On July 6, 2012 the Securities and Exchange Commission filed a Complaint in federal district court against The Companies (TC), LLC (“The Companies”) and its principals, Kristoffer A. Krohn (“Kris Krohn”), Stephen R. Earl (“Earl”), and former officer, Michael K. Krohn (“Mike Krohn”) (collectively “Defendants”).
The Companies, directly and through related companies and subsidiaries, purchases distressed real estate for investment. The Complaint alleges that to raise money to purchase real estate, The Companies or its subsidiary, Alpha Real Estate Holdings, L.P. (“Alpha LP”), initiated four unregistered offerings of securities from January 2009 to June 2011. Kris Krohn, Earl, and Mike Krohn participated in the offerings by providing content for and approval of the private placement memoranda (“PPMs”) used to solicit investors and by directly offering the securities to investors. The four offerings raised a total of approximately $11.9 million from approximately 169 investors. The PPMs contained material misrepresentations and omissions related to, among other things, the value of properties to be purchased or that were owned by the Companies or Alpha LP.
In addition to containing false representations, each of the four offerings relied on the exemption to registration under Regulation D, Rule 506. The offerings did not qualify for the Rule 506 exemption because Defendants solicited investors through general solicitation at meetings that were open to the public.