Hayworth Tanglewood DST Lawsuit: Help for Investors

Hayworth Tanglewood DST Lawsuit: Delaware Court Allows Claims Over $58 Million Real Estate Deal to Proceed

Have You Suffered Investment Losses in Hayworth Tanglewood DST?

The White Law Group is investigating potential claims involving Hayworth Tanglewood DST, including whether brokerage firms properly conducted due diligence before recommending this 1031 Delaware Statutory Trust (DST) offering to investors.

A newly developing Hayworth Tanglewood DST lawsuit filed in the Delaware Court of Chancery raises serious concerns about how investor funds were handled in connection with a $105.5 million Houston apartment complex known as The Hayworth.

Delaware Lawsuit Against Hayworth Tanglewood DST Trustees

In Hayworth Tanglewood IB, LLC v. Hayworth Tanglewood DST, et al., pending in the Delaware Court of Chancery, trustees are accused of:

• Failing to properly redeem ownership interests after selling more than $37 million in beneficial interests to outside investors

• Allegedly diverting redemption proceeds

• Breach of contract

• Breach of fiduciary duty

• Breach of the implied covenant of good faith and fair dealing

According to court filings, the plaintiff contributed more than $58 million in equity toward the acquisition of the Houston property in 2022. Under the governing trust documents and private placement memorandum (PPM), proceeds from subsequent investor sales were supposed to redeem the plaintiff’s interest over time.

Instead, the complaint alleges that:

• Approximately $20.1 million in proceeds were paid to a bridge lender

• Ownership interests were not redeemed as required

• Trust proceeds were allegedly diverted for improper purposes

On January 15, 2026, a Delaware magistrate allowed the Hayworth Tanglewood DST lawsuit to proceed, finding that the plaintiff had stated reasonably conceivable claims for breach of fiduciary duty and related violations.

Discovery in the case resumed in February 2026.

Why This Lawsuit Matters to DST Investors

Hayworth Tanglewood DST, sponsored by Versity/Crew, is a Delaware Statutory Trust (DST) structured as a private placement real estate investment. In 2022, the company reportedly filed a Form D to raise capital, with an offering amount of approximately $76,767,365.

Delaware Statutory Trusts (DSTs) are commonly marketed to investors seeking:

• 1031 exchange tax deferral

• Passive real estate income

• Stable, institutional-grade property investments

However, the Hayworth Tanglewood DST complaints highlight a key risk: investors must rely entirely on trustees and sponsors to follow governing documents and properly handle funds.

When trustees allegedly fail to follow redemption frameworks or divert proceeds, investors may face:

• Delayed liquidity

• Reduced ownership value

• Increased litigation risk

• Uncertainty surrounding future property sale proceeds

The property was reportedly listed for sale in May 2025, though court filings indicate that no current offer is under consideration and a sale may be years away.

Additional Litigation Involving Funding Arrangements

Separate litigation in New York involves allegations of fraudulent misappropriation of syndication proceeds tied to bridge financing used in the transaction. While that case focuses on different agreements, it underscores the complex financial structure behind the offering.

For retail investors, layered financing and litigation can significantly increase investment risk.

Risks of Investing in Hayworth Tanglewood DST

Like many private placement 1031 DST offerings, Hayworth Tanglewood DST carries significant risks, including:

• Illiquidity – No public market for resale

• High commissions and fees – Often 7–10% or more

• Limited investor control – Trustees control all operations

• Sponsor and trustee risk

• Potential loss of principal

• Litigation exposure, including the pending Hayworth Tanglewood DST lawsuit

If material risks, conflicts of interest, or fund usage concerns were not fully disclosed, investors may have grounds for a claim.

Did Your Broker Unsuitably Recommend Hayworth Tanglewood DST?

Under Regulation Best Interest (Reg BI) and FINRA rules, brokerage firms must perform reasonable due diligence and ensure a DST investment is appropriate for the investor’s financial situation, objectives, and risk tolerance.

If your advisor failed to clearly explain the risks of Hayworth Tanglewood DST, including liquidity restrictions, trustee control, structural complexities, or ongoing litigation concerns, you may have legal options.

Filing a Hayworth Tanglewood DST Lawsuit Through FINRA Arbitration

Most Hayworth Tanglewood DST complaints against brokerage firms are handled through FINRA arbitration, not class action lawsuits.

FINRA arbitration is often appropriate for investors with substantial losses and allows for individual recovery through a streamlined process.

Class actions are typically used when many investors have smaller claims.

Investors who suffered losses in Hayworth Tanglewood DST may be able to pursue recovery through a FINRA arbitration claim against the recommending brokerage firm.

Frequently Asked Questions About Hayworth Tanglewood DST Complaints

1. What is the Hayworth Tanglewood DST lawsuit about?

The Delaware lawsuit alleges that trustees failed to properly redeem ownership interests after selling beneficial interests and may have diverted proceeds, constituting breach of fiduciary duty and breach of contract.

2. Can investors file their own Hayworth Tanglewood DST lawsuit?

Investors typically do not sue the DST directly. Instead, they pursue claims against the brokerage firm or financial advisor through FINRA arbitration if the investment was unsuitably recommended.

3. What if my Hayworth Tanglewood DST investment has not been sold yet?

Even if the property has not yet been sold, investors may still have claims if there were material misrepresentations, omissions, or unsuitable recommendations at the time of purchase.

Contact The White Law Group

If you invested in Hayworth Tanglewood DST and have concerns about losses, liquidity, or trustee conduct, contact The White Law Group for a free consultation.

888-637-5510

Our securities attorneys represent investors nationwide in FINRA arbitration claims involving private placements, DST offerings, and real estate investments.

About The White Law Group

The White Law Group is a national securities fraud and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. We represent retail investors in claims against brokerage firms involving private placements, 1031 DST investments, and other complex products.

Visit our homepage to learn more about your investment recovery options.