The law firm of Oakes & Fosher is currently interested in hearing from investors who believe that they may have lost money investing with former securities broker James Lunsford. According to his publicly available FINRA BrokerCheck report, James Lunsford has been the subject of multiple customer complaints. The complaints against him revolve around him placing investors in a private placement known as the Jadda Senior Secured Mortgage Fund. This security was later renamed Sonoma Ridge Capital.
James Lunsford was a California based securities broker. He worked in the securities industry for twenty-three years. During his career, he was registered with three different securities firms. He is no longer working as a registered securities broker in any fashion.
His Registrations
- Mony Securities Corporation (1992-2001)
- London Pacific Securities (2001-2004)
- Mid Atlantic Capital Corporation (2004-2015)
What is a Private Placement?
As already mentioned above, Jadda was what is known as a private placement. These products are privately traded securities. This means that they are not traded on any public securities exchanges. Also, this particular product was not registered with the Securities and Exchange Commission. Because of this, there is a great potential for oversight that many securities brokers use to their advantage when trying to sell private placements to unsuspecting investors.
Private placements are highly unsuitable for most investors as they are highly risky and speculative. These products are also highly illiquid. Most investors require the need to liquidate their investments should a situation arise that they need the money. However, private placements do not operate that way. An individual looking to liquidate their shares of a private placement will find that the stated market value of their shares does not always equate to the amount they can receive when selling.
Private placements like Jadda are so detrimental to investors that the large wire house securities firms like Merrill Lynch, Wells Fargo, and Morgan Stanley do not even allow their securities brokers to sell them. They are only sold by lower tier firms as a quick way of making money as these products generate exorbitant commissions for securities brokers, like James Lunsford, and their firms.
Jadda (Sonoma Ridge Capital)
The Jadda Senior Secured Mortgage Fund was a private placement in speculative high yield mortgages. The fund was owned and controlled by James Lunsford. Along with David Boydell, another securities broker registered with Mid-Atlantic Capital Corporation, James Lunsford founded and owned the company that owned Jadda called Bridgeway Capital. This setup created a massive conflict of interest as James Lunsford and David Boydell began recommending Jadda to Mid Atlantic customers even though the two men owned the company that owned that product.
The Jadda Secured Senior Mortgage Fund raised approximately $30 million from investors. Mid-Atlantic securities brokers presented it as way to avoid the unpredictability of the stock market. Investors were told that their investment would show annual returns of 9 to 11 percent.
Due to it’s nature as a private placement, management was able to continuously report to investors that the value per share had not dropped. This continued even though the fund was experiencing financial issues. To keep up appearances, management made phantom payments to investors looking to reinvest the fictional growth they thought they were accruing. These customers believed they were making annual dividends and then reinvesting said dividends in order to increase their annual returns.
James Lunsford perpetrated this facade for as long as he could in order to increase the amount of annual management fees he was getting for himself, David Boydell, and for Mid Atlantic Capital Corporation. When the Jadda Secured Senior Mortgage Fund finally collapsed, the shares that the investors believed had not changed in value from the date of purchase, had become completely worthless.
Accredited Investors
Private placements that are not registered with the SEC are only supposed to be sold to what are known as “accredited investors.” An accredited investor is an individual with a net worth of at least $1 million. This excludes the value of their primary residence. They may also be deemed accredited if they have had an annual income of $200,000 or more for the last two years and is expected to generate $200,000 or more in come during the current year. This amount is bumped up to $300,000 if the individual is married.
What Does This Mean?
James Lunsford, along with David Boydell, perpetrated a fraudulent investment scheme where they spent years enriching themselves at the expense of their investors. The two men either knew, or should have known, that their entire operation was on its way to collapsing; however, they continued to lie to to investors and continuously contribute to a large amount of people losing their money.
Oakes & Fosher Can Help
Oakes & Fosher dedicates its practice to assisting investors who have been the victim of wrongful conduct by their investment broker. Oakes & Fosher has a nationwide practice and there are no costs to our clients unless we collect for you. If you, or anyone you know, have lost money investing with James Lunsford, or investing in the Jadda fund through Mid Atlantic Group, please contact us immediately for a free and private consultation.
