Northridge Holdings LTD
Lubiner, Schmidt & Palumbo LLC is investigating Northridge Holdings LTD. On June 10, 2019 the New Jersey Bureau of Securities filed a complaint and Cease and Desist Order against Northridge for marketing unregistered securities to New Jersey Investors. Northridge violated the Uniform Securities Laws of New Jersey by paying unregistered New Jersey based agents to market the product. According to the Complaint, between March 2011 to at least October 2018 the President of Northridge Glenn Mueller unlawfully sold more than 130 unregistered securities totaling $10.46 million to New Jersey Investors.
Northridge according to the company’s website offers investors the potential to invest in “limited partnerships in multi-unit properties”. Northridge owns and operates properties throughout the Midwest, with many located in the state of Illinois’ where Northridge is based. Mueller who according to the Northridge company website expanded a family real estate business from 54 apartments worth $1,324,000 to 973 apartments worth approximately $77,000,000 in a span of 14 years. The biography of the Northridge President illustrates how their business model operates, stating that Northridge uses IRA investment accounts of individuals who purchase the promissory notes for the limited partnerships connected to the properties managed. Northridge marketed itself to investors in New Jersey and throughout the country by selling them promissory notes connected to properties in their portfolio. As stated in the Complaint by the New Jersey State Attorney General, the unregistered promissory notes were one page, issued by entities controlled by Glenn Mueller.
The Promissory Note contained a pledge to pay the principal amount invested as well as a coupon or interest payment. The Northridge Promissory Note was issued by a separate LLC and functioned as a limited partnership created and controlled by Northridge and Mueller.
The issue is that these promissory notes marketed by Northridge were not properly registered before being offered to potential investors in violation of New Jersey State Uniform Securities Laws. Promissory Notes offering interest to investors from hard money lending schemes have been ruled as securities by New Jersey and the SEC. Lubiner, Schmidt & Palumbo is also researching the business model of Northridge, a portfolio that Massachusetts has labeled a “monumental and byzantine investment empire.” Notably how Northridge was able to offer the rate of return promised for such a short maturity on the promissory notes. What the purposes of the funds were and what Northridge was doing with the investor assets when purchased.
The Promissory Notes contained no critical risk or disclosure information for New Jersey investors. No “meaningful risk disclosures” nor any information concerning the financial solvency of Northridge was provided according to the Complaint. Unregistered securities are generally highly risky, illiquid and should be considered unsafe for retired investors of limited means living on a fixed budget. As noted in the Complaint, information such as market or liquidity risk, generally contained in a private placement memorandum or prospectus for a security offering, were completely lacking with the Northridge offering.
The scale of Northridge Promissory notes sales as revealed in the Complaint was staggering. According to the Complaint, Mueller and Northridge sold more than $47 million of unregistered securities nationally to more than 500 investors in more than thirty states. According to the Complaint, in exchange for marketing and selling Northridge two unregistered New Jersey Agents were paid at least $694,977 in commissions. Despite Northridge and Mueller’s extensive sales of securities to New Jersey investors, neither the company, Mueller, nor any of their controlled entities had ever been registered to sell securities in New Jersey. The main issue with the sale of unregistered securities as hit upon in the press release by the New Jersey Director of Consumer Affairs, is that these products generally contain serious risks that unsophisticated investors are not familiar with. Furthermore, as with the Woodbridge and the Ponzi Scheme perpetrated in connection with the marketing of that security, unregistered securities are often connected to securities fraud and investment scams.
Much remains to be seen with Northridge and the complaint filed by New Jersey. As stated in the complaint and press release multiple other states are pursuing legal action against Northridge. The New Jersey complaint seeks penalties against Northridge and Mueller along with a rescission offer to investors who were sold Northridge. Recession reverses the fraudulent securities sold and returns the investor to the position occupied before the fraud was perpetrated.
The main issue now is whether Northridge will have the liquidity to pay the civil monetary penalties assessed by New Jersey and offer recession to investors.
If you invested in Northridge the securities attorneys of Lubiner, Schmidt & Palumbo would be interested in talking with you. Please contact the law offices of Lubiner, Schmidt & Palumbo for a free consultation.