On Tuesday, the Commonwealth of Massachusetts filed a regulatory action against Securities America, Inc., accusing the brokerage firm of committing securities fraud on a massive scale. Specifically, Securities America sold approximately $697 million in promissory notes that were issued by entities wholly owned by Medical Capital Holdings, Inc. (“Medical Capital”). Unfortunately for Securities America’s customers and other investors, the notes were part of an alleged Ponzi scheme, Medical Capital has defaulted on more than $1 billion of the notes that it issued. Securities America sold $358 million of those defaulted notes. The United States Securities and Exchange Commission (“SEC”) sued Medical Capital several months ago, alleging that Medical Capital was a massive investment fraud, and Medical Capital now lies in an SEC receivership and is the subject of various injunctions and asset-freeze orders.
Similar to at least two nation-wide class-action lawsuits and dozens of FINRA securities arbitration claims that have been filed against Securities America, the Massachusetts complaint alleges that Securities America failed to conduct proper due diligence of Medical Capital or ignored red flags or which it was aware and made “material omissions and misleading statements” in the course of the sale of approximately $697 million of promissory notes to Medical Capital investors.
The Massachusetts complaint states “…all material risks and information regarding MC Notes were not disclosed to investors. These risks were known to [Securities America]. Year after year, the due diligence analyst, retained by [Securities America] to conduct a review of the various Medical Capital offerings, specifically requested and at many times pleaded that investors be informed of certain heightened risks.”
Medical Capital claimed to provide financing to healthcare providers by purchasing the providers’ accounts receivables and making loans to those providers. The accounts receivables then allegedly were packaged into notes and sold through private placements to investors. Approximately 20,000 investors purchased $2.2 billion in Medical Capital investments, including hundreds or thousands of Securities America customers. Securities America had approved the Medical Capital notes for sale by its brokers to Securities America customers.
Blum Law Group is a nationally recognized law firm with extensive experience representing investors throughout the United States and Latin America in investment fraud and stockbroker fraud cases involving stocks, bonds, options, private placements, Regulation D offerings, principal protected notes, structured products, and hedge funds. The law firm is currently represent numerous Medical Capital investors who have lost tens of millions of dollars. The firm’s clients invested in Medical Capital notes with the expectation that their principal was safe, and they never were informed of the fraudulent nature of the investments. If you suffered Medical Capital investment losses, please contact Blum Law Group for a free case evaluation.