If you have suffered losses in a crowdfunded real estate investment, you may be able to pursue recovery of your losses through FINRA arbitration or securities litigation. Please call Kons Law Firm at (860) 920-5181 for a FREE, NO OBLIGATION consultation to discuss your investment loss recovery options.
Crowdfunded Real Estate Investors May Have Investment Loss Recovery Options
The rise in online platforms that offer and sell crowdfunded real estate investors has caused thousands of investors to purchase real estate investments in increments as slow as $500 (in some instances). In many cases, these online marketplaces tout the sponsor of the property, the prospects of the offering, and even, in some instances, the hypothetical return or distribution rate on the investment itself. In some instances, these marketplaces also offer their own proprietary investment vehicles such as REITs, funds, or limited partnerships to help facilitate the investment.
Despite the highlights of the real estate sponsors or properties that these marketplaces tout, most of the real estate offerings offered through these marketplaces are in fact high-risk, illiquid investments where the investor may have little control over the use of proceeds, may have long holding periods, may be subject to additional capital calls beyond the initial amount of their investment, and may suffer a complete loss of principal.
Additional risks with crowdfunding marketplaces also may include a lack of transparency into the due diligence conducted on each sponsor or property offered and sold, or may include a risk that the marketplace is acting as an unregistered broker-dealer by marketing, offering, selling, and/or participating in the sale of securities without being properly licensed.
As a result, investors must exercise great care when choosing to invest through a crowdfunding marketplace.
Investors in Crowdfunded Real Estate Investments May Have Loss Recovery Options
Fortunately for investors, investors who suffer losses in crowdfunded real estate investments may have investment loss recovery options. Marketplaces that represent to the investing public that they conduct due diligence on real estate sponsors or offerings may be held to a stringent standard of care regarding such due diligence, and may held liable for failure to conduct proper due diligence.
Similarly, the marketplaces that have affiliated broker-dealers may be held to stringent due diligence requirements under FINRA rules. Registered broker-dealers recommending or selling crowdfunded real estate investments may also be required to ensure that the investment being recommended is "suitable" for the customer, and that it has a "reasonable basis" for recommending the security for purchase. This “reasonable-basis” suitability requirement means that in the context of crowdfunded real estate investments that brokerage firms have a duty to conduct due diligence on:
-The issuer and its management;
-The business prospects of the issuer/sponsor;
-The assets held by or to be acquired by the issuer/sponsor;
-The claims being made; and
-The intended use of proceeds of the offering.
Broker-dealers, including those associated with crowdfunding marketplaces, can be held liable if they violate this reasonable-basis suitability requirement. In addition, third-party firms such as unregistered crowdfunding marketplaces that materially assist in a securities offering may have liability under state and federal securities laws for any misrepresentations or omissions made in connection with the sale of such securities.
Finally, any crowdfunding marketplace that is offering and/or selling securities without registering as a broker-dealer may be liable to the investor for losses or "rescission" of the investment transaction offered or sold by the unregistered entity.
Crowdfunding Investors May Be Able to Pursue Recovery of Their Losses
Investors who suffer losses with real estate investments have several avenues of potential recovery to explore. If you have suffered losses in a crowdfunded real estate investment through any online marketplace, you may be able to pursue recovery of your losses through securities arbitration or securities litigation. Please call Kons Law Firm at (860) 920-5181 for a FREE, NO OBLIGATION consultation to discuss your crowdfunded investment loss recovery options.
Kons Law Firm represents investors throughout the US in securities arbitration and litigation matters. To learn more about the Firm’s securities litigation and FINRA arbitration practice, please visit www.investmentfraudattorneys.com.
