Private Placement Fraud Attorneys

private placement

Your broker called with a compliment. You qualified as an accredited investor, so you had access to a private deal that regular investors never see, and only a few spots were left. A private placement attorney hears that same phone call described over and over. Being told you are one of the few is what entices you to fall for private placement fraud.

Erez Law, PLLC represents investors pursuing losses in Regulation D offerings, and we have recovered more than $400 million for investors nationwide. The claim runs against the brokerage firm that sold the deal.

Call 305-728-3320 for a free, confidential consultation.

What Does Erez Law Do for Investors Who Lost Money in a Private Placement?

We reconstruct the sale. Private placement claims turn on three things. What the investor was told, what the offering documents disclosed, and what the selling firm knew or had a duty to find out. Our attorneys bring 65-plus years of combined experience to that reconstruction.

Jeff Erez, our founder, puts the firm’s posture directly: “I will try your case if we have to and we have experience and strategies that have gotten results to put you in best position to prevail.”

Reading the Offering Documents Against the Sales Conversation

A private placement memorandum, the disclosure document behind most Regulation D offerings, is frequently long, dense, and delivered after the decision was already made.

We compare its risk language against what the broker said on the phone and put in writing. Those two accounts rarely match in the cases we take.

Building the Firm’s Own Paper Trail Into the Claim

Selling firms keep due diligence files, product approval memoranda, and internal communications about the offerings they put on their platform. Those documents come out in discovery and frequently show that concerns existed inside the firm well before the investor heard a word about them.

What Reconstruction Involves

Rebuilding a sale that happened years ago takes more than the investor’s memory. Our work pulls from several directions at once.

  • The private placement memorandum, read line by line against what the broker actually said
  • Account records showing the size of the position relative to everything else the investor held
  • Written communications, including the marketing material the firm never intended to surface
  • The firm’s internal product approval and due diligence file, obtained through discovery
  • The compensation the representative and the firm earned on the sale

The investor supplies the first half of that picture. The firm supplies the second half, and it does so under a panel’s authority rather than voluntarily.

Can Investors Sue Over Losses in a Private Placement?

Yes, investors may pursue losses in a private placement, though the claim proceeds through FINRA arbitration rather than a lawsuit in court. Broker-dealers that sell Regulation D offerings owe their customers suitability obligations and a duty to perform reasonable due diligence before recommending the product.

The claim runs against the selling brokerage firm, which approved the offering and supervised the sale, rather than against the issuer or the individual representative alone.

What the Selling Firm Was Obligated to Do

Two obligations carry most of these claims. The firm had to investigate the offering well enough to understand what it was distributing, and it had to match the recommendation to the specific investor’s objectives, risk tolerance, and need for access to the money.

A Regulation D exemption relieves the issuer of registering with the Securities and Exchange Commission and relieves the selling firm of nothing.

Where Do Private Placements Go Wrong for Investors?

Private placements go wrong multiple ways, and almost none of them involve the deal simply failing. Investments lose money legitimately. The claim arises from how the offering was evaluated, presented, and sized inside a portfolio.

The failure patterns we see most often break down as follows:

Failure pattern What it looks like in the account
Misrepresentation Risk, liquidity, or projected returns were softened in the sales conversation compared with what the private placement memorandum disclosed
Unsuitable recommendation An illiquid speculative offering went to an investor whose recorded objectives pointed the other direction
Overconcentration A single offering or a single sponsor absorbed a share of the portfolio no reasonable allocation supports
Inadequate due diligence The selling firm approved the product without the reasonable investigation its own obligations require
Selling away The representative placed the offering outside the firm’s platform and outside its supervision entirely

Each of these is a conduct failure rather than a market outcome, which is the distinction that matters to an arbitration panel. A deal that failed honestly is not a claim. A deal that was never properly vetted or properly explained is a different matter.

Who Is Responsible When a Private Placement Fails?

The selling brokerage firm carries the responsibility, not only the individual representative who made the call. Firms owe suitability and due diligence obligations to their customers on every product they distribute.

Regulation D removes the issuer’s registration requirement and changes nothing about the selling firm’s duties.

Why We Pursue the Brokerage Firm

Brokerage firms approve the products their representatives offer, supervise how those products are sold, and collect a share of the compensation. FINRA Rule 5123 requires member firms to file private placement offering documents with FINRA, which reflects how closely the forum watches this market. FINRA’s own private placement guidance sets out what member firms are expected to do before distributing these offerings.

Our attorneys have represented thousands of investors and secured some of the largest awards in the country. That record comes largely from putting the institution rather than the salesperson at the center of the claim. An award against a representative who has left the industry is often worth nothing. An award against the firm is enforceable.

Where Does Selling Away Change the Analysis?

Selling away complicates the picture without ending it. A firm that failed to supervise a representative, ignored outside business activity disclosures, or missed obvious signals may still carry exposure. The analysis turns on what the firm knew and what its supervisory systems were built to catch.

Does Being an Accredited Investor Defeat the Claim?

No. Accredited investor status establishes eligibility to buy an offering, not consent to be misled about it. Firms raise this defense in nearly every private placement matter, and panels routinely look past it to the conduct that actually occurred.

What the Accreditation Standard Measures

Accreditation rests on income or net worth thresholds. It measures financial capacity to absorb a loss. It does not measure investment sophistication, familiarity with an illiquid alternative structure, or access to the due diligence a selling firm was obligated to perform.

The Defenses Firms Raise and What Answers Them

Several arguments surface predictably, and each has a documentary answer.

  • You signed the subscription agreement, which is answered by what the representative said before it was signed
  • The private placement memorandum disclosed the risk, which is answered by whether the disclosure matched the pitch
  • You are a sophisticated investor, which is answered by the firm’s own recorded risk profile for the account
  • The market turned, which is answered by whether the product was suitable on the day it was recommended

Signed paperwork is a starting point in these cases rather than an ending one. Arbitration panels examine the whole transaction, including the parts that never made it into a document.

Which Products Show Up Most Often in These Claims?

Non-traded real estate investment trusts, oil and gas programs, and structured notes generate the largest share of private placement claims we handle. These products share a profile. They pay well at the point of sale, they are difficult to exit, and their valuations are hard for an investor to verify independently.

These are the most recurring categories:

  • Non-traded real estate investment trusts, where redemption windows narrow or close and share valuations get written down
  • Oil and gas drilling programs and royalty partnerships, sold for tax treatment and income that frequently did not arrive
  • Structured notes and market-linked products with payoff terms most retail buyers never fully price
  • Equipment leasing and direct participation programs marketed as uncorrelated income
  • Private credit and pre-initial-public-offering funds sold based on access rather than analysis

Each of these product families has its own page on our site with the specific failure modes that attach to it. The shared thread across all of them is a compensation structure that rewards distribution more than it rewards diligence.

What Evidence Decides a Private Placement Claim?

Documents decide these claims, and most of the useful ones sit inside the brokerage firm rather than in the investor’s file. The investor’s records establish what was bought and when. The firm’s records establish what it knew and what it did about it.

Before your first meeting with a Private Placement Fraud Lawyer, gather the following documents:

  • The private placement memorandum, subscription agreement, and any term sheet
  • Account statements showing the position and any distributions received
  • Emails, texts, and letters from the representative about the offering
  • Marketing material, presentation decks, or one-page summaries you were given
  • Notes on what you were told about liquidity, exit timing, and expected income

Incomplete files are normal, and the gaps get filled through discovery. What matters at the consultation is enough to identify the offering and the timeline.

What We Pursue From the Firm

Discovery reaches the firm’s due diligence file, product approval records, supervisory reviews, compensation records, and internal correspondence about the offering. Those materials establish whether a reasonable investigation happened. They also frequently reveal how many other customers bought the same thing.

Fraud lawyers nationwide to recover your money

FAQ for Private Placement Attorneys

Are private placements illegal?
No, private placements are legal offerings sold under exemptions from registration. The exemption relieves an issuer of registering the offering with the Securities and Exchange Commission. It places no limit on the obligations a selling brokerage firm owes its own customers regarding suitability, disclosure, and reasonable diligence.
Do these claims go to court or to arbitration?
Arbitration, in nearly every case. Brokerage account agreements contain pre-dispute arbitration clauses, which send customer disputes to the FINRA forum. Claims against parties outside FINRA membership sometimes proceed in court instead. We evaluate which forum applies based on who sold the offering and under what agreement.
May a group of investors in the same offering file together?
Yes, multiple investors harmed by the same offering sometimes proceed as co-claimants in one arbitration. Whether that helps depends on how similar the accounts and the sales conversations were. Separate claims occasionally produce better results where the facts diverge, which we assess case by case.
What if I never received a private placement memorandum?
That absence strengthens rather than weakens a claim. A selling firm distributing an offering without delivering the disclosure document has a supervision problem on its hands. We document what you received and when, because the delivery record itself becomes evidence in the proceeding.
Do you handle claims involving offerings sold by independent broker-dealers?
Yes. Independent broker-dealers and regional firms distribute a large share of private placements, and we pursue claims against them routinely. Firm size affects the recovery analysis, including available insurance coverage, which we review during the evaluation rather than after filing.
How do I know whether I have a private placement claim or just a bad investment?
The difference lies in conduct. A private placement that failed because the underlying business failed is a loss. Meanwhile, a private placement recommended without reasonable due diligence, sized far beyond a sensible allocation, or described differently than the documents disclosed is a claim. A document review answers the question quickly.
The sponsor went bankrupt. Is there anyone left to recover from?
Usually yes. The claim runs against the brokerage firm that recommended and sold the offering, which is a separate entity from the sponsor or issuer. A sponsor’s bankruptcy affects the underlying investment, not the selling firm’s liability for how the product was evaluated and presented to you.
How long do I have to bring a claim over a Reg D offering?
FINRA Rule 12206 makes a claim ineligible for arbitration once six years have passed from the occurrence giving rise to it. With illiquid offerings, identifying that occurrence takes analysis, because problems often surface years after purchase. Timing gets reviewed at the consultation rather than assumed.

Call a Private Placement Attorney About Your Case

Jeffrey Erez

Jeffrey Erez, FINRA Arbitration Lawyer

Somewhere in the file is the language the firm relies on and the language it hopes nobody reads closely. Finding out which is which takes a document review and a conversation, not a commitment.

Call Erez Law at 305-728-3320 for a free, confidential consultation, available 24 hours a day. We prepare every claim as though it goes to a hearing, and we have recovered more than $400 million for investors. We represent clients nationwide from our Miami office. Hablamos Español.