Thoughts On RealtyShares Closing Its Doors To New Investors

[Chicago81]

I am in complete agreement.  RS currently has a conflict of interest as to the FG deals, as RS cannot be truthful to investors (as it is bound to do) that FG may have been a fraud from the onset without incurring potential liability themselves.  Many important fraud-related questions remain:

1.  Especially for the last FG deals to close, FG must have known that it could not and would not proceed with the stated deal.  If so, then FG accepted our money under false pretenses knowing that the stated purpose was a ruse.  RS may have also known (or been "on notice") that FG was a sham by then, yet they continued to churn FG deals.

2.  If FG has commingled funds between projects, especially if it used new funds from later deals to pay investors on previous deals knowing the hole was getting deeper, then it would look a lot like a Ponzi scheme.

3.  It seems unjust for RS and FG to retain their various "acquisition fees" considering that this was a fraud (or massive misrepresentation) from the onset.

I have been asking RS for any assurance that this was not a complete fraud for several months now.  RS refuses to respond to my emails (not even a boilerplate response).  Perhaps after RS confirms that we have taken a substantial loss, investors in FG deals should hire an attorney on contingency to try to recoup our losses.

If RS had disclosed that they were, in fact, on the verge of collapsing and that, if they collapsed, they would shut down their phone line and refuse to respond to investor emails, none of us would have proceeded.  This is not just unlawful (and potentially criminal); it is also shameful.

Best,

[Sam]

I am in complete agreement.  RS currently has a conflict of interest as to the FG deals, as RS cannot be truthful to investors (as it is bound to do) that FG may have been a fraud from the onset without incurring potential liability themselves.  Many important fraud-related questions remain:

1.  Especially for the last FG deals to close, FG must have known that it could not and would not proceed with the stated deal.  If so, then FG accepted our money under false pretenses knowing that the stated purpose was a ruse.  RS may have also known (or been "on notice") that FG was a sham by then, yet they continued to churn FG deals.

2.  If FG has commingled funds between projects, especially if it used new funds from later deals to pay investors on previous deals knowing the hole was getting deeper, then it would look a lot like a Ponzi scheme.

3.  It seems unjust for RS and FG to retain their various "acquisition fees" considering that this was a fraud (or massive misrepresentation) from the onset.

I have been asking RS for any assurance that this was not a complete fraud for several months now.  RS refuses to respond to my emails (not even a boilerplate response).  Perhaps after RS confirms that we have taken a substantial loss, investors in FG deals should hire an attorney on contingency to try to recoup our losses.

If RS had disclosed that they were, in fact, on the verge of collapsing and that, if they collapsed, they would shut down their phone line and refuse to respond to investor emails, none of us would have proceeded.  This is not just unlawful (and potentially criminal); it is also shameful.

Best,

Do you have the links to the original FG deals? It would be good for us all to review them to see if there were any red flags to be better protected and more knowledgeable in the future. thx

[Beat_The_Fraud]

RealtyShares was a huge disappointment. While many of us are kicking ourselves for not figuring out in advance the lack of quality of the sponsors/deals, in reality, very little information was available about the sponsors -- at least ones like Franchise Growth, which still is virtually invisible on the Internet. I believe that RS had a responsibility to do due diligence on sponsors before just promoting them to online investors. RS was interested in selling deals to investors since that is how it made money. In the case of FG, it touted FG's substantial business in assisting franchisees to establish new franchise businesses. It stated in its materials selling the deals that "The sponsor, Franchise Growth, LLC (the "Sponsor"), has a reported track record in restaurant franchising and anticipates the development of 400+ units in 13 states in the next 3 years."  A reasonable investor would expect that RS would not make such a statement without verifying its truth. 

Now we are seeing, only through a forum established by a third party, that FG appears to have no expertise. It appears that every deal they did has failed.  That's not normal fallout of "not all deals succeed." When every deal fails and the only payout that has occured is from the reserve that was held back, then one has to suspect that FG may have been either dishonest or totally inexperienced and incompetent.  Any reasonable amount of due diligence by RS should have uncovered that. Individual investors were typically only involved in one or two FG deals, but RS promoted at least nine FG deals (perhaps more). So RS really should bear the responsibility for the FG debacle.

I have all the information regarding FG...It's partners, DOBs, addresses, etc. which I will publicly disclose once the outcome of our investments is reached. They have opened multiple companies incorporated in Florida in early 2017 with addresses in Coral Gables...And that's exactly when RS have started to provide funds to these newly developed companies of FG. This all seems to be a collaborated ponzi scheme initiated through RS and FG...But being somewhat optimistic I would like to see the outcome before taking any further step which will include but not limited to reporting to Attorney General of Florida, Maryland and New York (FG partners residence states)

[1UnknownSubject]

Thank you for collecting the information. I too feel I was burned by RS and FG, although it has not come to an ending yet. This company caused me to have to file an extension on my 2018 taxes, something I have never done and caused additional stress at the time. RS has never answered any emails I have sent. When the arbitrarily extended a loan to FG in the Fall, I was a bit shocked. I am hoping my other 2 investments turn out okay. I did research on FG, and the principals seem to have had almost no experience. I regret that now. In for $10k, was paid about $1.1k in interest, if I get my 10k back I will certainly be happy.

Still waiting for the K-1's and now it is May. I mean come on, the books closed by in December or early January. I know it is out of my control, but that is a really poor way to run a business.

Thank you guys for posting the information you have on this thread. RS never let me know they changed hands and could not get additional funding.  I have lost money before, will lose money again, but this seems somehow avoidable.

I have FG for a Church's Chicken Coastal Florida, an apt bldg in Los Angeles, and apt bldg in Ohio near a college (this has recently paid me).

[kt1984]

Guys, lets hope the FG story ends on a decent note with all of us getting at least our principal back including the interest already paid. I am keeping my fingers crossed- but in case of a major loss, I agree we need to move forward legally on this. RS was well aware of what was happening at FG way in advance especially as there is a guy who moved from RS to FG. So far one of the Taylor MI deal reached between FG and RS involved 100% return of principal- I hope that promise is kept for that deal and the rest of the deals as well. I am still optimistic, we will reach a decent enough resolution since FG and RS both would want to avoid legal trouble here!

[DECA]

I am in complete agreement.  RS currently has a conflict of interest as to the FG deals, as RS cannot be truthful to investors (as it is bound to do) that FG may have been a fraud from the onset without incurring potential liability themselves.  Many important fraud-related questions remain:

1.  Especially for the last FG deals to close, FG must have known that it could not and would not proceed with the stated deal.  If so, then FG accepted our money under false pretenses knowing that the stated purpose was a ruse.  RS may have also known (or been "on notice") that FG was a sham by then, yet they continued to churn FG deals.

2.  If FG has commingled funds between projects, especially if it used new funds from later deals to pay investors on previous deals knowing the hole was getting deeper, then it would look a lot like a Ponzi scheme.

3.  It seems unjust for RS and FG to retain their various "acquisition fees" considering that this was a fraud (or massive misrepresentation) from the onset.

I have been asking RS for any assurance that this was not a complete fraud for several months now.  RS refuses to respond to my emails (not even a boilerplate response).  Perhaps after RS confirms that we have taken a substantial loss, investors in FG deals should hire an attorney on contingency to try to recoup our losses.

If RS had disclosed that they were, in fact, on the verge of collapsing and that, if they collapsed, they would shut down their phone line and refuse to respond to investor emails, none of us would have proceeded.  This is not just unlawful (and potentially criminal); it is also shameful.

Best,

Do you have the links to the original FG deals? It would be good for us all to review them to see if there were any red flags to be better protected and more knowledgeable in the future. thx

Sam, you asked that people post links to the original FG deals.  Here are the links to the AFC - Long Island deal and the Louisville (Shelbyville, Ky) Captain D's deal:

https://www.realtyshares.com/investments/long-island-american-family-care-tranche-3

https://www.realtyshares.com/investments/louisville-msa-captain-d-s

[Sam]

Deca - Thanks.

"The sponsor, Franchise Growth, LLC (the "Sponsor"), has a reported track record in restaurant franchising and anticipates the development of 400+ units in 13 states in the next 3 years. "

That is a very WEAK description of FG's experience no? "has a reported track record"? What is that? Surprised a 10 month loan is already getting screwed up. Also the updates show the tenant has been 4 months delinquent for the Long Island Property? Who is the tenant? They just moved in!

[Mark]

Here is the link to a FC deal for a Church's Chicken in Winston Salem, NC

https://www.realtyshares.com/investments/church-s-chicken-winston-salem-tranche-2

[groovydude]

I am in complete agreement.  RS currently has a conflict of interest as to the FG deals, as RS cannot be truthful to investors (as it is bound to do) that FG may have been a fraud from the onset without incurring potential liability themselves.  Many important fraud-related questions remain:

1.  Especially for the last FG deals to close, FG must have known that it could not and would not proceed with the stated deal.  If so, then FG accepted our money under false pretenses knowing that the stated purpose was a ruse.  RS may have also known (or been "on notice") that FG was a sham by then, yet they continued to churn FG deals.

2.  If FG has commingled funds between projects, especially if it used new funds from later deals to pay investors on previous deals knowing the hole was getting deeper, then it would look a lot like a Ponzi scheme.

3.  It seems unjust for RS and FG to retain their various "acquisition fees" considering that this was a fraud (or massive misrepresentation) from the onset.

I have been asking RS for any assurance that this was not a complete fraud for several months now.  RS refuses to respond to my emails (not even a boilerplate response).  Perhaps after RS confirms that we have taken a substantial loss, investors in FG deals should hire an attorney on contingency to try to recoup our losses.

If RS had disclosed that they were, in fact, on the verge of collapsing and that, if they collapsed, they would shut down their phone line and refuse to respond to investor emails, none of us would have proceeded.  This is not just unlawful (and potentially criminal); it is also shameful.

Best,

I will say that RS closed on two FG deals that I had money in (at least I think they were FG deals), so there may be hope unless they really were just using funds collected from newer offerings to pay off the older ones. Regardless, these are really strong charges, but unfortunately they have a ring of truth to me. RS has just been too quiet since November. I'm not buying that their staff is just too overworked to answer our emails. Nevertheless, the complete lack of knowledge leaves us all wondering what to do.

Even if they're on the up-and-up with FG and other deals, and their only fault was in not doing enough due diligence on the deals they offered, we're still in pretty deep do-do. IMHO. RS may be able to pay it's bills today, but every day that passes more of their deals exit and their income drops. Soon it will be at a point where they can't afford to keep any staff on board.

We've heard nothing from our letter. Distributions are still coming late or not at all. I think it might be time to lawyer up.

[1UnknownSubject]

I would be interested in joining with others in starting down that path, as it relates to FG. I don't have any information except this forum; I sure hope this was not a ponzi scheme...

[Hindsight2020]

I am in complete agreement.  RS currently has a conflict of interest as to the FG deals, as RS cannot be truthful to investors (as it is bound to do) that FG may have been a fraud from the onset without incurring potential liability themselves.  Many important fraud-related questions remain:

1.  Especially for the last FG deals to close, FG must have known that it could not and would not proceed with the stated deal.  If so, then FG accepted our money under false pretenses knowing that the stated purpose was a ruse.  RS may have also known (or been "on notice") that FG was a sham by then, yet they continued to churn FG deals.

2.  If FG has commingled funds between projects, especially if it used new funds from later deals to pay investors on previous deals knowing the hole was getting deeper, then it would look a lot like a Ponzi scheme.

3.  It seems unjust for RS and FG to retain their various "acquisition fees" considering that this was a fraud (or massive misrepresentation) from the onset.

I have been asking RS for any assurance that this was not a complete fraud for several months now.  RS refuses to respond to my emails (not even a boilerplate response).  Perhaps after RS confirms that we have taken a substantial loss, investors in FG deals should hire an attorney on contingency to try to recoup our losses.

If RS had disclosed that they were, in fact, on the verge of collapsing and that, if they collapsed, they would shut down their phone line and refuse to respond to investor emails, none of us would have proceeded.  This is not just unlawful (and potentially criminal); it is also shameful.

Best,

I will say that RS closed on two FG deals that I had money in (at least I think they were FG deals), so there may be hope unless they really were just using funds collected from newer offerings to pay off the older ones. Regardless, these are really strong charges, but unfortunately they have a ring of truth to me. RS has just been too quiet since November. I'm not buying that their staff is just too overworked to answer our emails. Nevertheless, the complete lack of knowledge leaves us all wondering what to do.

Even if they're on the up-and-up with FG and other deals, and their only fault was in not doing enough due diligence on the deals they offered, we're still in pretty deep do-do. IMHO. RS may be able to pay it's bills today, but every day that passes more of their deals exit and their income drops. Soon it will be at a point where they can't afford to keep any staff on board.

We've heard nothing from our letter. Distributions are still coming late or not at all. I think it might be time to lawyer up.

You haven't heard back from the CEO at all?

[groovydude]

John_PVF sent the letter, he hasn't posted since a few days after (3 weeks ago). I've got a PM out to him, but I think he would have posted something if he had any meaningful response. See the other thread:

https://www.financialsamurai.com/forums/real-estate-crowdfunding/letter-to-realty-shares-ceo-from-deal-level-investors/

[dwengca]

We've heard nothing from our letter. Distributions are still coming late or not at all. I think it might be time to lawyer up.

I agree as well.  Based on my own RS investments, things are getting worse and worse by the month.   My 16 active investments are down to only 3 that are paying distributions in April.   At this rate, it will be just a matter of time before we (RS) investors end up with nothing.   :-(

[groovydude]

The more I think about it, the more I'm convinced it's time to act. RS has assets - servicing rights to our investments - and may have thought that they could sell what assets they had back in November, but if that really were possible it would have happened by now. Every day that passes their assets are worth less. Now they're running a dying company and clearly running it into the ground. The managers may have been up to illegal activity (fraud), or just incompetent, but it's done. The owners need to be told to do the right thing - quit. Give the assets back to the sponsors. This will leave those of us with bad investments on our own to deal with, but it's the quickest and simplest way out of this mess. I'll give the other thread a day or two, and then take it from there and start calling lawyers or coordinating calls to lawyers. If anyone reading this knows of someone who might have the experience to deal with this, PM me.

[DECA]

Deca - Thanks.

"The sponsor, Franchise Growth, LLC (the "Sponsor"), has a reported track record in restaurant franchising and anticipates the development of 400+ units in 13 states in the next 3 years. "

That is a very WEAK description of FG's experience no? "has a reported track record"? What is that? Surprised a 10 month loan is already getting screwed up. Also the updates show the tenant has been 4 months delinquent for the Long Island Property? Who is the tenant? They just moved in!

Sam, the Louisville Captain D's description of FG's experience goes further and touts their "extensive experience":

"The sponsor, Franchise Growth, LLC (the "Sponsor"), has extensive experience in restaurant franchising and anticipates the development of 400+ triple net leased facilities (of various tenancies) across 13 states in the next 3 years. "

It's another fairly short term debt deal that is totally screwed up.  Was RS more interested in just getting deals sold to investors than in doing due diligence on FG? Hopefully, we investors will come out ok and not have to litigate to find the answer to that question.

[Nosferatu_FL]

Hello all
glad I found this forum!
I have invested a ton of $$ in RS. I have 18 active deals, only one exited successfully so far!
Most of them have stopped paying and just received this notice about the BEST Western Toledo, where I invested 150K
It sounds like it was a complete loss and no return on any of the principal:

"The sale of this property has closed and we received the settlement statement from the sponsor. The property sold for $3,827,250 and approximately $3,280,000 of the proceeds went to pay off the first-lien debt.  Payment of real estate taxes, TenX transaction fee, loan charges, sale commission, and other escrow and title fees combined to reduce the net proceeds paid to the seller to $25,425.  The sponsor advises that all of this cash will be used post-closing to settle some of the accounts payable and will likely have to contribute additional equity to fully settle. Therefore, no equity is available from the sale for distribution to equity investors. This outcome is in line with the April 4, 2019 update that indicated there would be no recovery."

This is very disturbing and I don't have much faith that things will get any better.
I have started calling lawyers to look into litigated this.

anyone else was involved in the toledo deal or interested in litigation at this point?
Thanks

[Dgilpin]

150K in second Lein debt,  wow that is...bold

[Hindsight2020]

Hello all
glad I found this forum!
I have invested a ton of $$ in RS. I have 18 active deals, only one exited successfully so far!
Most of them have stopped paying and just received this notice about the BEST Western Toledo, where I invested 150K
It sounds like it was a complete loss and no return on any of the principal:

"The sale of this property has closed and we received the settlement statement from the sponsor. The property sold for $3,827,250 and approximately $3,280,000 of the proceeds went to pay off the first-lien debt.  Payment of real estate taxes, TenX transaction fee, loan charges, sale commission, and other escrow and title fees combined to reduce the net proceeds paid to the seller to $25,425.  The sponsor advises that all of this cash will be used post-closing to settle some of the accounts payable and will likely have to contribute additional equity to fully settle. Therefore, no equity is available from the sale for distribution to equity investors. This outcome is in line with the April 4, 2019 update that indicated there would be no recovery."

This is very disturbing and I don't have much faith that things will get any better.
I have started calling lawyers to look into litigated this.

anyone else was involved in the toledo deal or interested in litigation at this point?
Thanks

Do you have the link to the original listing?

[Nosferatu_FL]

Dglpin  clearly I had no idea what I was getting myself into!  This guy Robert Fay was calling me periodically and he sold me on this specific deal where I made the biggest investment!


Hindsight here's the original link:

https://www.realtyshares.com/dashboard/share?cmsInvestmentId=3516921281124642&pfcDealId=4219348292632747

Best Western Toledo, Maumee, OH

[Nosferatu_FL]

When I googled their Sponsor Bridgeton Holdings.. they had terrible google reviews, so clearly RS did not even do basic vetting on some of these sponsors..