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Schorsch, AR Capital to pay $60 million to settle SEC charges

July 17, 2019

Schorsch, AR Capital to pay $60 million to settle SEC charges

July 16, 2019 | Bruce Kelly | Investment News

Nicholas Schorsch, the former nontraded real estate investment trust czar who in his heyday raised billions of dollars annually from retail investors, and his firm AR Capital agreed to pay $60 million in penalties to settle Securities and Exchange Commission charges that he, the firm and a partner wrongfully obtained millions of dollars in connection with REIT mergers that were managed by AR Capital.

According to the SEC’s complaint, between late 2012 and early 2014, AR Capital arranged for American Realty Capital Properties Inc., a publicly traded REIT, to merge with two publicly held, nontraded REITs.

The SEC alleges that AR Capital, Mr. Schorsch and a partner at AR Capital, Brian Block, inflated an incentive fee in both mergers. This improper calculation allegedly allowed them to obtain approximately 2.92 million additional ARCP operating partnership units as part of their incentive-based compensation.

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