Millstone Creek Lawsuit | Reg D Private Placement Risks
The White Law Group is investigating potential claims involving Millstone Creek, LLC, a real estate private placement that raised about $4.2 million from 53 investors. Below is what the company’s SEC filing discloses and what options investors may have.
Millstone Creek was offered under Regulation D, a private placement exemption that allows companies to raise money with limited disclosure. Investors who have questions about this offering can talk with our FINRA arbitration attorneys about a possible claim against the firm that sold it.
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What Is Millstone Creek, LLC?
Millstone Creek, LLC is a Delaware limited liability company formed in 2018. It lists its principal office in Vero Beach, Florida, and its industry as “Other Real Estate.” True North Resources, LLC is named as the company’s manager. The company chose not to disclose its revenue or asset size.
Millstone Creek Offering Terms
The Form D, signed January 3, 2019, reports the following:
- Exemption claimed: Rule 506(b) of Regulation D
- Type of security: Equity
- Total offering amount: $4,277,000
- Amount sold: $4,177,000, with $100,000 remaining
- Number of investors: 53
- Minimum investment: $6,000
- Date of first sale: December 19, 2018
- Sales commissions: $292,390
- Estimated proceeds paid to executive officers, directors or promoters: $700,000
The filing names one FINRA member firm, Green Vista Capital, LLC of Winter Park, Florida, as receiving sales compensation. The offering was marketed in 21 states, including Florida, California, Texas, New York and Illinois.
What Brokers Owe Investors in Private Placements
A brokerage firm must research a private placement before its brokers recommend it. FINRA Regulatory Notice 10-22 says firms cannot simply accept the issuer’s own sales pitch. That duty grows when the firm or its broker is connected to the issuer, because the conflict makes an independent review more important. The broker must also believe the investment fits each customer’s goals and risk tolerance under FINRA Rule 2111.
Risks of Reg D Investments Like Millstone Creek
- A potential conflict of interest. The person listed as receiving sales compensation is purportedly also listed as a principal of the company’s manager. That means the seller stood to benefit on both sides of the deal.
- High upfront costs. Sales commissions equal about 7% of the money raised. The company also estimated $700,000, roughly 17% of the amount sold, would go to its officers and promoters.
- Your money is locked up. These interests do not trade on any exchange. Selling them early can be difficult or impossible.
- No government review. The SEC does not check a Form D or the offering documents for accuracy.
- A brand-new company. Millstone Creek was formed in 2018, the same year it began selling to investors.
- Little financial transparency. The company declined to report its revenue or asset value.
Recovering Investment Losses in Millstone Creek
Investors who lost money in Millstone Creek may be able to recover it from the brokerage firm that sold it. These claims often allege the firm failed to research the offering, overlooked conflicts of interest, or recommended an investment that did not fit the customer. They are generally resolved through FINRA arbitration.
Contact The White Law Group
The White Law Group, national securities fraud attorneys with offices in Chicago and Seattle, is investigating potential claims for Millstone Creek, LLC investors. Call (888) 637-5510 for a free consultation, or contact us online.
Frequently Asked Questions
How can I recover money I invested in Millstone Creek, LLC?
You bring a claim against the brokerage firm that sold you the investment, usually through FINRA arbitration. Most brokerage account agreements typically include a pre-dispute arbitration clause that many investors never notice when they open the account. So these cases generally go to FINRA arbitration instead of court, and arbitration can still lead to a monetary award or settlement.
Why are Reg D private placements riskier than other investments?
Reg D private placements are sold without the registration and SEC review that public investments go through. The company only files a short notice called a Form D, so investors get far less verified information. Your broker’s own research is often the main protection you have.
Can the brokerage firm be held responsible for my losses?
Yes, it can. Brokerage firms must supervise their brokers and review the private placements those brokers sell. A firm that let an unsuitable investment through, or ignored a conflict of interest, may be liable for failing to supervise.
