Securities Lawyers Blog
Previously financial advisor Evan Katz (Katz), previously employed by brokerage firm Stonehaven, LLC has been subject to at least one disclosable event. These events include one tax lien. According to a BrokerCheck reports most of the recent customer complaints concern either corporate debt securities or alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements. The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.
FINRA BrokerCheck shows a final customer complaint on September 27, 2024.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that cease-and-desist proceedings be, and hereby are, instituted against Evan H. Katz (‘Respondent’). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement which the Commission has determined to accept. The commission finds that This matter arises out of misrepresentations in the private placement memorandum (‘PPM’) and marketing materials for the Crawford Ventures Absolute Return Fund, LP (the ‘Fund’), a currency trading fund that raised more than $16 million from investors. The Fund’s PPM and marketing materials claimed that the Fund’s currency trading strategy would mirror a successful strategy previously used by two of the Fund manager’s principals-brothers Akshay and Dev Kamboj (the ‘Kamboj brothers’)-in Separately Managed Accounts (‘SMA’). As proof of the SMA results, prospective investors were provided with an ‘Audit Report’ and a ‘Performance Audit’ purportedly issued by an audit and consulting firm (‘the Auditor’) based in Australia. In reality, the Auditor had not audited the SMAs and the Audit Report and the Performance Audit had been forged by the Kamboj brothers. Katz, a co-founder of the Fund, provided to certain prospective investors the forged materials that the Kamboj brothers furnished. While the Kamboj brothers hid their conduct from Katz, he failed to take reasonable steps to confirm the legitimacy of the Audit Report and the Performance Audit in violation of Sections 17(a)(2) and (3) of the Securities Act.
Alternative investments, including nontraded REITs, oil and gas offerings, and equipment leasing products, are examples of DDPs. With high fees and costs, these alternative investments are usually inappropriate for investors and rarely provide meaningful returns. Brokers who sell these products receive extra commissions, encouraging them to promote low-quality investments and creating distorted incentives that artificially inflate the market.
Several studies have confirmed that Non-traded REITs underperform publicly traded REITs with some showing that Non-Traded REITs cannot even beat safe benchmarks, like U.S. treasury bonds. Brokers offering these products are required to inform investors that non-traded REITs come with lower returns than treasuries, along with high risk and illiquidity—but they rarely do. As investors do not gain extra returns to offset higher risk and illiquidity, these alternative investment products are almost never a good fit for them.
Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client after conducting due diligence. Due diligence includes an investigation into the investment’s properties including its benefits, risks, tax consequences, issuer, history, and other relevant factors. Appropriate due diligence would identify that an alternative investment’s high costs, illiquidity, and conflicts of interests that would make the investment not suitable for investors. Investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
Unfortunately, these types of alternative investment products continue to popular among brokers due to their high commissions. In order to counter the perverse incentives to sell these flawed product many states now limit investors from investing more than 10% of their liquid assets in Non-Traded REITs and BDCs. Many states impose these limitations because these investments do not benefit investors.
Katz has been in the securities industry for more than 8 years. Katz has been registered as a Broker with Stonehaven, LLC since 2024.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.
