Two Florida investors are accusing a commercial real estate debt fund of securities fraud, claiming it favored a large institutional investor while stalling their redemption requests.
Aaron Finch and Teresa Moore filed suit against M360 CRE Income Fund LP and its general partner M360 Advisors LLC in the United States District Court for the Southern District of Florida on January 13, seeking at least $7 million in damages.
The investors allege the fund violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 by making false representations about how it processed investor withdrawals. The case also includes claims of breach of fiduciary duty and common law fraud. No determination has been made on the merits.
Finch and Moore say they invested $2 million in the fund starting in January 2017, drawn in by representations from leadership touting strong growth and returns. They reinvested their monthly distributions based on those assurances.
When they moved to redeem their investment in September 2020, they were told the fund had "temporarily paused redemptions." Then-CEO Evan Gentry allegedly reassured them the fund was "performing fine" and that redemptions would resume within one to two quarters.
That never happened.
At the heart of the lawsuit is the allegation that the fund gave preferential treatment to Shinhan Bank, a large South Korean bank that held 57.87 percent of the fund by 2018. According to the filing, the fund paid out nearly $151 million to limited partners between 2020 and 2023, with Shinhan allegedly allowed to exit at or about the fund's 2020 valuation while smaller investors like Finch and Moore were left waiting.
The case invokes the SEC's Preferential Treatment Rule, adopted in 2023, which bars fund advisers from granting certain investors redemption terms that materially harm others. The SEC has said such practices may be "fraudulent, deceptive, or manipulative"—a standard that predates the rule itself.
The fund's finances also came under scrutiny. The filing alleges that when accounting for collateralized loan obligation liabilities, the fund carried approximately $918 million in debt against $708 million in assets as of December 31, 2022—leverage of roughly 130 percent, far exceeding the 50 percent cap stated in its offering documents.
By January 2024, the fund marked down the plaintiffs' holdings by more than 67 percent and announced it would wind down operations. No further withdrawals would be permitted.
Finch and Moore say they ultimately received just $750,000 of their investment. They are seeking compensatory damages, punitive damages, and prejudgment interest.
The lawsuit names several current and former executives as defendants, including Gentry, fund president Matthew Koelliker, and other officers of M360 Advisors and affiliated entities.
The defendants have not yet responded to the allegations.
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