One of Banks’ clients had over 50 percent of their assets invested in Aequitas products.

“I’m particularly hearing from people who had invested in the last 60 days because they were advised to do so by their investment advisor,” Banks says. “I think the advisors who told clients to get into this in 2015 and 2016 are going to have real problems with breach of fiduciary duty claims.”

Bean was assured of Aequitas’s ability to deliver on its promises after clean audits from New York-based consultants Deloitte and after reviewing the company’s financials.

“As it turned out, they really didn’t have good enough reserves to meet their short-term cash needs,” Bean says. “Not only did they understate their cash issues, they were dramatically understating the underlying assets.”

One of Bean’s clients, a San Francisco-area attorney, had invested as much as $600,000 in Aequitas products. Bean placed some of his mother’s retirement into the notes, but none of his clients had more than 10 percent of their total assets wrapped up in Aequitas products.

“Most of those clients had some portion of these products in their retirement,” Bean says. ”Due to our own internal controls, nobody was in for more than 10 percent.”

Some of Bean’s involvement in Aequitas came after absorbing assets from another firm, Strategic Capital, that had over $100 million invested in Aequitas products. As part of that deal, Aspen Grove Equity Solutions, a firm owned by Aequitas and its leadership, ended up with a majority stake in Private Advisory Group. Until that deal, Bean had only a small amount of client assets placed with Aequitas.

Banks questions whether the investments were suitable in the first place.

“I’ve heard that advisors are accusing Aequitas of misleading them with questionable financial reports, but they aren’t sharing those reports with their clients,” Banks says. “At the end of the day, even if there wasn’t fraud or any of these problems with Aequitas, to have someone put half of their assets into these funds is highly questionable.”

Many advisors were receiving commissions, some as high as 2 percent, for selling Aequitas products, Banks notes.