Investors accuse Nicholas Schorsch of plundering RCAP for own gain
Unsecured creditors claim one-time REIT czar and his partners siphoned revenue from RCAP to enrich themselves, leaving shareholders in the lurch
March 10, 2017 | by Bruce Kelly | InvestmentNews
A group of investors has accused Nicholas Schorsch, the former nontraded REIT czar, and his partners of siphoning off revenue in RCS Capital, or RCAP, a company once controlled by Mr. Schorsch that went into bankruptcy.
The allegation, which surfaced in a lawsuit filed by the investors on Wednesday in Delaware Chancery Court, claimed that Mr. Schorsch and his partners enriched themselves by funneling revenue from RCAP to AR Capital, another company they controlled.
RCAP was the publicly traded brokerage holding company that had its initial public offering in 2013. Initially, RCAP’s chief assets was Realty Capital Securities, a wholesaling broker-dealer that sold AR Capital-branded, nontraded real estate investment trusts. Until RCAP’s IPO, Realty Capital Securities operated under AR Capital’s control.
Crushed by more than $1 billion in debt raised for Mr. Schorsch’s binge buying of retail broker-dealers, RCAP declared bankruptcy at the start of last year. It emerged from bankruptcy in May as Aretec, the holding company that now controls Cetera Financial Group, a large broker-dealer network.
The investor plaintiffs in the new suit, the RCS Creditor Trust, represents unsecured creditors who claim their investment was wiped out.
I had no idea this service existed. I could have used it years ago! Great presentation and service!