SEC Obtains $7 Million Final Judgment and Bars First Capital REIT CEO
Concerned about investment losses in First Capital Real Estate Trust Inc.?
Have you suffered losses investing in First Capital Real Estate Trust Inc.? If so, The White Law Group may be able to help you. It may be possible to recover your losses by filing a FINRA Dispute Resolution claim against the brokerage firm that sold you the investment.
First Capital Real Estate Trust Incorporated is a public non-traded REIT based in New York City and founded in 2012.
On July 21, 2021, the United States District Court for the Southern District of New York reportedly entered consent judgments against a CEO and board chairman and his entities, First Capital Real Estate Investments, LLC and First Capital Real Estate Advisors LP, as well as against First Capital Real Estate Trust Inc., for alleged fraud. The SEC also reportedly barred the CEO from the securities industry.
According to the SEC’s complaint, filed on December 13, 2019, the CEO and his entities allegedly engaged in two separate frauds relating to two public companies, First Capital Real Estate Trust Inc. (First Capital), which was also charged in the complaint, and a business development company (BDC).
The SEC alleges that First Capital and the CEO made material misrepresentations and omissions concerning the REIT’s ownership of 12 hotels in several Forms 8-K. The CEO also purportedly acquired an interest in the BDC’s external adviser and then allegedly caused the BDC to make two $1.5 million loans to an entity that he purportedly used for his own purposes.
The CEO and First Capital Real Estate Investments, LLC agreed to pay $3.2 million in disgorgement and $676,400 in prejudgment interest, and further agreed to pay a civil monetary penalty of $3.2 million. Finally, the CEO consented to a bar for a period of 10 years from acting as an officer or director of a public company, according to the press release.
First Capital Real Estate Trust Fraud Allegations
First Capital’s CEO allegedly claimed that he owned 12 hotels and purportedly contributed them to First Capital REIT in order to acquire a $15.2 million interest in the REIT’s operating partnership, according to the SEC’s complaint.
The executive and First Capital REIT then allegedly made material misrepresentations and omissions concerning the hotels in several filings with the regulator. The complaint alleges that, consequently, First Capital REIT allegedly reported inflated net asset values and purported to issue common shares to investors at inflated prices.
The SEC’s complaint alleges that, after acquiring an ownership interest in the unnamed BDC’s external investment adviser, the First Capital executive allegedly directed the BDC to make two $1.5 million loans to an entity that he controlled, and then allegedly kept nearly half of the loan proceeds to himself. The BDC reportedly lost all of its $3 million investment.
The REIT was already reportedly struggling — as we reported in October 2016, the REIT announced plans to suspend monthly distributions “to protect cash reserves” at the end of 2016. Around the same time, Investment News reported that First Capital Real Estate Trust Inc. was failing to pay its employees on time.
On May 30, 2017, the REIT reported that multiple indirect subsidiaries had each filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of California.
The indirect subsidiaries, and the respective ownership interest of First Capital Real Estate Operating Partnership, are: Township Nine Owner, LLC (31.3%), Capitol Station Holding, LLC (100%), Capitol Station Member (100%), LLC and Capitol Station 65, LLC (100%).
Potential Securities Claims to Recover Financial Losses
The White Law Group continues to investigate potential claims involving broker dealers who may have unsuitably recommended First Capital Real Estate Trust to investors. The firm has received numerous calls from investors who are concerned about investment losses in the high risk, non-traded REIT.
Compared to traditional investments, such as stocks, bonds and mutual funds, non-traded REITS, are considerably more complex. REITs involve a high degree of risk. Unfortunately, many investors are unaware of the risks and liquidity problems with REITs such as First Capital Real Estate Trust, Inc.
The White Law Group has represented numerous investors in claims against the brokerage firm that recommended non-traded REITs to its investors.
Broker dealers are required to perform adequate due diligence on any investment they recommend. They must ensure that all recommendations are suitable for the investor. Recommendations should be in line with the investor’s age, risk tolerance, net worth, and investment experience.
If brokerage firms fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses.
If you have invested in First Capital Real Estate Trust Inc. and would like to speak to a securities attorney about the potential to recover your investment losses, please call The White Law Group at 1-888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.
For more information on The White Law Group, visit www.whitesecuritieslaw.com.
To learn more about the firm’s investigation, please see: