Lodging Fund REIT III: Lawsuit Investigation Update
Have you suffered losses investing in Lodging Fund REIT III? The White Law Group is continuing to investigate potential securities claims involving broker dealers who may have improperly recommended Lodging Fund REIT III to investors. If you suffered investment losses due to your broker’s recommendation, you may have recovery options.
SEC Fair Fund for Harmed Investors
On September 4, 2025, the Securities and Exchange Commission (SEC) announced a Notice of Proposed Plan of Distribution in the matter involving Legacy Hospitality II, LLC, Legendary Capital REIT III, LLC, and Corey R. Maple (Administrative Proceeding File No. 3-21586).
The SEC had previously found that from 2014 to 2020, the Respondents improperly directed two REITs—including Lodging Fund REIT III—to reimburse approximately $5 million in overhead expenses in a manner inconsistent with disclosures to investors.
As part of the settlement, the Respondents were ordered to pay:
- $2,746,900 in disgorgement
- $544,444.17 in prejudgment interest
- $1,475,000 in civil penalties
This totals $4,766,344.17, which has been placed in a Fair Fund under the Sarbanes-Oxley Act of 2002 to be distributed to harmed investors.
The Proposed Plan outlines that the Net Available Fair Fund (disgorgement, interest, and penalties, plus accrued interest, minus taxes and fees) will be distributed to compensate investors for losses tied to the improperly allocated expenses.
Investors may comment on the Proposed Plan within 30 days of the SEC’s notice. The plan is available on the SEC’s website at SEC Fair Fund List.
Financial Filings Delays
In December 2024, Lodging Fund REIT III amended its revolving line of credit, increasing its borrowing capacity from $5 million to $20 million and extending the maturity date to December 31, 2027.
The REIT has experienced significant delays in financial filings. Its 2023 annual report was filed about 9 months late, and it failed to timely file its Q2 2024 report. Earlier, in 2024, the company had only just filed its Q3 2022 report in April and its 2022 annual report in March, leaving multiple reports still outstanding for 2023.
SEC Enforcement Actions: Expense Reimbursement Scheme
The SEC has repeatedly raised concerns about improper reimbursements involving Legacy Hospitality II LLC and Legendary Capital REIT III LLC, both affiliated with Lodging Fund REIT III.
In September 2023, the SEC fined Corey R. Maple, co-founder of Legendary Capital, $100,000 for his role in the improper reimbursements. The advisors were ordered to disgorge $4.8 million, covering reimbursed funds, interest, and penalties.
The SEC concluded that the reimbursements contradicted offering documents that explicitly assigned overhead costs to the advisors rather than to the REITs, leaving investors unfairly burdened.
Non-traded REITs are Complex Investments
Non-traded REITs, including Lodging Fund REIT III, are illiquid and risky investments. Rising interest rates and volatility in the hospitality sector have negatively impacted performance, with some REITs suspending distributions.
Unlike traditional stocks and bonds, non-traded REITs often come with:
- High upfront commissions (up to 15%)
- Lack of liquidity (difficulty selling on secondary markets)
- Opaque fee structures
These factors make them more suitable for sophisticated investors than retail clients.
Broker Due Diligence Requirements
FINRA requires brokerage firms to ensure that investment recommendations are suitable based on an investor’s age, financial situation, and risk tolerance.
If a firm fails to conduct proper due diligence on a REIT offering, or if brokers recommend unsuitable investments to retail clients, they may be held liable for resulting losses through FINRA arbitration claims.
Class Action Lawsuits vs. Individual FINRA Arbitration
Investors often wonder whether a class action lawsuit or an individual FINRA arbitration claim is the better recovery option.
- Class actions may be effective for many investors with small losses.
- FINRA arbitration is typically more effective for investors with substantial losses (e.g., over $100,000).
The best option depends on the size of the loss and the investor’s individual circumstances.
Recovery of Investment Losses – Lodging Fund REIT III
If you are concerned about your investment in Lodging Fund REIT III, you may be able to file a claim against your brokerage firm.
The securities attorneys at The White Law Group have handled over 800 FINRA arbitration cases nationwide. With more than 30 years of experience, our attorneys have helped investors recover millions in losses due to unsuitable and fraudulent investment recommendations.
For a free consultation, please call 888-637-5510 or visit our website.
Frequently Asked Questions (FAQs)
What is the Lodging Fund REIT III lawsuit about?
The lawsuit centers on allegations that executives improperly directed Lodging Fund REIT III and a related REIT to reimburse about $5 million in overhead expenses, despite investor documents stating that such costs were the responsibility of the advisors, not the REITs. The SEC found these actions misled investors and violated securities laws.
What is the SEC Fair Fund for Lodging Fund REIT III investors?
In 2025, the SEC created a Fair Fund totaling more than $4.7 million from disgorgement, interest, and penalties collected from Legacy Hospitality II, Legendary Capital REIT III, and Corey R. Maple. The fund is designed to return money to investors harmed by the improper expense reimbursements.
How do I know if I qualify for the Lodging Fund REIT III Fair Fund distribution?
Investors impacted by the improper expense reimbursements may be eligible to receive compensation. The SEC’s Proposed Plan of Distribution is available on its website, and investors can submit comments within 30 days of the September 4, 2025 notice.
Can I still file a lawsuit if I invested in Lodging Fund REIT III?
Yes. Even if an SEC Fair Fund is established, you may still have the right to file a FINRA arbitration claim against your broker or brokerage firm if you believe the investment was misrepresented or unsuitable for your financial situation.
