1
00:00:00,000 --> 00:00:03,960
Welcome to part two of this
video series going through how

2
00:00:03,960 --> 00:00:08,670
to stay in compliance with the
SEC and state regulators. When

3
00:00:08,670 --> 00:00:12,270
you're doing a securities
offering under Regulation D,

4
00:00:12,630 --> 00:00:15,750
this is an exciting video
because this one is going to be

5
00:00:15,900 --> 00:00:20,370
a problem that I see coming up
time and time again, though it's

6
00:00:20,370 --> 00:00:24,600
happening more and more. So
let's go through exactly what

7
00:00:24,600 --> 00:00:28,440
I'm talking about. It's time I
call this section, improper

8
00:00:28,440 --> 00:00:32,760
structures. What exactly does
that mean? Does the structure of

9
00:00:32,760 --> 00:00:36,480
my regulation security have to
do with it? My name is Tilden

10
00:00:36,480 --> 00:00:39,360
Moschetti. I am a securities
attorney with the Moschetti

11
00:00:39,360 --> 00:00:40,800
Syndication luck.

12
00:00:52,050 --> 00:00:54,840
All right, we're going to talk
right now about three different

13
00:00:54,840 --> 00:00:58,410
structures that I call improper
structures. They're structures

14
00:00:58,410 --> 00:01:02,580
that, in my opinion, as a
securities attorney, as somebody

15
00:01:02,580 --> 00:01:07,050
who specializes in syndication
law, these are big, big

16
00:01:07,050 --> 00:01:12,450
problems, I think the SEC is
going to be looking extremely

17
00:01:12,450 --> 00:01:16,560
close at what that these two
kind of three setups, these

18
00:01:16,560 --> 00:01:20,550
kinds of three structures. And
if they found wind of what was

19
00:01:20,550 --> 00:01:25,560
going on, there is going to be
an issue. Now, let's talk real

20
00:01:25,560 --> 00:01:29,190
briefly about how the SEC
normally gets notified about

21
00:01:29,190 --> 00:01:34,890
things. So most of the time, 99%
of the time, the SEC gets wind

22
00:01:34,890 --> 00:01:38,820
of things when there is a
lawsuit filed. So when there's a

23
00:01:38,820 --> 00:01:41,760
lawsuit filed the plaintiff's
attorney most of the time will

24
00:01:41,760 --> 00:01:46,230
file a complaint also, with the
SEC, saying that the Regulation

25
00:01:46,230 --> 00:01:50,190
D is not set up properly, or
it's not compliant, and

26
00:01:50,190 --> 00:01:54,930
therefore, it's not under what
we call the safe harbor of the

27
00:01:54,960 --> 00:01:59,160
of Regulation D. If it's not
under the Safe Harbor of

28
00:01:59,160 --> 00:02:03,330
Regulation D or any of the other
exemptions, then it

29
00:02:03,360 --> 00:02:07,110
automatically is a public
security. And if it's a public

30
00:02:07,110 --> 00:02:10,830
security, and there is a
violation, then the investor

31
00:02:10,830 --> 00:02:15,030
themselves has a right of
rescission. That's what that

32
00:02:15,030 --> 00:02:19,050
means is the investor has the
right to say, hey, there was no

33
00:02:19,050 --> 00:02:23,880
contract whatsoever, give me all
my money back, give me the money

34
00:02:23,880 --> 00:02:30,600
that I lost as opportunity cost.
And SEC states go get them. Just

35
00:02:30,780 --> 00:02:34,620
go get them, grab them, drag
them to the ground. And they

36
00:02:34,620 --> 00:02:40,950
will. So let's go through what
these three structures look like

37
00:02:40,980 --> 00:02:46,350
and why exactly I think they are
a big problem. And what I think

38
00:02:46,350 --> 00:02:50,340
the SEC is going to be doing
about them and looking very,

39
00:02:50,340 --> 00:02:55,620
very closely at. So again, I am
an attorney. And I'm not saying

40
00:02:55,620 --> 00:02:59,430
that they will look closely at
these things. This isn't legal

41
00:02:59,430 --> 00:03:03,990
advice for you. Right. So this
is the kind of normal caveat, I

42
00:03:03,990 --> 00:03:06,750
don't normally put this out
there except in the show notes.

43
00:03:07,140 --> 00:03:11,280
But this isn't legal advice for
you. If you're watching this

44
00:03:11,280 --> 00:03:15,060
video, and you are part of an
investment that gets set up for

45
00:03:15,060 --> 00:03:21,060
this, that may or may not be
something that is relevant to

46
00:03:21,060 --> 00:03:26,220
you. So do not call my office.
If you are an investor in this

47
00:03:26,220 --> 00:03:28,440
is something that happened to
you. We just don't have that

48
00:03:28,440 --> 00:03:31,830
kind of case. I want you to get
help, you should find a

49
00:03:31,830 --> 00:03:35,340
securities attorney who does
litigation and discuss it with

50
00:03:35,340 --> 00:03:39,090
them. But that's just not us. We
help syndicators and fund

51
00:03:39,090 --> 00:03:43,170
managers put these together in
compliance. So if that is you,

52
00:03:43,980 --> 00:03:46,800
you never got you're never
calling on these people because

53
00:03:46,800 --> 00:03:51,570
they're in compliance, they're
doing a great job. So, again, if

54
00:03:51,570 --> 00:03:57,060
this is you, it's not us that
you want to talk to so let's go

55
00:03:57,060 --> 00:04:02,340
through what these structures
are. And they're similar. So

56
00:04:02,340 --> 00:04:11,790
number one is what I call the
fake. J V. I've done another

57
00:04:11,790 --> 00:04:15,570
video on this. It's a phony
system. Let's talk about what a

58
00:04:15,570 --> 00:04:20,850
fake JV is. So JV stands for
joint venture. The idea goes

59
00:04:20,850 --> 00:04:28,680
something like this. We've got a
syndicator here, right? And he's

60
00:04:28,680 --> 00:04:37,500
got this wonderful investment
that he is syndicating out. He's

61
00:04:37,500 --> 00:04:42,150
got a number of investors
actually let's drive over here.

62
00:04:46,110 --> 00:04:49,410
He has some investors over here

63
00:04:54,810 --> 00:05:05,100
who all want to be a part of it.
But this guy has a problem. He

64
00:05:05,100 --> 00:05:09,840
needs more money. Right? So he's
trying to put this great deal

65
00:05:09,840 --> 00:05:15,300
together. But he hasn't raised
all this enough money. Let's say

66
00:05:15,330 --> 00:05:21,750
where I see this happening a lot
is under Rule 506b also. So this

67
00:05:21,750 --> 00:05:28,800
is a 506b offer. So 506b offer,
say that also lists that there

68
00:05:28,800 --> 00:05:33,510
can be no general solicitation,
he cannot put advertisements out

69
00:05:33,510 --> 00:05:38,460
there. He these people here are
just friends and family really

70
00:05:38,460 --> 00:05:40,740
wants to do this deal.
Everybody's going to make a lot

71
00:05:40,740 --> 00:05:44,910
of money in this deal goes
forward, this guy knows it. But

72
00:05:45,090 --> 00:05:49,440
he's doing a 506b, and he's
hasn't come up short. He's come

73
00:05:49,440 --> 00:05:53,280
up short. He's got half of the
money that he needs. So what

74
00:05:53,280 --> 00:05:55,680
does he do? He calls his friend

75
00:06:01,500 --> 00:06:02,250
over here

76
00:06:07,380 --> 00:06:10,620
he calls a friend and says, Hey,
I've got I've got this problem,

77
00:06:10,650 --> 00:06:14,250
I need to raise another $2
million to make this project, go

78
00:06:14,250 --> 00:06:17,610
for it. Forget about the dollar.
It's just we need some sort of

79
00:06:17,610 --> 00:06:22,560
dollar. So I need 2 million more
dollars. In order to do this, do

80
00:06:22,560 --> 00:06:26,730
you want to invest? And he says
I $2 million, I don't have $2

81
00:06:26,730 --> 00:06:30,030
million, you know that? You
know, I've got a lot of friends

82
00:06:30,030 --> 00:06:38,760
who would invest. And so this
guy has a great idea. But he

83
00:06:38,760 --> 00:06:41,190
thinks it's a great idea. This
is supposed to be a lightbulb.

84
00:06:43,470 --> 00:06:56,100
He says okay, why don't you go
and tell your three buddies that

85
00:06:56,100 --> 00:07:00,450
they can invest in this in this
property? Well, this guy has

86
00:07:00,450 --> 00:07:03,510
heard of securities rules,
right? So he knows kind of what

87
00:07:03,510 --> 00:07:08,400
he's doing. And he says, Well, I
can't you don't have a personal

88
00:07:08,400 --> 00:07:13,590
relationship with them. And he
says, oh, yeah, I don't this

89
00:07:13,590 --> 00:07:16,740
guy's I don't have a personal
relationship with them. What can

90
00:07:16,740 --> 00:07:23,220
I do? What if you either put
together your own syndication

91
00:07:23,220 --> 00:07:33,090
here. Or sometimes they say,
What if you put together an LLC

92
00:07:35,250 --> 00:07:39,960
and bring them in that way, they
can either come in on that 506b

93
00:07:39,960 --> 00:07:44,490
that you're putting in or they
can come in through this LLC and

94
00:07:44,490 --> 00:07:55,050
then invest up here. And if you
do that, I'm gonna give you 10%

95
00:07:56,220 --> 00:07:59,040
of the equity that you raise,
because I'm desperate. And this

96
00:07:59,040 --> 00:08:01,200
money this is going to make a
big this is gonna make us so

97
00:08:01,200 --> 00:08:10,050
much money we can afford I can
afford to pay a 10% Okay, so so

98
00:08:10,080 --> 00:08:14,640
this is the joint V JV problem.
This guy says, well, we can't do

99
00:08:14,640 --> 00:08:18,840
this. We we know we can't do
this. That's that's not we can't

100
00:08:18,870 --> 00:08:23,760
join like that. And so this guy
being clever, being clever gets

101
00:08:23,760 --> 00:08:27,030
us in trouble here. being clever
says, oh, yeah, we can because

102
00:08:27,030 --> 00:08:31,470
what we're gonna do is on our
paperwork here, on our ppm,

103
00:08:32,310 --> 00:08:41,310
we're gonna say that we're doing
a joint venture. And that's how

104
00:08:41,310 --> 00:08:45,840
you come in, you're coming in as
a joint venture out, which is in

105
00:08:45,870 --> 00:08:52,140
itself investing into this
thing. This is the fake JV JV

106
00:08:52,140 --> 00:08:57,570
problem, because, well, it seems
like this should work. It

107
00:08:57,600 --> 00:09:03,330
doesn't. So he is not this is
not a joint venture at all

108
00:09:03,360 --> 00:09:10,560
right? This guy is acting as a
finder being paid a commission

109
00:09:11,070 --> 00:09:15,420
in order to bring people to the
investment. It's a clear cut

110
00:09:15,420 --> 00:09:20,430
case of what is actually going
on here. The SEC would not like

111
00:09:20,430 --> 00:09:24,540
this, this does not comply with
the rules, and it would

112
00:09:24,570 --> 00:09:29,070
immediately get kicked out. Now
there's actually another kind of

113
00:09:29,250 --> 00:09:37,380
JV fake JV and I've made a video
about this guy as well. So so

114
00:09:37,380 --> 00:09:50,160
we'll let's call this Let's race
here. So we've got fake JV A,

115
00:09:50,850 --> 00:10:02,550
which is finders and then
there's fate jVb. Now we've got

116
00:10:02,550 --> 00:10:09,150
this guy here. He's going to be
unhappy. But right now we're

117
00:10:09,150 --> 00:10:16,260
going to put him not unhappy. So
what his idea is, is, he knows

118
00:10:16,260 --> 00:10:25,830
that he doesn't want to pay a
great syndication attorney, any

119
00:10:25,830 --> 00:10:31,230
money. He doesn't want to pay
the guy, you know, he just wants

120
00:10:31,230 --> 00:10:35,250
to be able to syndicate this. I
mean, after all, all these

121
00:10:35,250 --> 00:10:42,600
people here, who are very
excited about his investment are

122
00:10:42,600 --> 00:10:50,940
gonna come in. That's supposed
to be a certificate are going to

123
00:10:50,940 --> 00:10:55,710
come in, right? After all,
they're all friends and family.

124
00:10:56,070 --> 00:10:58,860
And this isn't for that much
money. It's only for $2 million,

125
00:10:59,340 --> 00:11:02,460
and 4 million, like the last
example. So it's only $4

126
00:11:02,460 --> 00:11:07,560
million. And the they I know
them all really well is what

127
00:11:07,560 --> 00:11:11,340
this guy's thinking. Right? He's
thinking that they that they're

128
00:11:11,340 --> 00:11:15,810
all friends. And I don't want to
pay some amount, you know, I

129
00:11:15,810 --> 00:11:18,480
don't want to pay something to
the to the syndication attorney

130
00:11:18,480 --> 00:11:21,540
to set it up and go comply. I
also don't want to file a Form

131
00:11:21,540 --> 00:11:24,660
D, that sounds really hard. I
don't want to put together a

132
00:11:24,660 --> 00:11:28,710
private placement memorandum
that sounds really hard. So what

133
00:11:28,710 --> 00:11:33,960
I'm going to do is I'm going to
put together this LLC. And I'm

134
00:11:33,960 --> 00:11:39,540
gonna go to all my friends here.
And I'm going to tell them,

135
00:11:40,020 --> 00:11:43,620
Okay, we're all coming into this
LLC together, and we're gonna

136
00:11:43,620 --> 00:11:47,280
invest in this real oops, you
can't see that we're gonna

137
00:11:47,280 --> 00:11:54,030
invest in this really great
property, for example. It's

138
00:11:54,030 --> 00:11:56,670
really great, we're gonna buy
it, we're gonna make lots of

139
00:11:56,670 --> 00:12:01,920
money. And investors listen up.
I know, you want to be passive.

140
00:12:01,950 --> 00:12:04,440
I know, you don't want to be
actively working on this thing

141
00:12:04,440 --> 00:12:08,250
and banging on toilets for this
multifamily building, right? So

142
00:12:08,790 --> 00:12:13,980
you don't have to worry, I am
going to be the manager of this.

143
00:12:15,960 --> 00:12:18,810
And I'm going to take care of
everything. I'm going to do

144
00:12:18,810 --> 00:12:24,180
everything for you. But if you
read the paperwork, if you read

145
00:12:24,180 --> 00:12:27,330
the paperwork, what I'm actually
what we're actually saying is

146
00:12:27,330 --> 00:12:29,880
that you're going to be an
active decision maker, but

147
00:12:29,880 --> 00:12:32,790
you're not okay. You don't need
to be an active decision maker.

148
00:12:33,030 --> 00:12:35,160
You don't need to come to
meetings or do anything, I'm

149
00:12:35,160 --> 00:12:37,590
going to do all the work, I'm
going to get a small management

150
00:12:37,590 --> 00:12:46,800
fee. But just if anyone asks,
tell them that I'm that you're

151
00:12:46,800 --> 00:12:52,140
active, okay. Yeah, well, you
can tell already, because the

152
00:12:52,140 --> 00:12:56,640
guy would say that this can't be
good. This can't be something

153
00:12:56,640 --> 00:13:02,880
that's actually legit. And it's
not legit at all. It's awful.

154
00:13:03,270 --> 00:13:06,690
But there's still some people
out there in the world,

155
00:13:06,690 --> 00:13:10,200
including here on YouTube, where
you can find their videos, who

156
00:13:10,200 --> 00:13:16,470
think this is a compliant
solution, it's not that guy is

157
00:13:16,470 --> 00:13:20,940
going to get have that right of
rescission problem. One of those

158
00:13:20,940 --> 00:13:25,110
investors is gonna get mad and
he's gonna get compensated for

159
00:13:25,110 --> 00:13:34,500
it. So bad, bad, bad. The, we're
gonna call this the SED type of

160
00:13:34,500 --> 00:13:42,090
thing I manage is what we're
going to call it. And they are

161
00:13:42,090 --> 00:13:46,050
we're calling it still under the
umbrella of g v, because it's a

162
00:13:46,050 --> 00:13:50,070
joint venture under that LLC.
With those other people,

163
00:13:50,070 --> 00:13:54,210
everybody is all together doing
a joint venture together. Except

164
00:13:54,210 --> 00:14:00,510
it's not that is a fake JV. This
is a real problem. This is

165
00:14:00,510 --> 00:14:03,660
something that is absolutely
going to bite people in the

166
00:14:03,660 --> 00:14:07,620
butt. And there are going to be
people losing money left and

167
00:14:07,620 --> 00:14:11,940
right. When is it going to start
happening? You know, we've got

168
00:14:11,940 --> 00:14:16,140
bank rates really high right now
and properties are starting to,

169
00:14:16,410 --> 00:14:20,880
you know, need to get reified.
And now the actual amount of

170
00:14:20,880 --> 00:14:25,200
money that's coming in is
tanking. Look at my, the stuff

171
00:14:25,200 --> 00:14:29,460
that I've published about apples
way. Apples way, look it up.

172
00:14:29,490 --> 00:14:34,890
Google it. They lost $240
million of investor money. Do

173
00:14:34,890 --> 00:14:38,610
you think they were in trouble?
Yeah. Do you think they wanted

174
00:14:38,610 --> 00:14:42,150
to lose it? Absolutely not. They
didn't want to lose investor

175
00:14:42,150 --> 00:14:45,900
money but they screwed up. They
did. They weren't doing this

176
00:14:45,900 --> 00:14:49,170
setup, though. Let me preface
that. They're not following the

177
00:14:49,170 --> 00:14:53,070
setup there. They actually set
up a proper way and they're

178
00:14:53,070 --> 00:14:57,810
probably not going to jail for
it. They made mistakes, but not

179
00:14:57,810 --> 00:15:02,070
this kind of mistake. They were
inaccurate in their underwriting

180
00:15:02,070 --> 00:15:07,410
and in MIS sized what the risks
are. That's not illegal, they

181
00:15:07,410 --> 00:15:11,160
born their investors that that
could happen. They're probably

182
00:15:11,160 --> 00:15:14,880
not going to be going to jail.
They're probably okay. The end

183
00:15:14,880 --> 00:15:18,780
of the day now, will we be able
to do another deal? Again? No, I

184
00:15:18,780 --> 00:15:21,660
doubt it possible, but not
likely.

185
00:15:23,040 --> 00:15:27,420
Because that's a pretty bad
mistake losing $240 million.

186
00:15:28,200 --> 00:15:31,560
Would you really invest with
that guy again? Probably not.

187
00:15:32,310 --> 00:15:38,280
So. But when loans are coming
due, and when things are gonna

188
00:15:38,280 --> 00:15:43,500
have to get renewed, this is
gonna bite. This is gonna eat up

189
00:15:43,530 --> 00:15:46,860
a lot of people. And when this
comes out, there's gonna be

190
00:15:46,860 --> 00:15:51,750
lawsuits filed. And that's how
the SEC is gonna see. Wait a

191
00:15:51,750 --> 00:15:55,650
minute, Howard, why are they
setting up and trying to claim

192
00:15:55,920 --> 00:15:59,610
that they're not under
Regulation D. They're not under

193
00:15:59,610 --> 00:16:03,360
Regulation D actually. Which
means it's a securities

194
00:16:03,360 --> 00:16:07,890
violation because this shirt is
a security. So these people are

195
00:16:07,890 --> 00:16:11,580
gonna get nailed. I don't know
if they'll go after the gurus

196
00:16:11,580 --> 00:16:15,960
who told them that this is an
okay setup, because it's not, or

197
00:16:15,960 --> 00:16:19,620
this is going to bite them.
Because those finders, those

198
00:16:19,620 --> 00:16:22,200
people are going to be desperate
to get their money back. And

199
00:16:22,200 --> 00:16:25,710
they're going to immediately be
telling they're playing their

200
00:16:25,710 --> 00:16:30,720
plaintiff's attorney. Hey, you
know what? This was Joe Smith,

201
00:16:30,720 --> 00:16:33,870
who brought me in, he actually
didn't really have anything to

202
00:16:33,870 --> 00:16:37,140
do with the deal. He just sold
me the security. So We're suing

203
00:16:37,140 --> 00:16:40,860
him. But you know who the real
bad guy is, is the guy who put

204
00:16:40,860 --> 00:16:44,130
it all together and said it was
okay the guy with the lightbulb.

205
00:16:44,460 --> 00:16:49,590
He's got a problem. So fake JV,
these people are going down.

206
00:16:50,430 --> 00:16:53,850
That's my prediction. We'll see
if I'm right, I'm sure well,

207
00:16:53,850 --> 00:16:56,730
legally, I know I'm right,
whether or not they go down or

208
00:16:56,730 --> 00:17:02,220
not. We'll see that's up to the
regulators to figure out number

209
00:17:02,220 --> 00:17:09,690
two we'll save the worst for
last. So number two, we'll put

210
00:17:09,720 --> 00:17:16,410
compensation Oh, my goodness,
compensation of investors. Now

211
00:17:16,410 --> 00:17:19,170
this is actually a problem that
I do see from time to time

212
00:17:19,200 --> 00:17:25,590
happen. It looks something like
this. It's not a problem in the

213
00:17:25,590 --> 00:17:30,510
structure. It's a problem of
disclosure. And so inherent in

214
00:17:30,510 --> 00:17:33,330
that as a problem of structure
because if it was disclosed

215
00:17:33,330 --> 00:17:37,410
properly, it would be properly
structured. So you've got this

216
00:17:37,410 --> 00:17:48,780
guy here. He put together an
amazing LLC and he did

217
00:17:48,810 --> 00:17:57,750
everything absolutely right or
so he thought he did a great PPM

218
00:17:58,830 --> 00:18:11,580
right. And you've raised money
from investors now the investors

219
00:18:12,750 --> 00:18:14,430
are actually all happy

220
00:18:19,980 --> 00:18:21,900
all right, the investors are
actually all happy they're

221
00:18:21,900 --> 00:18:26,970
making money now what was this
investing into? It was investing

222
00:18:27,000 --> 00:18:36,360
into this company up here or a
let's let's call it a project

223
00:18:40,770 --> 00:18:45,090
and this project what happened
the LLC just goes and invest

224
00:18:45,120 --> 00:18:49,320
right? It doesn't matter if it
was a development project or

225
00:18:49,320 --> 00:18:52,740
some other kind of security
doesn't the one I heard about

226
00:18:52,740 --> 00:18:57,510
this happening on first wasn't
even a wasn't real estate at

227
00:18:57,510 --> 00:19:01,260
all. It was another kind of
security altogether. Which guy

228
00:19:01,260 --> 00:19:06,000
and will be kept private because
the may be figured out double

229
00:19:06,270 --> 00:19:11,280
who that was that we're talking
about. So it is a it was a

230
00:19:11,280 --> 00:19:14,880
project to make money. It was
completely sound business idea,

231
00:19:14,910 --> 00:19:20,400
and it made total sense. Now
that project was run by these

232
00:19:20,400 --> 00:19:25,260
guys. And these guys were super
smart. Oops

233
00:19:30,510 --> 00:19:34,380
okay, it was run by this guy,
let's say and he's super smart.

234
00:19:35,130 --> 00:19:38,880
Right? He's he's doing
everything right. Everything was

235
00:19:38,880 --> 00:19:44,190
totally legit paper looks good.
So the compensation problem is

236
00:19:44,190 --> 00:19:51,600
this. He this guy. Now he's that
comes up with a brilliant idea.

237
00:19:52,080 --> 00:19:59,940
His brilliant idea is I'm gonna
make it so here. There's no fees

238
00:20:02,760 --> 00:20:09,330
Right, there's no management
fees, and incredible splits.

239
00:20:12,750 --> 00:20:21,210
Were like 98% to the investor.
Wow, that sounds pretty good. So

240
00:20:21,210 --> 00:20:26,310
98% to the investor. And then
we've got, we've got all these

241
00:20:26,310 --> 00:20:28,680
people investing here. So
that's, that sounds pretty

242
00:20:28,680 --> 00:20:33,360
amazing. I want to go in on that
deal. But how is this guy

243
00:20:33,360 --> 00:20:38,970
getting paid? Well, this guy is
getting paid by that guy,

244
00:20:39,090 --> 00:20:44,010
because he wants to get this
project done. Right. And it

245
00:20:44,010 --> 00:20:48,450
looks legit, it's set up in a
way that is not a it's not a

246
00:20:48,450 --> 00:20:53,520
fake JV. It's not anything like
that. It looks compliant. And

247
00:20:53,640 --> 00:21:02,280
probably would be, except for
one problem. This guy here is

248
00:21:02,280 --> 00:21:06,630
the problem. Actually, this
guy's the I actually, this guy's

249
00:21:06,630 --> 00:21:10,140
well, actually everybody on this
site is the problem, because

250
00:21:10,140 --> 00:21:18,510
they have no idea that this is
going on, they have no idea that

251
00:21:18,990 --> 00:21:23,490
you can see, they have no idea
that that this guy is being

252
00:21:23,490 --> 00:21:30,540
compensated by this guy. And
that's a problem. And so what

253
00:21:30,540 --> 00:21:34,260
happened in the instances that I
know about is the regulator's

254
00:21:34,260 --> 00:21:39,930
said, Ah, so here's the, the
regulator.

255
00:21:51,060 --> 00:21:54,960
Aha, I know how we can protect
our my investors, I know how I

256
00:21:54,960 --> 00:21:58,410
can protect this guy, this guy,
this guy, I know how I can

257
00:21:58,410 --> 00:22:02,310
protect people from this state,
because they never had the

258
00:22:02,310 --> 00:22:08,070
opportunity to look at this
compensation, this compensation

259
00:22:08,070 --> 00:22:11,760
was being made, it's quite
possible that if he knew about

260
00:22:11,760 --> 00:22:16,200
it, he wouldn't have been an
investor at all. And this guy,

261
00:22:16,230 --> 00:22:19,710
if he knew about it, he wouldn't
be an investor at all. And if he

262
00:22:19,710 --> 00:22:22,260
knew about it, he wouldn't be an
investor at all, because you've

263
00:22:22,260 --> 00:22:25,800
got this conflict of interest
here. And you know what? He's

264
00:22:25,800 --> 00:22:30,480
right. It's right, it is a
conflict of interest. And the

265
00:22:30,480 --> 00:22:33,780
problem with conflicts of
interest are, they can exist,

266
00:22:33,930 --> 00:22:39,420
but they've got to be disclosed
in your PPM everywhere, make it

267
00:22:39,420 --> 00:22:44,580
super clear, so that everybody
knows that it actually exists.

268
00:22:44,910 --> 00:22:49,620
So that is the compensation
problem. That happens, why is it

269
00:22:49,620 --> 00:22:52,380
an inverted structure because it
was structured everything,

270
00:22:52,380 --> 00:22:58,800
right? Except the disclosure
wasn't structured at all. So you

271
00:22:58,800 --> 00:23:01,830
can take that money, but you got
to tell them that, uh, you got

272
00:23:01,860 --> 00:23:04,680
that you're gonna take that
money and make it super clear,

273
00:23:04,860 --> 00:23:09,360
and give a basis for allowing
you to, if it's part of some

274
00:23:09,360 --> 00:23:12,840
sort of thing that requires a
licensee gotta disclose whatever

275
00:23:12,840 --> 00:23:16,620
it is, it's got to be disclosed,
and that the mechanism for

276
00:23:16,620 --> 00:23:21,600
getting that paid should be
disclosed as well. Otherwise, it

277
00:23:21,600 --> 00:23:27,300
is a failure to disclose, which
is punishable by right of

278
00:23:27,300 --> 00:23:32,190
rescission, which comes with
lost opportunity costs, and

279
00:23:32,190 --> 00:23:39,030
possible criminal penalties for
fraud. So bad, bad, bad. That is

280
00:23:39,030 --> 00:23:46,920
the compensation problem. The
third, and my new favorite way

281
00:23:46,950 --> 00:24:01,260
of of trying to cheat the system
is the fun fund of funds. And

282
00:24:01,260 --> 00:24:04,650
want to use the most egregious
form of it that I've seen

283
00:24:04,650 --> 00:24:09,810
recently, and why it's bad. Now,
this gets really complicated,

284
00:24:09,810 --> 00:24:14,010
and I'm going to try desperately
to try and simplify it. So I'm

285
00:24:14,010 --> 00:24:18,390
going to focus really on what is
inherently bad, most of all

286
00:24:23,730 --> 00:24:30,690
the fund of funds problem, so
we're going to abstract it a

287
00:24:30,690 --> 00:24:40,620
little bit. So we've got this
guy here. He thinks to himself.

288
00:24:44,550 --> 00:24:53,130
Wow, I've got a great idea. I am
going to put together this guy

289
00:24:53,130 --> 00:24:58,200
actually let's talk about him
first. Very smart has a master's

290
00:24:58,200 --> 00:25:03,330
degree in finance. He knows a
lot about securities. He knows a

291
00:25:03,330 --> 00:25:07,050
lot about alternative
investments. He knows a lot

292
00:25:07,050 --> 00:25:13,440
about cryptocurrency, he knows
everything about money, right?

293
00:25:13,560 --> 00:25:17,100
He knows how the whole system
works. He doesn't know about the

294
00:25:17,100 --> 00:25:21,420
laws, but he knows how the money
system itself works and how to

295
00:25:21,420 --> 00:25:26,940
make good money. And his
friends, he's got two friends.

296
00:25:30,690 --> 00:25:39,300
And both of them are like, Whoa,
dude, you know a lot about

297
00:25:39,300 --> 00:25:42,990
making money. Can you help us
and invest some of this money

298
00:25:42,990 --> 00:25:47,970
for us? And the answer, he
answers Well, sure, I know how

299
00:25:47,970 --> 00:25:51,360
to do this. So he goes to a
securities attorney and says,

300
00:25:51,360 --> 00:25:55,200
Hey, can I do this? The
securities attorney says, Well,

301
00:25:55,200 --> 00:25:57,900
I don't know. Let's look at it.
You know, that's a complicated

302
00:25:57,900 --> 00:26:01,470
question. Okay. And then he
asked, well, what's the fee, so

303
00:26:01,470 --> 00:26:04,080
he tells him the fee, and he's
like, Oh, I can, I don't need to

304
00:26:04,080 --> 00:26:06,210
pay that. These are just
friends, I'm just going to

305
00:26:06,210 --> 00:26:13,080
invest it for, after all, I
found this amazing.

306
00:26:19,420 --> 00:26:24,940
website with a YouTube video
that plays at the top. And it

307
00:26:24,940 --> 00:26:31,330
says that I can set this up.
That basically this beautiful

308
00:26:31,330 --> 00:26:36,490
website, what it does is it lets
this guy come in, and it lets

309
00:26:36,490 --> 00:26:45,520
this guy come in, and it lets me
charge fees to manage their

310
00:26:45,520 --> 00:26:52,930
account. That's amazing. So I
get to manage this account for

311
00:26:52,930 --> 00:26:56,320
these guys. And these guys all
have their own individual

312
00:26:56,320 --> 00:27:00,010
accounts, they can keep making
money deposits in, they can put

313
00:27:00,010 --> 00:27:05,770
money in, and they just keep
getting money back. This kind of

314
00:27:05,770 --> 00:27:09,940
starting to sound like
something, something that may be

315
00:27:09,940 --> 00:27:14,830
a little familiar. Well think
about what a broker dealer does?

316
00:27:16,570 --> 00:27:19,990
Isn't this pretty similar to
what a broker dealer or a

317
00:27:19,990 --> 00:27:24,940
registered investment advisor
does? And so this guy is already

318
00:27:24,940 --> 00:27:27,790
thought of that. He's like,
Yeah, I know, I know all about

319
00:27:27,790 --> 00:27:32,560
them. But here's where it's
different. Is that these assets

320
00:27:32,560 --> 00:27:37,540
that I'm putting in here,
they're not they're not full on

321
00:27:37,540 --> 00:27:47,200
things. These are funds. This
are your this is your I'm just

322
00:27:47,200 --> 00:27:53,710
choosing, you know, different,
different certifications out

323
00:27:53,710 --> 00:27:56,650
there that I think are really
good. And I'm putting them into

324
00:27:56,650 --> 00:28:01,330
this hopper. And then these guys
get to choose which ones of

325
00:28:01,330 --> 00:28:07,330
those they like? Well, that's
certainly interesting, because

326
00:28:07,330 --> 00:28:12,520
now it sure sounds like this guy
is putting together a fund of

327
00:28:12,520 --> 00:28:17,230
funds. Wow, maybe on the
surface. But to me, what, and

328
00:28:17,230 --> 00:28:22,330
probably my guess, is to the
SEC, and every state regulator,

329
00:28:22,330 --> 00:28:28,120
who were would look at this is
gonna say, No, that's a big

330
00:28:28,120 --> 00:28:33,220
problem. You're not acting as a
true fund of funds. You're

331
00:28:33,220 --> 00:28:39,670
acting as a broker dealer.
You're buying securities, on

332
00:28:39,670 --> 00:28:43,780
behalf of clients, probably
advising them on what exactly

333
00:28:43,780 --> 00:28:46,900
they need to do and what they
need to be doing. And if you're

334
00:28:46,900 --> 00:28:49,540
not advising them, well, then
you're certainly acting in their

335
00:28:49,540 --> 00:28:52,720
stead, which is definitely a
problem. Because they're not

336
00:28:52,720 --> 00:28:55,270
actually if they're not actually
making the problem, then it's

337
00:28:55,270 --> 00:28:58,690
another problem. But if you're
making a management fee after

338
00:28:58,690 --> 00:29:04,750
placing them into these funds,
well, you're either acting as an

339
00:29:04,750 --> 00:29:08,470
unregistered broker, or you're
buying them for your own

340
00:29:08,470 --> 00:29:12,010
account, and then divvying
things up which is basically

341
00:29:12,010 --> 00:29:17,020
acting as an unregistered
dealer. Either way, you're going

342
00:29:17,020 --> 00:29:28,180
down. And so the SEC or the
state regulator, sees what to do

343
00:29:28,210 --> 00:29:36,220
and bows it up. Now, I have seen
that this is heavily in

344
00:29:36,220 --> 00:29:41,050
existence right now. There are
this platform. These platforms

345
00:29:41,080 --> 00:29:48,010
exist. They're out there. I've
read the policeman memorandums

346
00:29:48,010 --> 00:29:57,130
for them. I know how they work.
My prediction these guys are

347
00:29:57,130 --> 00:30:00,100
gonna go down by facilitating
and unlawful thing there They're

348
00:30:00,100 --> 00:30:04,420
going to be, they've got
multiple problems. Right? These

349
00:30:04,420 --> 00:30:13,120
guys are not only giving out
PPMS. But they're not attorneys.

350
00:30:13,150 --> 00:30:16,780
So they're going to be hit with
unauthorized practice of law.

351
00:30:17,620 --> 00:30:27,640
But they're also facilitating
the functions of not even the

352
00:30:27,640 --> 00:30:30,940
broker dealer, but the guy who
holds the license under the

353
00:30:30,940 --> 00:30:38,680
broker dealer. These guys have a
big, big problem coming. I

354
00:30:38,680 --> 00:30:46,090
predict sec and FINRA, sec,
FINRA, and the states are coming

355
00:30:46,090 --> 00:30:51,190
after that guy with with
vengeance and look for that

356
00:30:51,190 --> 00:30:54,010
fairly soon, we've got a
recession coming, people are

357
00:30:54,010 --> 00:30:58,540
going to start losing money. And
when that happens, they are not

358
00:30:58,540 --> 00:31:02,950
going to be in business too much
longer, and they have a mountain

359
00:31:03,400 --> 00:31:07,690
of securities problems coming.
If they had, if that guy with a

360
00:31:07,690 --> 00:31:11,980
brilliant idea had just called a
securities attorney, we could

361
00:31:11,980 --> 00:31:17,140
have set up a system for him to
basically do what he's wants to

362
00:31:17,140 --> 00:31:23,110
do in a manner that would be
totally compliant. But he fell

363
00:31:23,110 --> 00:31:27,670
into the marketing hype from
another company, or from a

364
00:31:27,670 --> 00:31:31,780
company that thinks it knows
what it's doing is not an

365
00:31:31,900 --> 00:31:36,610
attorney, and is causing
massive, massive problem on its

366
00:31:36,610 --> 00:31:42,910
subscribers. So those companies
are out there, a big, big

367
00:31:42,940 --> 00:31:48,790
problem is coming down the pipe.
So hope that helps. That is the

368
00:31:48,790 --> 00:31:53,140
section on improper structures,
I see those three things as

369
00:31:53,320 --> 00:31:58,240
major problems of structure that
are going to start hitting

370
00:31:58,240 --> 00:32:01,210
people or could be four. So
we've got the fate jayvees,

371
00:32:01,360 --> 00:32:04,060
we've got the Finder System
where it's like, hey, we'll be

372
00:32:04,060 --> 00:32:07,060
partners, and I'm going to and
will basically just been paying

373
00:32:07,060 --> 00:32:11,290
you find your fees and not going
to work. We've got the fake JV

374
00:32:11,290 --> 00:32:15,100
of the SED. What's all the buzz,
I'll pretend that I'm not the

375
00:32:15,100 --> 00:32:19,270
manager, and then but I'll
really be the manager, fake JV,

376
00:32:19,420 --> 00:32:24,700
going down, then we've got the
issue of compensation. This is

377
00:32:24,700 --> 00:32:28,000
an inherent problem that's so
easy to prevent, oh my gosh,

378
00:32:28,210 --> 00:32:33,010
just Tez glows and make it super
apparent that it's abroad that

379
00:32:33,010 --> 00:32:37,750
it exists. And then it becomes
so much less of a problem. A

380
00:32:37,750 --> 00:32:40,870
state regulator isn't going to
be spending every nickel and

381
00:32:40,870 --> 00:32:44,050
dime that he has in his budget
to go after somebody who

382
00:32:44,050 --> 00:32:48,400
disclosed everything about
what's going on. It's just not

383
00:32:48,400 --> 00:32:52,660
going to happen. Even if it's
coming close to a gray line. My

384
00:32:52,660 --> 00:32:57,160
guess is I have Well, Mike, it's
not even a guess. The fact is

385
00:32:57,250 --> 00:33:01,600
state regulators are way over
work. They are doing a

386
00:33:01,600 --> 00:33:05,560
monumental task against people
who are committing massive

387
00:33:05,560 --> 00:33:08,860
frauds, like the people running
Jake fake jayvees and funds of

388
00:33:08,860 --> 00:33:13,480
funds. They're working hard to
prevent those. They're not going

389
00:33:13,480 --> 00:33:17,200
to be spending time almost
certainly going after the guy

390
00:33:17,200 --> 00:33:20,920
who does compensation who didn't
disclose a compensation model.

391
00:33:21,730 --> 00:33:25,870
Right? Or who I'm sorry, who did
disclose a compensation model.

392
00:33:25,000 --> 00:33:30,790
And then we've got the issue of
the funds of funds. I mean, come

393
00:33:30,790 --> 00:33:34,600
on. If you want to be a broker,
dealer, go be a broker dealer,

394
00:33:34,660 --> 00:33:38,110
go get a securities license,
hang that license under somebody

395
00:33:38,110 --> 00:33:42,220
and be as broker dealer. It's a
great job. It's very unpleasant.

396
00:33:42,220 --> 00:33:45,760
And if you love securities, and
you love financial instruments,

397
00:33:45,910 --> 00:33:50,680
it's fantastic. I know broker
dealers, I know. They love their

398
00:33:50,680 --> 00:33:54,520
job, they totally are obsessed
with it and love it. They call

399
00:33:54,520 --> 00:33:58,060
them Masters of the Universe for
a reason. Because they feel like

400
00:33:58,060 --> 00:34:01,960
Masters of the Universe. They
love it. So if you want that

401
00:34:01,960 --> 00:34:05,350
world, just go do it. Right? And
then you're not going to be in

402
00:34:05,350 --> 00:34:07,330
trouble. Because you're going to
be fine with all those

403
00:34:07,330 --> 00:34:10,840
compliance rules. Absolutely. I
mean, there's like so stack of

404
00:34:10,840 --> 00:34:16,210
those, but be compliant. So
again, I'm gonna reiterate one

405
00:34:16,210 --> 00:34:20,740
thing, just because this is a
video on the internet. And this

406
00:34:20,740 --> 00:34:25,120
specific one is giving kind of
closer to more what some people

407
00:34:25,120 --> 00:34:30,070
may consider legal advice. This
is not legal advice. This is

408
00:34:30,070 --> 00:34:33,730
what I'm giving to you as
education about what I see going

409
00:34:33,730 --> 00:34:38,770
on in the securities world and
urging you to not fall victim

410
00:34:38,800 --> 00:34:43,300
and to be can stay compliant.
Just follow the rules. You need

411
00:34:43,300 --> 00:34:46,480
help with those if talked to a
securities attorney who can help

412
00:34:46,480 --> 00:34:49,570
you navigate it. You know,
that's what we're there for.

413
00:34:49,630 --> 00:34:53,470
Yes, we get paid. But isn't it
much better to pay a securities

414
00:34:53,470 --> 00:34:57,370
attorney than to go to jail? I
think so. And isn't it much

415
00:34:57,370 --> 00:35:00,010
better to pay a securities
attorney than to lose all your

416
00:35:00,010 --> 00:35:04,120
investors money? Absolutely.
That's even worse than jail in

417
00:35:04,120 --> 00:35:09,460
some way. So, and if you are
somebody who fell victim to one

418
00:35:09,460 --> 00:35:12,760
of these types of problems, what
are these inherent structural

419
00:35:12,760 --> 00:35:16,900
problems? Look, I'm not saying
you don't have a real issue

420
00:35:16,900 --> 00:35:20,800
here. But I'm just not the
attorney for you. I work with

421
00:35:20,800 --> 00:35:24,190
the guys setting these things
up, the ones who do it in

422
00:35:24,190 --> 00:35:28,510
compliance and doing it right.
That's the people I help. So if

423
00:35:28,510 --> 00:35:31,750
you need it, you definitely need
help. If you have questions, it

424
00:35:31,750 --> 00:35:35,140
definitely should get the
answers. Talk to your state

425
00:35:35,140 --> 00:35:38,770
regulators. If you if that's
helpful. Talk to the SEC, if

426
00:35:38,770 --> 00:35:41,980
that's helpful, they're very,
they're actually very good at

427
00:35:41,980 --> 00:35:45,370
helping people. Right, they're
actually very good and very

428
00:35:45,370 --> 00:35:49,030
approachable and will help with
what your issue is. And if

429
00:35:49,030 --> 00:35:52,570
you've got a legitimate
litigation type issue, or you've

430
00:35:52,570 --> 00:35:56,230
got something that happened that
went wrong, then talk to an

431
00:35:56,230 --> 00:35:59,650
attorney who can help you. So
it's just not my firm. So I

432
00:35:59,650 --> 00:36:02,470
don't have referrals for people
who do that. I represent the

433
00:36:02,470 --> 00:36:04,990
other guys, and I make sure that
they don't vote that they're

434
00:36:04,990 --> 00:36:09,070
not. I make sure that they're
always in compliance anyway. So

435
00:36:09,370 --> 00:36:12,640
I never run across the people
who are suing the people because

436
00:36:13,000 --> 00:36:17,500
my guys never never have this
issue. So, again, my name is

437
00:36:17,500 --> 00:36:21,340
Tilden Moschetti. I am a
securities attorney, syndication

438
00:36:21,340 --> 00:36:24,610
attorney with the Moschetti
Syndication Law Group. Now if we

439
00:36:24,610 --> 00:36:28,000
can help you stay in compliance,
I would like to talk with you

440
00:36:28,180 --> 00:36:31,390
feel free to give us a call or
visit our website. Let's set up

441
00:36:31,390 --> 00:36:32,530
a meeting to talk