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Advisors That Sold Funds Issued by the Heartland Group Could Be Liable to Investors

If you were sold any of the Heartland Funds by a financial advisor, insurance agent, or other related advisor, you could have viable arbitration of litigation claims to pursue. The SEC has filed a civil complaint against the Heartland Funds alleging them to be a Ponzi Scheme.

The investment fraud attorneys at Stoltmann Law Offices, P.C. have spoken to investors defrauded by the Heartland Funds. These investors were all sold interests in either a Heartland Fund directly, or, through a separate “feeder” fund that pooled investor funds to invest into a Heartland Fund. The Funds at issue include:

  • The Heartland Group Ventures, LLC
  • Heartland Production and Recovery LLC
  • Heartland Production and Recovery Fund II, LLC
  • The Heartland Group Fund III, LLC
  • Heartland Drilling Fund I, LP
  • Legacy Energy Opportunities Fund, LLC (Feeder Fund)

The SEC has sued Heartland and the court has appointed a receiver to marshal the assets of the numerous Heartland Funds and to sue numerous defendants identified by the SEC. There is no way of knowing whether the SEC will be successful in recovering funds, and if they do, how much of that money will end up going to investors after civil fines and penalties are paid. Investors should not wait for the SEC to get them their money back before taking steps to secure rights against potentially liable parties.

On December 1, 2021, the Securities and Exchange Commission filed a Complaint against The Heartland Group Ventures, LLC. The complaint was filed in the Federal Court in Fort Worth, Texas. The SEC alleges that the Heartland Group Funds, defrauded nearly 700 investors out of approximately $122 million. The SEC also states, from at least October 2018 to October 2021, the Heartland Group of funds mixed investor funds in numerous unrelated-companies, made Ponzi-payments to investors without their knowledge, and lied about using investor proceeds to invest in legitimate oil and gas wells and projects. The SEC also claims that Heartland became majority-owned, starting in or about September 2019, by Jay Ikey, who was convicted of conspiracy to commit wire fraud in 2014. The SEC also alleges that Heartland entrusted over $54 million of investor money to a group of entities referred to as the Sahota Defendants, purportedly to invest in various oil and gas well programs. The SEC alleges that these investor funds were turned over to the Sahota Defendants notwithstanding Heartland’s knowledge of extensive red flags that the Sahota Defendants were not using investor money as represented, including using millions of investor dollars to buy a private jet, a helicopter, real estate in the Bahamas, and other personal expenditures unrelated to oil and gas exploration. Although disturbing, the facts claimed by the SEC have not been proven and are only allegations.

Heartland used “finders” to solicit investors. Many of these “finders” were insurance agents, licensed financial advisors, or in some instances, unlicensed former financial advisors that had been barred by FINRA from the securities industry. Heartland did no research to ensure the people they paid handsomely, in excess of 8% commissions, were trained and appropriately licensed to sell securities, especially speculative private placements like the Heartland Funds. On January 31, 2020, the State of Michigan Department of Licensing and Regulatory Affairs, in Complaint No. 340616, filed a Notice and Order to Cease and Desist against Heartland Production and Recovery, LLC for selling securities through unlicensed “finders” to residents in the State of Michigan. The Cease and Desist alleged, as a “conclusion of law” that Heartland offered securities through “unregistered agents whose activities went beyond merely locating, introducing, or referring potential purchases of securities in violation of Section 402(4) of the Securities Act, MCL 451.2402(4).

Advisors who solicited clients to invest money into Heartland, either directly or through a feeder fund, like an investment advisor or financial advisor, could be liable for the advice to invest. Further, depending on the facts, the brokerage or investment advisory firms those advisors worked for could likely have liability too. The Heartland Funds were speculative and high-risk private investment vehicles. They were likely not suitable for any investor from a due diligence perspective given the volume of red flags that any reasonable professional would have noticed. Investors should evaluate their options with an experienced securities attorney to determine whether they have claims against third parties. These advisors or their firms may require suits against them be filed in arbitration, not court. If the advisors are not registered with a firm or licensed to sell securities, they could be liable for selling securities as an unlicensed broker in violation of state securities regulations. These “finders” were, in most cases, as pointed out in the Michigan complaint, acting as advisors, not mere “finders”.

If you were recommended an investment in Heartland 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.

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