According to the SEC, investors were allegedly defrauded in several ways. For example, the Defendants’ purportedly failed to disclose sizable up-front fees of 15-30% taken off the top of investor equity. In addition, the Defendants allegedly misrepresented the returns earned on various real estate deals, touting their “impressive returns” when, in actuality according to the SEC, investors sustained heavy losses on investments in predominantly South Side Chicago real estate deals. The SEC has further alleged that rather than inform investors of financial distress, father and son Defendants Jerome and Shaun Cohen, respectively, elected instead to continue “[t]o solicit investors with offers of safe investments and outsized returns.”

Equitybuild is structured as a Florida corporation. Since at least 2010, the company has solicited investments, promising returns that were to be generated through the purchase, renovation and development of Chicago real estate. Equitybuild Finance, f/k/a Hard Money Company, LLC, is structured as a Delaware limited liability company. Both companies were founded by Defendant Jerome Cohen, 63 years of age, and currently a resident of Naples, Florida. Defendant Shaun Cohen is a resident of New York, New York, and serves as the President and sole officer of Equitybuild Finance.

As noted in the SEC’s Complaint, none of the securities offered by Defendants were registered with the SEC. As we have discussed in prior blog posts, whenever investors are solicited to invest in an unregistered securities offering, commonly known as a private placement, they should proceed with the utmost caution. Typically, private placement deals are very complex, and furthermore, only provide investors with limited information and transparency, often marketed via a Private Placement Memorandum (“PPM”) or similar disclosure documents.

As alleged in the SEC’s Complaint, Defendants “utilized a variety of promotional methods to solicit investments in the Notes.” These Notes, sometimes referred to as Private Mortgage Notes, were offered to investors with interest rates ranging from 12-20%, with terms ranging from 6 mos. – 24 mos. According to the SEC, Defendant Shaun Cohen managed a network of salespeople who reported directly to him and who were instructed “[t]o bring in at least $50,000 in new investments each day.”

Investors who were solicited to invest in Equitybuild Private Mortgage Notes through a stockbroker or financial advisor may have viable FINRA arbitration claims or litigation options, in the event that the brokerage firm or Registered Investment Advisory (“RIA”) firm did not perform adequate due diligence before recommending the investment, or alternatively, in the event that the brokerage firm or RIA failed to properly supervise its financial advisor in connection with his or her recommendations to invest in Equitybuild securities.

Investors who wish to discuss a possible claim may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Jerome and Shaun Cohen, father and son, run EquityBuild and a subsidiary, EquityBuild Finance. EquityBuild allegedly has raised at least $135 million from more than 900 investors since 2010, according to the SEC suit, filed in federal court in Chicago. EquityBuild allegedly solicited investors to invest in debt used to finance properties. EquityBuild allegedly touted outsize returns of 12 to 20 percent with minimal risk of loss of principal. and downplayed the risks, according to the SEC complaint. The SEC alleges that EquityBuild, based in Marco Island, Florida, skimmed 15 to 30 percent off each investment through fees that the company and the Cohens didn’t disclose. EquityBuild also allegedly paid returns to older investors with the proceeds of newer investments, paying investors about $14.5 million in interest payments between January 2015 through February 2017 although income and fees from EquityBuild properties totaled only $3.8 million, according to the SEC suit.

It is unclear from publicly available information whether EquityBuild investments were sold by FINRA or SEC-registered financial advisors. Investors in EquityBuild may wish to consider claims against professionals such as stockbrokers, financial advisors, or insurance agents who sold them the investments, or any professional services firms (law firms, accounting firms, etc.) that may have materially participated in EquityBuild’s unregistered securities offering. As the SEC has alleged that the EquityBuild investments were securities that were not registered or exempt from registration, investors may be able to pursue claims against various third-parties that materially participated in these transactions.

EquityBuild investors may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.