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Written by 8:13 am Blog, Securities Fraud Articles

DeWaay Possible Bankruptcy and DBSI Litigation

DeWaay Financial Network LLC says they are teetering on the edge of bankruptcy due to a deluge of securities litigation against them. According to the Des Moines Register, the litigation and looming bankruptcy “stem from selling high-risk private placement investments — particularly real estate deals for DBSI Inc., a Delaware company that packaged real estate deals, and oil and gas development deals.”

It has been reported that DeWaay sold $46.3 million in DBSI investments, mostly tenants in common exchanges, to 590 customers. Tenants in common exchanges are “are higher-risk investment vehicles in which real estate ownership is split among two or more parties that have a fractional interest in the property.” The big problems for these investors began when “DBSI entities filed for bankruptcy protection in November 2008 as commercial and residential real estate values plummeted.”

Recently, DeWaay filed an injunction to halt eight investor claims against the firm from going to FINRA arbitration hearings. DeWaay Financial Network claims they do not have the resources to pay the 8 investors currently pursuing individual arbitration claims, they stated in a memorandum that they, “[lack] sufficient funds to satisfy the claims in eight arbitration claims against it — let alone the potential claims of 304 other customers that have not yet brought suit.” DeWaay has reported total assets of $3.4 million.

In filing for a temporary restraining order in Delaware Federal Court, DeWaay is seeking to stay the 8 FINRA arbitrations filed against the firm (as well as any future claims that may have been filed against the firm as a result of their sale of DBSI to investors).  Based on the pleading filed by the firm, it is apparent that DeWaay is also hoping to convince the Delaware judge that there is a limited amount of money available to settle its contingent liabilities resulting from its sales of DBSI and that the FINRA arbitrations could potentially result in an inequitable allocation of the available settlement proceeds.  The Delaware judge has yet to hear argument on DeWaay’s request to stay the FINRA arbitrations.

It should also be noted that the Des Moines register spoke to an attorney of two of the eight current FINRA plaintiffs who “pointed out that DeWaay Financial Network’s holding company, DFN Partners, reported having $4.8 million in assets and $580,000 in annual net revenue in 2010.”

The White Law Group is also right in the middle of this ongoing situation. Our firm is currently representing DBSI investors who have been struggling with their investment losses in claims against DeWaay Financial Network and other broker-dealers who represented and sold DBSI investments. The White Law Group is committed to ensuring that their rights as investors are honored in the best way possible.

If you invested in a DBSI tenants in common investment through DeWaay Financial Network or another FINRA registered broker dealer and would like to speak to a securities attorney about your ability to pursue recovery of your investment losses through FINRA arbitration please call our Chicago office at 312-238-9650.

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 Boca Raton, Florida.

For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.

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