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Aequitas Capital Warning Signs

Aequitas Capital, and its affiliates, managed $1.67 billion in assets last year, up from $250 million in 2011. The firm raised money from investors and used it to invest in various alternative investments, including student loans and unpaid hospital bills.

Aequitas recently provided an investor update that indicated that the company was having liquidity challenges and had engaged a leading provider of restructuring services.  They also announced that they were ceasing any redemptions and interest payments on their notes and reducing staff to preserve cash.  Further reports indicate that Aequitas is even considering bankruptcy.

While the collapse of Aequitas seems sudden, there were warning signs.

In 2013, Western Property Holdings LLC sued Aequitas Capital Management Inc. over a sour business deal.  The claims included allegations of breach of fiduciary duty.

In 2014, a federal judge ordered Aequitas Capital Management Inc. to set aside nearly $2.5 million ahead of a trial in a civil lawsuit relating to commissions on a portfolio of student loans.

In 2014, Aequitas Capital Partners enters into the financial advisory space with a merchant banking model that provides access to growth capital in exchange for a significant business relationship despite reports that the model might not be for everyone.

In 2015, Aequitas was forced to answer questions about its link to embattled Corinthian Colleges Inc. (reports indicate that An affiliate of Aequitas Capital Management bought for about half price more than $500 million in Corinthian’s student loans and then charged the college chain millions in fees for its help).

While these warning signs are specific to Aequitas, other warning signs existed that are generally applicable to the types of investments Aequitas offered – Reg D private placements.  Reg D private placements are generally illiquid, high-risk, and high-commission investments.  Their high cost structure makes it difficult for these investments to have long term success without enormous risk.  These types of investments are also generally sold through independent brokerage firms that are willing to sell the investments because of the high commissions they offer.

While some law firms are investigating legal claims directly against Aequitas, The White Law Group is investigating the liability that these independent brokerage firms may have for unsuitably recommending Aequitas investments.

Brokerage firms have a responsibility to recommend securities products that are consistent with each individual client’s age, net-worth, investment objectives, financial needs, and risk tolerance. When brokerage firms overlook suitability requirements and industry regulations they may be liable for investment losses in a FINRA arbitration claim.

Specifically, The White Law Group’s securities fraud investigation includes the following Aequitas offerings (among others):

Aequitas WRFF I

Aequitas Private Client Fund

Aequitas Income Protection Fund

Aequitas ETC Founders Fund

Aequitas Income Opportunity Fund II

Aequitas Enhanced Income Fund

Aequitas Commodities Fund

Aequitas Capital Opportunities Fund

Aequitas Secured Subordinated Promissory Notes

If you invested in Aequitas WRFF I and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at (312)238-9650 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 Franklin, Tennessee.

For more information on The White Law Group, visit www.whitesecuritieslaw.com.

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