Investors who lost millions to Yieldstreet bring class action lawsuit

Seven years after the fintech firm Yieldstreet was established, is now facing a lawsuit filed by investors who lost over $100 million in a series of defaults of high-risk and misleadingly marketed alternative investment products. The company was created to take advantage of the US Securities and Exchange Commission (SEC) rules easing up on the definition of “accredited investors”.

The class action lawsuit is brought by four investors in the district court of Court for the Southern District of New York, represented by Peiffer Wolf and Sonn Law Group.

The lawsuit stated:

The end result is that, claims of no principal loss, in-depth ‘diligence,’ and reliance on ‘asset class experts’ notwithstanding, YieldStreet’s products are poorly sourced and structured, with a default rate five times higher than even that of so-called ‘junk bonds.’  YieldStreet’s junk bonds, however, are mass-marketed to the general public and may be purchased within a matter of minutes by anyone with access to a computer who self-certifies that they earn over $200,000 a year.

The FBI and SEC have been investigated YieldStreet investments, communication with customers, business practices and their marketing campaigns. The lawsuit filed yesterday focuses on the false and misleading statements the fintech firm made to investors to get them to invest in YieldStreet investment products such as vessel deconstruction funds, oil & gas wells, commercial real estate and modern art.

Joseph Peiffer, attorney and managing shareholder, Peiffer Wolf, commented:

Joseph Peiffer, Peiffer Wolf, attorney

Joseph Peiffer

Simply put, YieldStreet’s overexposed, concentrated loan model was doomed to fail—a ‘sinking ship,’ both literally and figuratively. Duped investors were purchasing YieldStreet’s vessel deconstruction products at a fever-pace, but none of them knew that the same borrower was on the other end of every deal. YieldStreet and Mr. Weisz were utterly unconcerned with this risk.

Michael Tecku, investor who lost a substantial amount of money in YieldStreet, said:

The dream of YieldStreet was beautiful, but the reality is a nightmare. These investments were marketed as low risk asset-backed institutional investments run by experts with reasonable returns, but the truth is, there are no experts and there is no institution. It’s just one group of hustlers being out-conned by another.

YieldStreet has an aggressive marketing strategy to promote its products through social media and email and drive potential investors to the company’s investment portal. The company claims to rely on “asset class experts”, however allegedly expert’s recommendations and warnings were largely ignored by YieldStreet’s president, Michael Weisz.

The fintech firm came on SEC and FBI’s radar in March 2020 when YieldStreet announced to its investors that a dozen marine vessels, serving as collateral securing the underlying marine funds, went missing. YieldStreet went on the offensive and has brought lawsuits against the vessel deconstruction business in order to recover investors’ money as well as having pursued insurance claims. YieldStreet denied being under an investigation by the two federal agencies. The company also accused the borrower and the expert who consulted in the deal.

Jeff Sonn, managing partner, Sonn Law Group, said:

Jeff Sonn, Sonna Law

Jeff Sonn

As of the end of the first quarter of 2020, nearly one-third of Yieldstreet’s portfolio was in default. At best, this was a case of the ‘blind leading the blind.’ YieldStreet falsely claimed to have a track record, specialized insights, and a history of success handling tens of millions of dollars of investors who were termed ‘accredited,’ but often not very sophisticated.

Read More:

Read Also: