Northstar Financial Services Bermuda, a financial services firm located in Bermuda, offered insurance and annuity investment vehicles that took advantage of Bermuda’s tax-friendly laws. Global Growth, a financial company owned by Greg Lindberg, purchased Northstar in 2018. However, questions about Global Growth’s liquidity led to criminal investigations and Lindberg’s conviction in 2020 for diverting funds from Global Growth portfolio companies such as Northstar to other entities.
Following the announcement of the allegations against Lindberg, investors began liquidating their Northstar investments, resulting in insufficient liquidity to repay investors and creditors. Subsequent investigations indicated discrepancies in the firm’s financial statements. Northstar filed for bankruptcy, culminating in the Supreme Court of Bermuda ordering the firm’s liquidation.
Before the allegations against Global Growth and Lindberg came to light, many broker-dealers continued to promote Northstar’s products as a safe investment. However, subsequent investigations revealed that the firm suffered from significant financial weaknesses that made its products risky for investment. Despite this, some representatives pressed on with selling Northstar’s products due to the high commissions and incentives they received.
Some investors who lost money with Northstar products following the firm’s bankruptcy have filed legal actions against their financial advisors. They allege that these advisors failed to undertake necessary due diligence into Northstar’s financials, which would have raised questions about the firm’s suitability for investment and whether the firm represented a safe investment as pitched by many advisors.
Are you among the many investors who lost money when Northstar collapsed? If so, an investment fraud attorney from Erez Law PLLC can help you explore your legal options for recovering your losses. These may include legal claims against your broker or investment advisor if they breached their fiduciary duty by recommending that you invest in Northstar or failing to provide information relevant to your decision to maintain your investment in the firm.
Why Recovering Compensation from Northstar May Be Difficult
Unfortunately, documents in Northstar’s bankruptcy proceedings indicate that the firm may have a deficit between its assets and liabilities to investors and creditors exceeding $250 million. Other filings suggest that the firm may have only a few million dollars to repay creditors and investors.
In 2023, the courts ruled that investors with segregated accounts could regain access to assets held in those accounts. However, investors who purchased fixed investment products could not access Northstar’s assets because the firm had not linked separate assets or accounts to those investments. As a result, many Northstar investors face the prospect of recovering pennies on the dollar or nothing at all from their investments with the firm, which include Northstar Global Advantage III, Global Interest Accumulator, Global Index Product, Global Advantage Plus Series, and Global Advantage Select.
Recovering compensation from Northstar is further complicated due to the firm’s Bermuda bankruptcy. Investors who lost money with Northstar products may have to follow the bankruptcy process established under Bermuda law to recover from the firm’s remaining assets. Furthermore, investors not located in Bermuda must deal with the complexities of pursuing litigation in another country.
Given the significant difference between Northstar’s assets and liabilities, investors who did not invest in segregated assets may have trouble recovering any portion of their investment.
Legal Pathway to Recovering Financial Losses
While investors might have a hard time recovering their investments directly from Northstar, some may have other options for seeking compensation. This is especially true for those whose brokerage firms played a role in getting them to invest in Northstar products or delaying their efforts to withdraw their investments when the company came under public scrutiny. Some Northstar investors have claimed that their financial advisors promoted Northstar as a safe investment at a time when reasonable due diligence could have revealed red flags that would question the firm’s status as a safe investment opportunity.
A broker-dealer or financial advisor’s fiduciary duties include conducting due diligence on all investment opportunities before presenting those opportunities to clients. This would ensure that a recommended investment meets the client’s investment goals and risk tolerances. In addition, a broker-dealer or financial advisor would provide the client with all the material information they need to decide whether to invest. Broker-dealers who breach their fiduciary duties to their clients may be financially liable should clients suffer financial losses from investments the broker has recommended.
Several investors have also alleged that their advisors committed breaches of fiduciary duties even after concerns about Northstar became public. Some claim that advisors continued to recommend Northstar investment products in order to continue earning commissions and incentives for selling the products despite the investigations into the company. Others say their advisors failed to advise them on material information about the company, such as its acquisition by Global Growth or its failure to file required financial statements and disclosure documents. These investors may have claims against their financial advisors for losses arising from the investors’ delayed opportunity to withdraw funds from Northstar before the firm collapsed.
FINRA Arbitration
In most cases, pursuing claims against broker-dealers and financial advisors requires a client to file for FINRA arbitration. Most brokerage agreements contain an arbitration clause that requires clients to submit all claims they have against the brokerage firm to FINRA for arbitration. Arbitration provides an alternative to traditional litigation in the court system and, in many cases, can take less time and money than a lawsuit. Arbitration also allows parties to keep their dispute confidential rather than putting it into the public record via a lawsuit.
However, arbitration gives parties limited appellate options should an arbitrator or arbitration panel rule against them. Courts could vacate arbitration decisions only if an arbitrator exceeded the scope of the arbitration, knowingly disregarded material evidence, or deprived a party of due process.
FINRA arbitration involves more complex rules and procedures than other forms of arbitration. Consequently, you need a seasoned attorney with extensive experience handling FINRA arbitrations to guide you through the process and advocate effectively for your rights and interests.
Contact Our Experienced Investment Fraud Attorneys for a Free Consultation
Have you suffered significant investment losses due to your broker’s recommendations to invest in products offered by Northstar Financial Services (Bermuda)? Then let Erez Law PLLC stand up for your rights and interests and demand the financial recovery you deserve. Contact us today for a free, confidential consultation with a knowledgeable investment fraud lawyer. We will discuss how you can pursue compensation from your investment advisors in a negligence or fraud claim.