In a recently filed lawsuit, Securities America Inc. is charged with continuing to sell offerings of a faulty private placement after an executive at the firm sounded the alarm bell concerning the problem investment last year.
In addition to this allegation, the lawsuit further charges that Securities America sold millions of dollars’ worth of notes of Medical Capital Holdings, Inc. In July, the SEC charged Medical Capital with fraud in the sale of $77 million of private securities in the form of notes. Since that time, a court-appointed receiver has questioned the value of the company’s assets, throwing into question the structure of the six deals it sold from 2003 to 2008.
W. Thomas Cross, an executive at Securities America, wrote to a Medical Capital official that he feared a run on the bank because of issues at Medical Capital. Allegedly, this written comment was made months before Securities America ceased selling the now infamous private placement.
An official with Securities America said the claim that the company continued selling Medical Capital notes after Mr. Cross’ raised concerns is preposterous.
In total, Medical Capital raised $2.2 billion from investors. Given the legal circumstances surrounding Medical Capital Holdings Inc, this is undoubtedly only the beginning salvo of lawsuits brought about by defrauded investors.