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
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.
