Arcadia, California financial advisor Cathy Wu (CRD# 4924232) allegedly misrepresented real estate investment trusts, according to a recent, denied investor...
Read MoreLodging Fund REIT III Settles SEC Charges
In August 2023, the real estate investment trust Lodging Fund REIT III’s CEO and advisor paid more than $4 million to settle charges by the Securities and Exchange Commission (SEC). The CEO, Corey Maple, and the advisor, Legendary Capital REIT III, of which Mr. Maple serves as principal, received a Wells Notice proposing the charges in September 2022. As a report by The DI Wire explained, the notice described the SEC’s preliminary determination to undertake an enforcement action in connection with allegations concerning “the reimbursement of and financial accounting for certain expenses incurred by Legendary Capital REIT III, as well as the adequacy of its disclosures related to those policies and practices.”
As the SEC explained in a 2023 release, its charges alleged that Lodging Opportunity Fund Real Estate Investment Trust and Lodging Fund REIT III “collectively raised approximately $215 million from investors for the purpose of investing in and managing hotels nationwide” between 2014 and 2020. The former, referred to as Fund 2, was managed by Legacy Hospitality II, of which Mr. Maple also served as principal. The latter, referred to as Fund 3, was managed by Legendary Capital. “As described in the order, Legacy, Legendary, and Maple represented to investors that Legacy and Legendary, not Funds 2 and 3, would be responsible for the overhead expenses from managing the REITs, primarily payroll and office rent,” the SEC found. However, it alleged, during the period in question they “improperly directed Funds 2 and 3 to reimburse approximately $5 million of overhead expenses,” with Mr. Maple receiving distributions from Legacy and Legendary.
The SEC found that these actions constituted violations of antifraud provisions of the Securities Act of 1933. “Without admitting or denying the SEC’s findings, Legacy, Legendary, and Maple have agreed to a cease-and-desist order, to pay total disgorgement of $2,746,900, total interest of $544,444.17, and total penalties of $1,475,000,” the order states, “which will be distributed to harmed investors to the extent feasible.” As it notes, Legacy had already reimbursed Lodging Fund 2 a total of $2.1 million.
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