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Comments off · Posted by Securities Lawyer in FINRA
In an InvestmentNews.com article by Bruce Kelly, he writes that failed private placements issued by Medical Capital Holdings Inc. and Provident Royalties LLC have forced dozens of broker-dealers to close, be sold or seek bankruptcy protection.
Failed real estate tenant-in-common syndicator DBSI Inc. is threatening to have the same result, with DeWaay Financial Network LLC claiming in federal court last month that bankruptcy looms, due to lawsuits by clients who bought DBSI securities.
Kelly writes that DeWaay Financial Network asked a federal judge in Delaware in October for a temporary injunction to halt eight arbitration claims that investors have filed with the Financial Industry Regulatory Authority Inc. stemming from DBSI losses.
DeWaay Financial Network “lacks sufficient funds to satisfy the claims in eight arbitration claims pending against it — let alone the potential claims of 304 other customers that have not yet brought suit. The threat posed by these mounting costs and the attendant potential for liability hangs over defendant’s limited funds like the Sword of Damocles,” according to the firm’s memorandum, which was filed in U.S. District Court in Delaware on Oct. 19.
“Absent injunctive relief, that sword’s descent is imminent and in all likelihood would force defendant to declare bankruptcy,” according to the memo.
DeWaay’s request for an injunction is part of its strategy to create a settlement with investors, president Matt Stahr said.
“We still feel like we’re in the right,” as the firm did its due diligence on the DBSI products, but the costs of defending the firm in individual arbitration claims are prohibitive, he said. The firm has made substantial progress toward reaching a settlement but hasn’t had a hearing yet regarding its request for an injunction, Mr. Stahr said.
DBSI raised $1 billion from investors by selling real estate deals through independent broker-dealers. The real estate firm declared bankruptcy in 2008, writes Kelly.
The InvestmentNew.com article said that according to court filings, the eight DeWaay Financial Network clients suing the firm in Finra arbitration bought $2.9 million in DBSI securities. DeWaay Financial Network so far has spent $46,000 defending those claims and expects to spend another $1.1 million in defense costs. Beyond those investors, DeWaay Financial Network sold DBSI securities to an additional 304 clients, and the firm’s total exposure exceeds $24 million.
Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced losses with DeWaay Financial Network LLC, and/or were sold DBSI TICs, through DeWaay or other broker/dealers, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.
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