Shepherd Smith Edwards and Kantas Is Investigating

Shepherd Smith Edwards and Kantas is investigating broker-dealer Spartan Capital Securities following FINRA complaints highlighting high-risk firm practices, severe trading costs, and the unsuitable sale of $24 million in illiquid Atlas Fund private placements. Due to major conflicts of interest, undisclosed markups, and misrepresentations tied to these pre-IPO investments, affected investors are being encouraged to explore legal recovery options.

For some time now, our securities law firm has been investigating claims of investor losses by customers of Spartan Capital Securities. Our scrutiny of this broker-dealer has only increased in the wake of allegations that its CEO, John Lowry, who also runs Atlas Fund Management, compelled the firm to unsuitably recommend and sell $24M in unregistered Atlas Fund private placements to 191 investors. Most of them were retail customers.

It also has come to our attention that Spartan Capital Securities meets the Restricted Firm designation under Financial Industry Regulatory Authority (FINRA) Rule 4111. This means that the self-regulatory organization (SRO) considers this brokerage firm to be a high risk to investors.

It was just last December that FINRA filed a civil complaint accusing Spartan of causing 114 customer accounts to pay almost $10M in trading costs while they sustained $8M in investor losses due to allegedly excessive trading. 53 of the investors affected were seniors. The SRO found that a cost-to-equity ratio as high as 491% was used. Our FINRA lawyers contend that the brokerage firm’s business model enables/relies on this type of broker misconduct.

Now, there are these private placement fraud allegations related to the Atlas Fund.

What Are the Atlas Funds and Why Should Investors Explore Their Legal Options?

Here is a list of funds: 

• Atlas Fund III Ser B LLC (Klarna)
• Atlas Fund III Ser E LLC (Scopely)
• Atlas Fund IV LLC Ser A (Kraken)
• Atlas Fund V LLC Ser C (Dataminr)
• Atlas Fund V LLC Ser F, F1, & F2 (The Zebra)

These are risky, illiquid alternative investments that were unsuitable for retail investors, conservative seniors, and retirees from the start. The funds offered indirect exposure to pre-IPO companies through an Atlas series and then into an investment vehicle related to StraightPath Venture Partners, which is now in receivership. StraightPath’s founders were convicted last year of running a $400M investment fraud.

• The fact that Lowry heads up Spartan Capital Securities and owns Atlas Fund Management is a clear conflict of interest. Not only that, but as the only private placement agent for the Atlas Funds, the brokerage firm was paid a 10% fee.
• Some $3.25M in markups were allegedly charged.
• The broker-dealer purportedly earned more than $2.4M in fees, while other payments allegedly ended up going to entities run by Lowry.
• Atlas Fund Management reportedly was paid more than $482,000 in management fees.
• Offering documents for the Atlas Funds purportedly misrepresented a lot of material facts.
• Spartan is accused of continuing to sell these private placement offerings without enough proof that StraightPath had the underlying shares or that there was a viable investment structure in place
• FINRA’s complaint alleges broker misconduct, negligence, misrepresentations, unsuitability, failure to address red flags, conflicts of interest, omissions, and more.

Why Should Atlas Fund Investors Explore Their Legal Options?

You may have grounds for a broker fraud claim against Spartan Capital Securities that could allow you to recoup your losses. Shepherd Smith Edwards and Kantas FINRA lawyers (investorlawyers.com) can help you assess whether you should file a FINRA lawsuit for damages.

Call our FINRA lawyers at (800) 259-9010 or contact us online to schedule your free case consultation.