Yieldstreet, an alternative investment platform, has agreed to pay $1.9 million to settle allegations made by the Securities and Exchange Commission (SEC). The SEC claimed that Yieldstreet failed to disclose critical information regarding a ship-related investment that ultimately failed.
Details of the Settlement
Yieldstreet and its registered investment advisory subsidiary, without admitting or denying the findings, have consented to the SEC’s discoveries. The regulatory penalty is linked to a $14.5 million asset-backed securities offering that Yieldstreet had sold to customers. These offerings were used to finance loans for the dismantlement of retired ships, with the ships serving as collateral.
Lack of Disclosure
During the period between June 2018 and September 2019, Yieldstreet offered these securities to accredited investors on its online platform. However, prior to the sixth and final offering, Yieldstreet received information indicating that some of the ships used as collateral could not be located. It was discovered that their tracking systems were not functioning properly, and some ships had already been broken up.
Despite this critical information, Yieldstreet proceeded with the offering without disclosing it to investors. As a result, the company raised $14.5 million from investors who were unaware of the risks involved.
Unfortunate Outcome for Investors
Subsequently, Yieldstreet discovered that the borrower had misappropriated the deconstruction proceeds from several ships. This has left investors who participated in the sixth offering facing significant financial losses.
Yieldstreet and its subsidiary have now reached a settlement with the SEC, agreeing to pay $1.9 million. This settlement aims to resolve any legal implications arising from the failure to disclose crucial information to investors.
While Yieldstreet has not explicitly admitted fault, the company is taking steps to ensure greater transparency moving forward. It serves as a reminder of the importance of full disclosure in investment offerings, especially when dealing with complex assets such as ship-related investments.
Yieldstreet Faces Penalties for Failure to Monitor Ship Loans
The Securities and Exchange Commission (SEC) has announced that Yieldstreet, a leading finance company, was found to have neglected to track the location and status of ships through publicly available information sources. Instead, the company relied on another party to service the loans and monitor the ships. This oversight led to significant losses for investors.
Yieldstreet encountered a major setback in October 2019 when a borrower failed to make a loan payment. The borrower provided several excuses and false assurances before finally claiming insolvency. To Yieldstreet’s dismay, the ship in question had already been dismantled, preventing any possibility of foreclosure. Upon discovering this apparent fraud, Yieldstreet promptly ceased offering securities for marine deconstruction loans.
Since then, Yieldstreet has launched extensive litigation efforts to recover investors’ funds and rectify the situation. The SEC acknowledges these efforts and anticipates that affected investors may ultimately receive some level of recovery. Yieldstreet’s commitment to resolving the matter and ensuring justice for its investors remains strong.
Yieldstreet’s remedial actions have been taken into account by the SEC when determining the imposed penalty.