Add five more small, relatively obscure broker-dealers to the list of firms that sold high-risk, illiquid investments backed by Inspired Healthcare Capital, which has gone belly up and filed for bankruptcy in February.
According to court documents and investor complaints, the five firms are: Aurora Securities, LightPath Capital Inc., Quincy Wells Capital, Realized Financial and TCFG Wealth Management.
A private equity firm that developed senior housing, Inspired Healthcare Capital, this winter filed for Chapter 11 bankruptcy, leaving investors who bought the firm’s private placements and Delaware Statutory Trusts in the lurch and broker-dealers that sold the securities potentially facing costly litigation.
InvestmentNews reported in February that broker-dealers that sold the defunct securities backed by assisted living developer Inspired Healthcare generated more than $100 million in fees and commissions for securities that no longer issue distributions – think dividends - to clients.
The value of the $1.2 billion of private placements, DSTs – Delaware Statutory Trusts – and other private vehicles issued by Inspired Healthcare since 2016 and sold by independent broker-dealers is also in question, according to industry executives.
Inspired Healthcare Capital, based in Scottsdale, Ariz., appears to be a sprawling network of related companies, with 161 related debtors and affiliates, according to its bankruptcy filing from February 2 in federal court in the Northern District of Texas.
The filing listed estimated liabilities of $1 billion to $10 billion and between 10,000 and 25,000 creditors.
According to a court filing from June 28 in the Texas federal bankruptcy proceedings, Aurora Securities, LightPath Capital Inc., Quincy Wells Capital and Realized Financial are listed as defendants in the matter.
A spokesperson for Realized Financial, based in Austin, Texas, declined to comment. LightPath Capital of Southlake, Texas, a suburb of Dallas, closed at the end of last year, according to its BrokerCheck profile.
Calls to Aurora Securities, based in a Detroit suburb, and Quincy Wells Capital of Chicago on Wednesday were not returned.
In a separate recent arbitration claim filed under the aegis of FINRA Dispute Resolution Services, a group of investors who bought Inspired Healthcare securities sued TCFG Wealth Management, claiming $15 million in damages and fees.
A call to TCFG Wealth Management, based in Orange County, Calif, on Wednesday was not returned.
Emerson Equity was the lead or managing director in the sale and distribution of the Inspired Healthcare securities. Emerson Equity was also the lead seller of private bonds issued by GWG Holdings, which went bankrupt in 2022 after defaulting on more than $1 billion in so-called L bonds.
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