowed heavily to invest in oil and gas wells before the recent collapse in energy prices.

According to recent reports, several of EverVest’s energy funds employed leverage to purchase oil and gas wells when crude process were much higher. As a result, investors in those funds will undoubtedly suffer significant losses on their investments. Further, recent reports have suggested that EnerVest fund managers have engaged in discussions to recapitalize or otherwise sell assets (presumably at firesale prices) from the $1.5 billion EnerVest Energy Institutional Fund XII, which closed in 2010, as well as the $2 billion EnerVest Institutional Fund XIII, which closed in 2013.

In the way of brief background, EnerVest is a private-equity firm that focuses on energy investments, claiming to operate more U.S. oil and gas wells than any other company operating in that space. EnerVest began raising investor capital in 2013 when oil and gas was trading at an average price of $90 per barrel; since that time, energy prices have collapsed, with crude currently trading around $50 per barrel (as of October 2017).

Published on: October 11, 2017

Woodbridge Mortgage Fund Investors May Have FINRA Arbitration Claims

by InvestorLawyers

Investors who have lost money in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds may be able to pursue recovery of any losses through securities litigation or arbitration.

Brokerage firms that sell private placements such as the Woodbridge funds must conduct due diligence on the investment before recommending it to their clients. The due diligence rule stems from FINRA Rule 2310, the so-called suitability rule, which requires that a brokerage firm must have reasonable grounds to believe that a recommendation to purchase a security is suitable for the customer. This principle is further explained in National Association of Securities Dealers Notice to Members 03-71, which elaborates that a brokerage firm must perform significant due diligence before recommending a private placement investment to any customer(s). By recommending a security to customers, the brokerage firm effectively represents that a reasonable investigation of the merits of the investment has been made.

According to a lawsuit filed by the Securities and Exchange Commission (“SEC”), Woodbridge has raised over $1 billion from thousands of investors through various finds. Some of the Woodbridge investments involve First Position Commercial Mortgages (“FPCMs”), which consists of a promissory note from a Woodbridge Fund, a loan agreement, and a non-exclusive assignment of the Woodbridge Fund’s security interest in the mortgage for the underlying hard-money loan. These FPCMs are securities in the form of notes, investment contracts, and real property investment contracts.

Published on: October 11, 2017

Bakken and Coachman Private Placement Investors May Have FINRA Arbitration Claims

by InvestorLawyers

Oil and gas private placements use some of investors’ money to drill and operate oil and gas wells. Oil and gas DPPs are sponsored and managed either by investment companies or oil and gas exploration companies, each of which may suffer from its own conflicts of interests in structuring the investments due to the very high fees and commissions associated with such investments.

Brokerage firms that sell private placements must conduct due diligence on the investment before recommending it to their clients. The due diligence rule stems from FINRA Rule 2310 the so-called suitability rule, which requires that a brokerage firm must have reasonable grounds to believe that a recommendation to purchase a security is suitable for the customer. This principle is further explained in National Association of Securities Dealers Notice to Members 03-71, which elaborates that a brokerage firm must perform significant due diligence before recommending a private placement investment to any customer(s). By recommending a security to customers, the brokerage firm effectively represents that a reasonable investigation of the merits of the investment has been made.

The following private placements could give rise to an arbitration claim against a stockbroker or financial advisor if the recommendation to purchase them lacked a reasonable basis, or if the investments were sold based on misrepresentations or omissions of material fact:

Published on: October 11, 2017

SEC Alleges Fraud in Connection with Southern Energy Group/Black Gold Resources Oil Investment Scheme

by InvestorLawyers

On August 11, 2017, the Securities and Exchange Commission (“SEC”) filed a Complaint against Defendants David R. Greenlee, David A. Stewart, Jr., and Richard “Ric” P. Underwood, in connection with various oil limited partnerships and joint ventures. Specifically, the SEC has alleged that the Defendants engaged in a fraudulent scheme whereby at least $15 million in limited partnership and joint venture interests were sold to more than 150 investors.

According to the SEC Complaint, Defendants Greenlee and Stewart operated the alleged scheme through two Tennessee corporations, Southern Energy Group, Inc. (“SEG”) and Black Gold Resources, Inc. (“BGR”), which later changed its name to Tennstar Energy, Inc. (“Tennstar”). Further, the SEC Complaint alleges that Defendant Underwood substantially assisted in facilitating and perpetuating the scheme by acting as principal salesman, assisting in drafting false offering materials given to potential investors, and overseeing the operations of a ‘boiler room’ sales team that solicited the oil investments.

In soliciting funds from prospective investors, the SEC has alleged that the Defendants represented that the limited partnerships and joint ventures would use investor funds in order to acquire “working interests” in various oil wells, as well as employ enhanced oil recovery techniques, such as fracking, to develop and recover oil from the wells. Moreover, the SEC has alleged that the Defendants represented to investors that the entities would sell enough oil to earn investors returns ranging from 15-55%, or more, per year “for decades.”

Published on: October 10, 2017

Credit Nation/CN Capital Investors May Have Legal Claims

by InvestorLawyers

Investors in promissory notes of Credit Nation Capital, LLC (“CN Capital”) and affiliated companies may have viable legal claims based upon allegations in cases filed by the United States Securities and Exchange Commission (“SEC”).

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The SEC filed a lawsuit in 2015 alleging that CN Capital and affiliates were engaged in fraud. The companies allegedly lost massive amounts of money and stayed afloat only by raising more money from investors, according to the SEC lawsuit. According to the SEC, related entities allegedly included Credit Nation Acceptance, LLC, a Texas limited liability company in Midland, Texas; Credit Nation Auto Sales, LLC, a Georgia limited liability company in Woodstock, Georgia, American Motor Credit, LLC, a Georgia limited liability company in Woodstock, Georgia; and Spaghetti Junction, LLC, a Nevada limited liability company.

Published on: October 6, 2017

Astenbeck Master Commodities Fund II Investors May Have Arbitration Claims

by InvestorLawyers

Investors who have suffered losses due to the recommendation of a stockbroker or financial advisor to invest in the hedge fund Astenbeck Master Commodities Fund II (“Astenbeck II”) may be able to recover losses through FINRA arbitration if the investment recommendation was unsuitable, or the nature of the investment was misrepresented by the advisor.

According to reports by Bloomberg, Astenbeck II posted large losses through the first half of 2017. In fact, in June 2017 alone, the hedge fund plummeted nearly 30% as reported by Bloomberg. Consequently, Astenbeck Capital Management decided to pull the plug and shut down Astenbeck II, the main hedge fund vehicle under the Astenbeck Capital Management umbrella.

Astenbeck II appears to have suffered losses part due to a heavy “long” position in crude oil. Unfortunately for investors, crude oil has not recovered from the prices of over $100 per barrel of crude as seen in 2014. In fact, as of early October 2017, the price of a barrel of West Texas Intermediate (“WTI”) crude oil continues to hover around $50.

Published on: October 6, 2017

FINRA Focuses On Non-Traded Business Development Companies – Have You Lost Money In a Non-Traded BDC Such As Sierra Income Corporation?

by InvestorLawyers

Investors in Sierra Income Corporation (“Sierra”), or a similar non-traded investment product may be able to recover losses on their investments through FINRA arbitration. The attorneys at Law Office of Christopher J. Gray, P.C. have considerable experience in representing aggrieved investors who have lost money due to unsuitable recommendations to purchase securities, including illiquid non-traded investment products.

According to publicly-available SEC filings (from May 2016), Sierra made a tender offer to purchase up to 1,005,447 shares of its issued and outstanding common stock. In connection with this tender offer, 855,215 shares were validly tendered at a price equal to $8.04 per share. Unfortunately, for many investors in Sierra, it would appear that the tender offer price represents a significant loss on the initial capital investment.

In January 2017, the Financial Industry Regulatory Authority (“FINRA”), as part of its ongoing efforts to ensure the integrity of financial markets and offer protection to investors, issued certain guidance through its ‘2017 Regulatory and Examination Priorities Letter.’ Among those concerns highlighted by FINRA were issues related to so-called ‘alternative’ investments such as non-traded real estate investment trusts (“REITs”) and non-traded business development companies (“BDCs”):