A New Rochelle investor claims that a broker ignored his investment goals and steered him to high-risk securities, including one that was part of an alleged Ponzi scheme.
Qian “Paul” Cao accused William Platt of negligence and breach of fiduciary duty in a lawsuit filed May 28 in Westchester Supreme Court.
Platt, the co-owner of Momentum Advisors, a Manhattan investment advisory firm that is also named as a defendant, did not respond to an email asking for his side of the story. But he defended his actions as appropriate, in a pending regulatory dispute.
Qian said Platt contacted him in 2003 about life insurance. He trusted Platt, according to the complaint, and relied on Platt”™s skill and expertise as an investment adviser.
Qian claims he told Platt that he is a very conservative investor and that his primary goal is preserving capital. Platt, according to the complaint, assured Qian that he would only sell him safe investments.
In 2017, Platt allegedly advised Qian to invest $50,000 in GPB Waste Management and $120,000 in Vida Longevity Fund.
GPB Waste owns trash hauling firms and is a component of GPB Capital Holdings, an alternative asset management firm.
In February, the U.S. Securities and Exchange Commission sued GPB Capital in U.S. District Court, Brooklyn, charging it with running a Ponzi-like scheme that raised more than $1.7 billion.
The firm allegedly touted consistent 8% annualized distributions paid to investors with funds from operations. But GPB Capital didn”™t have enough revenue, so “to maintain the appearance of success,” according to the SEC complaint, it used funds from new investors to cover the shortfalls.
The Waste Management fund, for instance, paid $15 million in annual distributions, but $13 million, or 83%, was paid with funds from new investors.
Qian says he considered liquidating his Vida investment but Platt convinced him that Vida was safe and GPB Waste was a one-time problem.
Now Vida is illiquid and has stopped making distributions, according to the complaint.
Platt failed to understand his investment objectives and risk tolerance, Qian said, and he recommended investments that “were incredibly high-risk.”
He is demanding unspecified damages.
A remarkably similar lawsuit was filed last December with the Financial Industry Regulatory Authority, a self-regulatory organization that oversees investment brokers.
A client whose name is not disclosed in a FINRA report accused Momentum Advisors of mispresenting GPB Waste Management and Vida Longevity Fund.
“The client is very sophisticated,” Platt responded in the FINRA report.
The client requested information on private investment funds, chose two funds and acknowledged the risks, including the illiquidity of the funds and the “potential for complete loss of the investment amount.”
Vida has performed well, Platt said. GPB Waste has not.
“Neither the illiquidity nor the subsequent investment performance is the result of any act or misrepresentation,” Platt said.
