UPDATE: The Securities and Exchange Commission filed charges against 1 Global Capital, its CEO Carl Ruderman, 1 West Capital, and others. Click here to read more.
Investment advisors sold investments in 1 Global Capital and 1 West Capital to thousands of investors nationwide. 1 Global Capital and 1 West Capital are affiliated companies that are now bankrupt and being investigated for fraud. Advisors may be liable for their clients’ losses in these investments.
If you purchased investments in either company from your investment advisor, you may be able to recover your losses. Call Marquardt Law Office LLC at (312) 945-6065 or send the firm a message to receive a free consultation regarding your recovery options.
Investments Offered by 1 Global Capital and 1 West Capital
Both 1 Global Capital (aka 1st Global Capital) and 1 West Capital operated as lenders providing cash advances to small businesses, or Merchant Cash Advances. They raised money for the cash advances by selling investors promissory notes documented by a “memorandum of indebtedness” or loan agreement. They also sent monthly statements reporting how investors’ funds were allegedly allocated.
The notes made investors unsecured lenders, leaving them little protection in the event of defaults. Typically, the notes matured in only nine-months and then repaid investors their principal plus interest at a rate of 10%, a high rate for short-term investment.
Fraud Investigations and Bankruptcy
On July 27, 2018, the companies filed Chapter 11 Bankruptcy, and shortly afterwards, stopped repaying their debt owed to investors holding the promissory notes. According to bankruptcy records, 1 Global has unsecured creditor claims of $283 million, mostly from investors or their IRAs.
Court fillings state that the companies needed to file bankruptcy when civil and criminal investigations prevented them from raising additional capital from investors, which caused a liquidity crisis. The Securities and Exchange Commission (SEC) and U.S. Attorney’s Office in southern Florida are investigating allegations the companies were involved in a $283 million loan fraud.
The SEC is specifically investigating allegations that 1 Global and 1 West committed fraud in the offer, sale, and purchase of the promissory notes and violated securities laws by failing to either register the notes as securities or apply for registration exemptions. The SEC is also investigating allegations unregistered brokers sold the notes.
State attorney general offices are also investigating the companies.
Investors’ Options to Recover Losses
Financial professionals and their firms must perform due diligence before recommending or selling investments, particularly with non-standard investments promising unusually high returns like those offered by 1 Global Capital and 1 West. Additionally, advisors and brokers are prohibited from selling or recommending investments in violation of registration requirements, which are critical investor safeguards that carry severe penalties for violators. Moreover, brokerage and investment advisor firms must supervise their employees and agents, and firms are often liable for losses caused by their employees’ and agents’ violations.
Investors can pursue private court litigation or arbitration claims to recover losses realized when their financial advisors or their firms violate their duties. This gives investors the ability to pursue recoveries independent of bankruptcy or government actions, which can provide recoveries above and beyond any distributions they might receive from bankruptcy claims or the SEC.
If you or someone you know lost money to 1 Global Capital, 1 West Capital, or other risky investments, call Marquardt Law Office, LLC at (312) 945-6065 or send the firm a message to schedule a free consultation with an attorney about options to recover the losses.
Marquardt Law Office LLC is a securities law firm that represents clients nationwide. Investors are represented on a contingency fee basis, which means the firm does not receive a fee unless and until it recovers money for an investor.