New York-based fintech firm Yieldstreet is facing lawsuits over £ 100 million

• It is believed that several Pakistani and Indian investors have lost huge amounts of investment made in Yieldstreet.
• Lawsuits focus on false and misleading statements the fintech firm gave to investors to get them to buy certain products.
• Yieldstreet had built an entire portfolio on the premise of poorly founded or poorly sourced contract structures.

LONDON / NEW YORK: Fintech firm Yieldstreet faces lawsuits filed by investors who lost more than $ 100 million in a spectacular series of high-risk defaults and misleadingly marketed alternative investment products – just seven years after it was created to take advantage of US securities and Exchange Commission (SEC) rules that relax the definition of supposedly sophisticated “accredited investors”.

The lawsuit was filed by Peiffer Wolf Carr Kane & Conway (Peiffer Wolf) and Sonn Law Group. It is believed that several Pakistani and Indian investors have lost huge amounts of investment and are part of the cases.

The class action lawsuit, filed by four investors in the U.S. District Court for the Southern District of New York, states: “The end result is that claims for no principal loss, in-depth ‘diligence’ and trust. , with a default rate that is five times higher than for so-called “junk bonds”. However, Yieldstreet’s junk bonds are mass-marketed to the general public and can be purchased in minutes by anyone with access to a computer that certifies that they earn over $ 200,000 a year. “

The law firm Peiffer Wolf said in a statement that the FBI and SEC have both sought information about the fintech firm’s practices and interactions with clients.

The lawsuit focuses on false and misleading statements the fintech firm made to investors to get them to buy certain products, including vessel decommissioning funds, oil and gas wells, commercial real estate and modern art.

The law firm has said that Michael Weisz is the soul and life of Yieldstreet and has run the operations with total control. Indian Origin Milind Mehere is the founder and CEO of Yieldstreet and co-founder of Yodle.

Simply put, Yieldstreet’s overexposed, concentrated loan model was doomed to fail – a ‘sinking ship’, both literally and figuratively. Scam investors bought Yieldstreet’s vessel decay products at a feverish pace, but none of them knew the same borrower was at the other end of every deal. Yieldstreet and Weisz were completely unaware of this risk, said attorney Joseph Peiffer in a statement.

A nightmare investment

Michael Tecku, a resident of Austin, Texas who lost a significant amount of money in Yieldstreet, said the company provided a beautiful dream, “but the reality” was a “nightmare”.

“These investments were marketed as low-risk institutional investments, driven by experts with reasonable returns, but the truth is that there are no experts and no institution. There is only one group of tougher people who are tricked by another,” he said.

Yieldstreet aggressively markets its “innovative products” to the public through social media and direct email campaigns that drive potential investors to the company’s website.

YieldStreet tried to divert the investment team’s lack of experience by claiming reliance on “asset class experts” to help create, structure and service the agreements.

However, experts’ recommendations and warnings were ignored by Yieldstreet President Michael Weisz.

Yieldstreet’s mismanagement came to light in March 2020, when the vessel deconstruction funds gradually began to default. Instead of owning up to its misdeeds, the company instead went on the offensive, accusing the borrower and the expert they consulted of structuring the deal of “fraud” and “mismanagement.”

In reality, Weisz and Yieldstreet are to blame, as they built an entire portfolio on the premise of ill-founded or poor sources of contract structures.

Jeff Sonn, Managing Partner, Sonn Law Group, said: “At the end of the first quarter of 2020, almost a third of Yieldstreet’s portfolio was in default. At best, this was a case of ‘blind leading blind’. Yieldstreet erroneously claimed to have a track record , specialized insights and a success story of handling tens of millions of dollars by investors who were described as “accredited”, but often not very sophisticated. “

In July 2013, the SEC adopted Rule 506 (c), which allows general encouragement to accredited investors. YieldStreet was formed shortly afterwards, promising to give accredited investors “access to innovative revenue-generating products”.

The law firm Peiffer Wolf Carr Kane & Conway, which has offices around the world, has asked Yieldstreet investors to get in touch to join the lawsuit.