First Allied Securities Has Been Accused of Selling Advanced Equities Securities By Misleading Investors

The brokerage firm Advanced Equities, Inc. (Advanced Equities) specialized in so called late-stage private equity private placements.  Advanced Equities had been particularly active in the clean-tech space.  Through First Allied Securities, Inc. (First Allied), Advanced Equities private placements including Advanced Equities GreenTech Investments, LLC, AEI 2007 Venture Investments, LLC, AEI 2010 Cleantech Venture, LLC, and AEI Fisker Investments, LLC, were sold to hundreds of investors.  Customers have alleged that First Allied misrepresented the Advanced Equities private placements to investors and failed to conduct adequate due diligence concerning the offerings.

In 2007, First Allied was acquired by Advanced Equities Financial Corp. (AEF) and became a sister corporation to Advanced Equities.  At the time of the merger, Advanced Equities employed about 80 registered representatives while First Allied employed over 1,000 brokers.  Utilizing First Allied’s customer and broker resources, AEI vastly expanded marketing of private placements to First Allied customers.

Sales materials developed for Advanced Equities and presented to investors touted the private placements as “late stage equities” or companies that were 12-36 months from going public through an initial public offering (IPO).  The private placements were also represented as providing “higher near-term investment returns than the public equity markets” while possessing “greater short-term liquidity and lower risk profiles.”

In addition, it has been alleged that brokers at First Allied were instructed to tell investors that the risks of investing in the private placements were minimal and that, in fact, none of Advanced Equities’ prior private equity investments had lost money.

Allegedly, First Allied’s representations misled investors.  Instead of being late-stage equity companies ready for public market IPO, the private placements were in the early stages of developing novel and speculative technologies.  Two of the most prominent underlying investments in Advanced Equities private placement offerings were Bloom Energy Corp (Bloom Energy) and Fisker Automotive, Inc. (Fisker Auto).

Bloom Energy’s business involved the sale of self-generating energy boxes for commercial customers.  In September 2012, the Securities and Exchange Commission (SEC) imposed sanctions against Advanced Equities’ president and chief executive officer Dwight Badger and chairman of the board of directors Keith Daubenspeck for misstatements, omissions, and failure to supervise.  The SEC Order accused Advanced Equities of raising $122 million from approximately 609 investors for Advanced Equities GreenTech Investments III, LLC and Advanced Equities GreenTech Investments IV, LLC through misleading statements concerning Bloom Energy.  The SEC charged that Advanced Equities’ principals fabricated Bloom Energy’s sales volumes in order to continue to induce investors to contribute additional funds.

Fisker Auto manufactures high-end plug-in hybrid electric vehicles.  Allegedly, First Allied began raising money through private placements in the AEI Fisker Investment LLC series in late 2009 as a late stage equity offering that would be able to IPO in the near term.  However, Fisker Auto has always been far from a profitable viable company ready to IPO.  Fisker Auto originally intended to begin selling its first model car, the Karma, in late 2009, but after repeated delays the Karma finally debuted two years later in October 2011.  Then Fisker Auto stopped car production in the summer of 2012 due to its short cash position and the bankruptcy of its battery supplier, A123 Systems.  In March 2013, Fisker hired a law firm to prepare for a possible bankruptcy filing and in April 2013, Fisker laid off 75% of its workforce.

Other companies the Advanced Equities private placements invested in include: Ambric, Inc., Teneros, Inc., Motricity, Inc., Xsigo System, Inc., Presto Services, Inc., and Luxtera, Inc., and Serious Energy, Inc.  None of these investments have turned a profit or returned even a fraction of shareholder’s investment.  All of these companies invested in untested technologies that were far from being late stage equities with a demonstrable business model.

Many of the underlining companies in the private placements have gone belly up.  Yet, allegedly the private placements were sold to investors using advertising materials containing exaggerated characterizations that understated the companies’ risks.

The attorneys at Gana LLP are experienced in investigating claims concerning misrepresentation of private placement securities.  Our attorneys can help you detect and uncover suspicious activity in your accounts.  Our consultations are free of charge and the firm is only compensated if you recover.