Advisors That Sold DeepRoot Funds to Their Clients Could be Liable for Breach of Fiduciary Duty
Arbitration claims or litigation could be necessary to pursue your advisor if you were solicited to invest in the DeepRoot Funds, which are alleged by the SEC to be a Ponzi Scheme.
The Securities attorneys at Stoltmann Law Offices, P.C. continue to hear from investors defrauded by Robert J, Mueller and the DeepRoot Funds. They are shocked and chagrined to learn that their investments are likely gone and that suing Mueller and DeepRoot is probably a waste of time given the allegations made by the Securities and Exchange Commission. Investors should not wait for the SEC to “get their money back” because it rarely works that way. Frankly, it is not the SEC’s job to get investors their money back; their job is to bust the bad guys and punish them for violating securities laws and regulations. If they are able to return some funds to investors, that is a bonus, but it is not the norm.
On August 20, 2021, the Securities and Exchange Commission filed a Complaint against Robert J. Mueller, DeepRoot Funds, LLC, and several other related entities. The complaint was filed in the United States District Court for the Western District of Texas in San Antonio. The allegations levied by the SEC state that Mueller and DeepRoot, from at least September 2015 to February 2021, defrauded nearly 300 people who invested approximately $58 million in the DeepRoot Funds. The SEC alleges that Mueller and DeepRoot commingled investor funds in various unrelated-entity bank accounts. Specifically, the SEC alleges that Mueller and DeepRoot “used the vast majority of [investor] funds’ assets…like a piggy bank to fund Mueller’s DeepRoot-affiliated businesses.” It is further alleged that Mueller used more than $1.5 million of investor money to pay personal expenses like his daughter’s private school tuition, family vacations, a second wedding, a second divorce, a third wedding, jewelry for his second and third wives, and a condo in Kauai, Hawaii. Mueller has asserted his 5th Amendment rights against self-incrimination throughout the SEC investigation. These are merely allegations contained in a complaint filed by the SEC and Mr. Mueller is entitled to the presumption of innocence until these allegations are proven.
Mueller and DeepRoot primarily offered two funds for investment; the DeepRoot 575 Fund, LLC and the DeepRoot Growth Runs Deep Fund, LLC. The SEC alleged that many investors cashed out annuities and IRAs they held with other investment companies in order to invest in DeepRoot. Apparently, these funds were to invest in life insurance policies and DeepRoot-related businesses in order to provide a safe return for investors. The 575 Fund offered investors a five year term investment that would generate 7% interest per year paid out as a lump-sum at the end of the 5 year term, or 5% simple annual interest paid monthly for five years. The Growth Runs Deep fund was less clear and represented that investors should expect a potentially large payout upon the maturity of a life policy investment pursuant to a complex redemption process. According to the lack of any filings, and the SEC, neither the Growth Runs Deep Fund or the 575 Fund were registered with the SEC or exempt from registration.
Given the mess DeepRoot is in, investors need to look for potentially liable third parties to recover their losses. Anyone who solicited investors to put money into DeepRoot, like an investment advisor or financial advisor, faces liability for the recommendation. On their faces, the DeepRoot Funds were speculative, unregistered, high-risk private investment vehicles. They were likely not suitable for any investor from a due diligence perspective. Further, if an investor surrendered an annuity or transferred an IRA to a custodial firm to facilitate this transaction, those actions could be identified as red flags by a brokerage firm or advisory firm that something was not right. According to calls made to Stoltmann Law Offices by investors, registered investment advisors were selling DeepRoot Funds to their clients. These solicitations are likely grounds for a breach of fiduciary duty claim. Investors must explore their options with an experienced securities attorney to determine whether they have viable claims against third parties. Waiting to see what happens with the SEC complaint is not viable because the statute of limitations is running on these claims. Lastly, any suggestion from your RIA that he or she is joining a group of other RIAs to bring a lawsuit on behalf of their clients is a massive red flag and nothing more than deflection – RIAs owe their clients fiduciary duties and selling an investment that turns out to be a Ponzi scheme is a big problem for them and they know it.
If you were recommended an investment in DeepRoot Funds by an advisor or broker, please call Stoltmann Law Offices, P.C. at 312-332-4200 for a no-obligation free consultation with a securities attorney. We are a contingency fee firm which means we do not get paid until you do.