Erez Law recently filed a FINRA arbitration against Centaurus Financial, Inc. related to investments.
The allegations are related to recommendations of Hospitality Investors Trust, Inc. and speculative and unsuitable L Bonds issued by GWG Holdings Inc. and by Valentino Scott (CRD# 1497615) and Sean Burr (CRD# 6421939).
The Erez Law clients allege the following in the newly filed FINRA claim.
The clients entrusted the two brokers and Centaurus Financial, Inc. with their securities investments. The clients placed a high degree of trust and confidence in the brokers, who they entrusted with the vast majority of their life savings and retirement savings.
Erez Law alleges that despite the clients aversion to high-risk investments, the broker recommended the clients invest in speculative and illiquid fixed income investments that were grossly unsuitable for them.
It is alleged that although the L Bonds were marketed and recommended by the brokers and Centaurus Financial, Inc. as a safe investment offering reliable income payments and a guaranteed return of principal upon redemption, in reality the GWG Holdings Inc. L Bonds were actually non conventional, unrated and illiquid private placement investments that were inherently speculative and unsuitable. Moreover, the GWG Holdings Inc. L Bonds were not in the clients’ best interests.
According to the claim, the brokers failed to adequately describe the nature of the L Bonds and failed to adequately disclose the enormous risks associated with investing in the GWG Holdings Inc. L Bonds. It is alleged that the brokers assured the client that the alternative investments were safe and would generate consistent income.
Regrettably, it is alleged that the L Bonds the brokers recommended and sold to the Erez Law clients were not the safe, income producing investment that brokers led the clients to believe they were. Additionally, the alternative investments paid significant commissions of as much as 5% or more of the bond’s market price, allowing the brokers and Centaurus Financial, Inc. to profit at the clients’ expenses.
It is alleged that the brokers failed to adequately disclose the enormous degree of risk, including liquidity risk, associated with the GWG Holdings Inc. L Bonds they recommended and sold to the clients. By failing to adequately disclose the enormous risks associated with the recommendation, the brokers deprived the clients of their right to make an informed decision about their investments.
According to the claim, now that GWG Holdings Inc. has filed for bankruptcy and has since been discharged, L Bond investors, including the Erez Law clients, cannot expect the return of their capital invested in the L Bonds. It is alleged that the brokers repeatedly assured the clients that they will recover their investment in GWG Holdings Inc. L Bonds. Regrettably, this was false and misleading.
In addition to their investments in GWG Holdings Inc. L Bonds, the brokers recommended and sold the clients another non traded, illiquid, speculative and unsuitable private placement investment, Hospitality Investors Trust, Inc., a publicly registered non-traded real estate investment trust (REIT).
It is alleged that contrary to the brokers and Centaurus Financial, Inc.’s representations, the REIT was a speculative and illiquid investment that was destined to fail and wholly inconsistent with the client’s risk tolerance and investment objectives. Additionally, Hospitality Investors Trust, Inc. pays significant (10%) up front commissions and fees to the broker-dealers and financial advisors who sell them.
Hospitality Investors Trust, Inc. filed for bankruptcy and the discharge of its debts, and as such, it is alleged that it is extremely unlikely that the clients and other investors in the REIT will recover any of their principal investment. It is alleged that the brokers failed to adequately disclose the risks associated with the client’s investments in the REIT and L Bonds and, as such, failed to satisfy their obligations under FINRA rules.
According to the claim, the clients have incurred significant financial harm as a result of the brokers’ reckless and unsuitable investment strategy.
Not only have the clients have suffered significant losses in connection with the L Bond and REITs that the recommended and sold to them, but they have also suffered the loss of needed income that the brokers represented they would receive from those investments.
Valentino Scott Customer Complaints
Valentino Scott has been registered with Centaurus Financial, Inc. in West Hills, California, since 1995.
He has been the subject of two customer complaints between 2022 and 2023, two of which were denied, and two were closed without action, according to his CRD report:
October 2023. “The customers allege that the Registered Representative recommended unsuitable, high-risk, speculative and illiquid investments, and breached his fiduciary duty. No Specific dates for the alleged activity were identified in the Statement of Claim.” The customer is seeking $298,000 in damages.
July 2022. “The customers allege that the Registered Representative misrepresented an unsuitable investment. No dates of alleged activity were disclosed in the Statement of Claim.” The case is currently pending.
Sean Burr Customer Complaints
Sean Burr has been registered with Centaurus Financial, Inc. in West Hills, California, since 2015.
He has been the subject of two customer complaints between 2022 and 2023, two of which were denied, and two were closed without action, according to his CRD report:
October 2023. “The customers allege that the Registered Representative recommended unsuitable, high-risk, speculative and illiquid investments, and breached his fiduciary duty. No Specific dates for the alleged activity were identified in the Statement of Claim.” The customer is seeking $298,000 in damages.
July 2022. “The customers allege that the Registered Representative misrepresented an unsuitable investment. No dates of alleged activity were disclosed in the Statement of Claim.” The case is currently pending.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Centaurus Financial, Inc. may be liable for investment or other losses suffered by Valentino Scott’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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