In January 2019, a former client of Quest Capital Strategies, Inc. won an award in a FINRA arbitration for compensatory damages for $235,000 and $41,226.46 in costs for losses sustained from investments in promissory notes of the Woodbridge Mortgage Investment Funds 1 and 2. The investors were clients of financial advisor Frank Dietrich (CRD# 2506091).
The causes of action included violations of federal securities laws; violation of the Virginia securities laws; violation of the Florida Securities and Investor Protection Act; breach of contract; common law fraud; breach of fiduciary duty; and negligence and gross negligence. The causes of action relate to Claimants’ investments in promissory notes of the Woodbridge Mortgage Investment Funds 1 and 2. Unless specifically admitted in the Statement of Answer, Respondent denied the allegations made in the Statement of Claim and asserted various affirmative defenses. The FINRA arbitration hearing was conducted in Boca Raton, Florida.
The Woodbridge Group of Companies is a southern California luxury real estate developer that missed payments on notes sold to investors and filed chapter 11 bankruptcy in December 2017, along with 275 subsidiaries and affiliates, citing “unforeseen costs associated with ongoing litigation and regulatory compliance.” It is alleged that elderly and other investors invested millions of dollars into the Woodbridge Group of Companies investment programs. The investors were allegedly told that these were secure investments in real estate, which is not the case as evidenced by these bankruptcy proceedings.
The SEC is investigating whether 235 LLCs have violated the anti fraud, broker-dealer and securities registration provisions of the federal securities laws in connection with the Woodbridge Group of Companies receipt of more than $1 billion of investor funds from thousands of investors nationwide. The SEC is investigating the offer and sale of unregistered securities, the sale of securities by unregistered brokers and the commission of fraud in connection with the offer, purchase and sale of securities. Monetary claims against Woodbridge remain pending.
In November 2018, FINRA barred Dietrich after he “consented to the sanction and to the entry of findings that he did not provide notice to his member firm prior to participating in the soliciting of investors to purchase promissory notes relating to a purported real estate investment fund, nor did he obtain approval from the firm for these private securities transactions. The findings stated that ultimately, Dietrich sold $10,831,645 in the purported company’s notes to investors, some of whom were the firm’s customers. Dietrich received a total of $260,864 in commissions in connection with these transactions. Later, the purported company filed a voluntary Chapter 11 bankruptcy petition.”
In August 2005, the State of Virginia Bureau of Insurance sanctioned Dietrich to a $5,000 monetary fine for allegedly violating the following VA insurance codes: 38.2-512 misrepresented information on or relative to an application for the purpose of obtaining a fee, 38.2-619 obtained insurance information under false pretenses, 38.2-1804 had insured sign a blank or incomplete forms pertaining to insurance, 38.2-1831 removed pages from an insurance policy before delivering to insureds, 14vac5-30-40 failed to submit replacement notices to a company for policies that were being replaced.”
Dietrich was registered with Quest Capital Strategies, Inc. in Lake Forest, California from 2018 to April 2018, when he was terminated regarding, “Failure to fully disclose outside business activities and sale of unapproved product.” Dietrich has been the subject of six customer complaints between 2013 and 2018, according to his CRD report:
- May 2018. “CLAIMANT states that she purchased a Woodbridge Mortgage Promissory Note through Frank Dietrich in August of 2017, outside of Quest Capital Strategies. Quest Capital Strategies never recommended, approved or offered the Woodbridge Mortgage Promissory Note mentioned in the client complaint. Any sales of said product was done away, without Quest Capital Strategies approval, in violation of firm policy. Quest Capital does not permit its Registered Representatives to engage in the sale of any promissory notes by Woodbridge Mortgage or any other company. Quest Capital was not aware of and did not approve of such activity by Mr. Dietrich. Further, Claimant has never been a client of Quest Capital.” The customer is seeking $100,001 in this pending complaint.
- May 2018. “CLAIMANT claims that she purchased a Woodbridge Promissory Note and Woodbridge 3a Units through Frank Dietrich in August of 2017, outside of Quest Capital Strategies. Quest Capital Strategies never reviewed, recommended, approved or offered the Woodbridge Promissory Note and Woodbridge 3a Units mentioned in the client compliant or any other Woodbridge investment. Any sales of said products were done away, without Quest Capital Strategies approval, in violation of firm policy. Quest Capital does not permit its Registered Representatives to engage in the sale of any promissory notes by Woodbridge or any other company. Further, Quest Capital does not permit its Registered Representatives to engage in the sale of any products by Woodbridge of any kind. Quest Capital was not aware of and did not approve of such activity by Mr. Dietrich.” The customer is seeking $5,001 in this pending complaint.
- April 2018. “Client states that she purchased a Woodbridge Wealth Promissory Note through Frank Dietrich in January of 2017, outside of Quest Capital Strategies. Quest Capital Strategies never recommended, approved or offered the Woodbridge Wealth Promissory Note mentioned in the client compliant. Any sales of said product was done away, without Quest Capital Strategies approval, in violation of firm policy. Quest Capital does not permit its Registered Representatives to engage in the sale of any promissory notes by Woodbridge Wealth or any other company. Quest Capital was not aware of and did not approve of such activity by Mr. Dietrich.” The customer is seeking $200,000 in damages and the case is currently pending.
- April 2018. “[Redacted] purchased $400,000 in Woodbridge promissory notes via Frank Dietrich outside the scope of Firm in 2013, 2015, and 2017. Woodbridge is not affiliated with Firm. Quest has never approved such product and had no knowledge of this activity and transaction.” The customer is seeking $400,000 in damages and the case is currently pending.
- March 2018. “{Redacted} has never been a customer of Quest Capital (Firm). She purchased a $633880 Mortgage Promissory Note with Woodbridge via Frank Dietrich outside the scope of Firm in 2015. Woodbridge is not affiliated with Firm. Quest has never approved such product and had no knowledge of this activity and transaction.” The customer is seeking $633,880 in damages and the case is currently pending.
- February 2018. “{Redacted} has never been a customer of Quest Capital (Firm). He bought Mortgage Promissory Note via Frank Dietrich outside the scope of Firm. Quest had no knowledge about this activity and transaction.” The customer is seeking $264,000 in damages and the case is currently pending.
- February 2013. “Alleges losses and possible churning. 3/9/2011-2/18/2013.” The customer sought $58,065 in damages and the case was settled for $50,000.
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, Quest Capital Strategies, Inc. may be liable for investment or other losses suffered by Dietrich’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and 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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