SEC Charges Alternative Investment Platform YieldStreet for Misleading Investors
summary
YieldStreet Inc. and its subsidiary YieldStreet Management LLC were charged by the SEC for fraudulently omitting material risk information about a ship‑collateral loan in a $14.5 million asset‑backed securities offering and agreed to pay over $1.9 million in penalties without admitting wrongdoing.
paragraph
The SEC alleged that YieldStreet failed to disclose that the loan securing the $14.5 million asset‑backed securities was backed by a ship that could not be seized, a risk known from prior deconstruction of similar vessels. Investors suffered millions of dollars in losses when the ship was deconstructed and the collateral value vanished. YieldStreet consented to the settlement, paying penalties, disgorgement and interest totaling more than $1.9 million while neither admitting nor denying the allegations.
narrative
YieldStreet Inc. and its affiliate YieldStreet Management LLC offered a $14.5 million asset‑backed securities (ABS) transaction that was purportedly secured by a ship used as collateral for a loan. Internal documents showed the firm knew the borrower had previously deconstructed ships without repayment, indicating a high risk that the collateral could not be seized, but this material risk was omitted from investor disclosures. When the ship was ultimately deconstructed, the collateral value evaporated, causing investors to lose millions of dollars. The SEC charged the companies with securities fraud for withholding this critical information. YieldStreet entered into a consent order, agreeing to pay more than $1.9 million in penalties, disgorgement, and interest, while neither admitting nor denying the SEC’s findings.
Classified financial-fraud(confidence 95%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →
Parties
sec ordersec order finding violationsSecurities and Exchange Commissionyieldstreet inc. and yieldstreet management llc
Keywords
yieldstreetsecinvestorsorderorder yieldstreetsecuritiesofferingshipalternativeloanalternative investmentinvestment platformplatform yieldstreetyieldstreet misleadingmisleading investors
Exhibits & Attached Documents (1)
Extracted insights
Dollar amounts 2
- $14.50M $14.5 million $10M–$100M
- $1.90M $1.9 million $1M–$10M
Entities 4
- agency sec order
- agency sec order finding violations
- agency Securities and Exchange Commission
- company yieldstreet inc. and yieldstreet management llc
Triples 7
- Securities And Exchange Commission announced settled action YieldStreet Inc. and YieldStreet Management LLC
- YieldStreet offered securities to finance a loan to a group of companies to transport a retired ship
- YieldStreet failed to disclose heightened risk that it would be unable to seize the ship
- YieldStreet proceeded with offering without disclosing material information to investors
- YieldStreet concluded borrowing group caused ship securing the September 2019 offering to be deconstructed and stole deconstruction proceeds
- YieldStreet consented to entry SEC order finding violations
- SEC Order requires YieldStreet to cease and desist and pay more than $1.9 million in penalties
PDF (from attached: pdf)
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Extracted body text (2,921c)
The Securities and Exchange Commission today announced a settled action against New York-based YieldStreet Inc. and its registered investment adviser subsidiary, YieldStreet Management LLC (together, YieldStreet), for failing to disclose critical information to investors in a $14.5 million asset-backed securities offering. According to the SEC’s order, in September 2019, YieldStreet offered securities to finance a loan a YieldStreet affiliate made to a group of companies to transport a retired ship and arrange its deconstruction. The SEC’s order finds that the collateral for the loan was the ship to be deconstructed and that YieldStreet’s right to the ship was the most important security for the loan and the securities that YieldStreet sold to investors. According to the order, YieldStreet failed to disclose to investors a heightened risk that it would be unable to seize the ship in the event of a default. The order finds that, prior to the offering, YieldStreet personnel had information showing that ships securing other loans that YieldStreet affiliates had made to the same borrowing group were reported as deconstructed without any notice or repayment or could not be located because their tracking systems were off. According to the order, YieldStreet proceeded with the offering without disclosing this material information to investors. The order states that YieldStreet later concluded that the borrowing group caused the ship securing the September 2019 offering to be deconstructed, but it stole the deconstruction proceeds by not repaying the loan from YieldStreet, leaving investors facing millions of dollars of losses. “YieldStreet aims to unlock the complex alternative investments market for retail investors but failed to disclose glaring red flags it had about the security of the collateral backing this offering,” said Osman Nawaz, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “As this case shows, we are committed to ensuring that investors in any asset class, including ‘alternative’ asset classes, receive complete and accurate disclosures about those investments.” Without admitting or denying the findings, YieldStreet consented to the entry of an SEC order finding that they violated certain antifraud and other provisions of the federal securities laws. The SEC’s order requires YieldStreet to cease and desist from these violations and to pay more than $1.9 million in penalties, disgorgement, and interest. The SEC’s investigation was conducted by Jason Casey and Daniel Nigro of the Complex Financial Instruments Unit, and assisted by Judy Bizu of the SEC's Denver Regional Office. Laura Metcalfe and Osman Nawaz supervised the investigation. The Enforcement Division appreciates the assistance from the SEC’s Division of Examinations including Karen Karakaya, Maurya Keating, James Mclean, Edward Moy, Azam Riaz, Kevin Rush, and Raymond Slezak.
OCR text (2,921c · html-text · 99% conf)
The Securities and Exchange Commission today announced a settled action against New York-based YieldStreet Inc. and its registered investment adviser subsidiary, YieldStreet Management LLC (together, YieldStreet), for failing to disclose critical information to investors in a $14.5 million asset-backed securities offering. According to the SEC’s order, in September 2019, YieldStreet offered securities to finance a loan a YieldStreet affiliate made to a group of companies to transport a retired ship and arrange its deconstruction. The SEC’s order finds that the collateral for the loan was the ship to be deconstructed and that YieldStreet’s right to the ship was the most important security for the loan and the securities that YieldStreet sold to investors. According to the order, YieldStreet failed to disclose to investors a heightened risk that it would be unable to seize the ship in the event of a default. The order finds that, prior to the offering, YieldStreet personnel had information showing that ships securing other loans that YieldStreet affiliates had made to the same borrowing group were reported as deconstructed without any notice or repayment or could not be located because their tracking systems were off. According to the order, YieldStreet proceeded with the offering without disclosing this material information to investors. The order states that YieldStreet later concluded that the borrowing group caused the ship securing the September 2019 offering to be deconstructed, but it stole the deconstruction proceeds by not repaying the loan from YieldStreet, leaving investors facing millions of dollars of losses. “YieldStreet aims to unlock the complex alternative investments market for retail investors but failed to disclose glaring red flags it had about the security of the collateral backing this offering,” said Osman Nawaz, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “As this case shows, we are committed to ensuring that investors in any asset class, including ‘alternative’ asset classes, receive complete and accurate disclosures about those investments.” Without admitting or denying the findings, YieldStreet consented to the entry of an SEC order finding that they violated certain antifraud and other provisions of the federal securities laws. The SEC’s order requires YieldStreet to cease and desist from these violations and to pay more than $1.9 million in penalties, disgorgement, and interest. The SEC’s investigation was conducted by Jason Casey and Daniel Nigro of the Complex Financial Instruments Unit, and assisted by Judy Bizu of the SEC's Denver Regional Office. Laura Metcalfe and Osman Nawaz supervised the investigation. The Enforcement Division appreciates the assistance from the SEC’s Division of Examinations including Karen Karakaya, Maurya Keating, James Mclean, Edward Moy, Azam Riaz, Kevin Rush, and Raymond Slezak.