The offshore Northstar Bermuda is now in court-ordered liquidation proceedings with anticipated debts of $265 million, after relying for years on U.S. brokerages to pitch its risky investment products to unsuspecting investors as being safe and secure.
The complaints, filed with the Financial Industry Regulatory Association (FINRA) seek compensatory and punitive damages against the brokerage firm and the brokers who sold the claimant-investors on Northstar annuities without properly warning about the risks involved in off-shore investment or adequately investigating the “complex, risky, speculative, and illiquid nature” of Northstar’s investment products.
The claimants are all longtime clients with modest investment portfolios. Residents of South America, they sought protections from the market volatility in their home countries by putting the bulk of their life savings in U.S.-backed certificates of deposit or money market funds. Beginning in 2013, however, these claimants were directed by their respective brokers to liquidate those investments and buy Northstar’s fixed rate investment products, Global Interest Accumulator and/or Global Advantage III. The brokers, who earned higher sales commissions by pushing Northstar, recommended to the investors that the offshore annuities carried the same equal protections as a CD but with a higher monthly yield.
While the brokers recommended that they had thoroughly investigated and understood Northstar’s investment products, according to the complaints:
“Unfortunately, Northstar was not truly operated or structured as conservatively as Respondent represented in its sales pitch. Moreover, due to Northstar offering “offshore” investments, investors such as Claimant did not benefit from the protections traditionally offered by U.S. securities regulators. Rather, many of the assets held by this company could be, and ultimately were, funneled into insiders’ pockets via self-dealing transactions and risky investments.”
The allegations against the brokerage firm include breach of fiduciary duty; negligence and negligent misrepresentation; overconcentration; and failure to supervise. Broker-dealers are supposed to recommend only suitable investments to their clients and perform due diligence on the products they sell. FINRA-registered brokers and firms are subject to arbitration to resolve disputes.
The claimants have lost their annuity principals and the interest earned. In September 2020, an insolvency petition was filed in the Supreme Court of Bermuda to initiate liquidation proceedings as Northstar investors, alarmed by a U.S. Department of Justice investigation of its owner, experienced suspended monthly income payments, illiquidity, and inability to surrender their policies.
Northstar was established in 1998 as Nationwide Financial Services (Bermuda). To differentiate its fixed-rate and variable-rate annuity investment products, Northstar touted Bermuda’s favorable tax breaks that were typically unavailable to U.S. investors while assuring clients that a “segregated account structure” insulated investors from risk. In 2015, for instance, Northstar’s then-Chief Marketing Officer boasted in an internal newsletter that “Bermuda is widely recognized as the jurisdiction of choice for the global insurance and reinsurance industries, largely because its legislative framework is focused on ensuring that policyholders are always protected.”
Northstar’s ultimate collapse was accelerated by the company’s sale to now-convicted fraudster Greg Lindberg, who in 2018 acquired Northstar through his Bermuda holding company BMX Bermuda Holdings, Ltd. Lindberg’s interest in Northstar was part of the billion-dollar empire of insurance and annuity companies he amassed under the names Global Bankers and Global Growth. Bermuda court documents indicate that shortly after Lindberg acquired Northstar Financial Services, he “reallocated the assets by investing in “illiquid equity and debt instruments, mainly in special purpose vehicle structures, under the control of Mr. Lindberg, in the U.S.”
Lindberg is now in prison after a DOJ investigation led to his March 2020 conviction for conspiracy to commit honest services wire fraud and bribery concerning his dealings with an official from the North Carolina Department of Insurance.
Northstar offered a wide range of fixed-rate and variable-rate investment, insurance, and/or annuity products, including, but not limited to:
- Global Interest Accumulator
- Global Advantage Plus Series
- Global Advantage Select
- Global VIP Elite
- Global Index Product
Silver Law Group and the Law Firm of David Chase are investigating other U.S. brokerages that face potential liability after pitching Northstar’s fixed and variable rate annuity products in the last decade, including Bankoh Investment Services; J.P. Morgan Securities; and Ocean Financial Services.
Our attorneys include former SEC prosecutors and former Wall Street defense attorneys with significant experience recovering investor money through stockbroker misconduct claims. If you suffered losses and would like a confidential consultation with a securities attorney with passion and experience advocating for aggrieved investors, call Silver Law Group toll free at (800) 975-4345 or email ssilver@silverlaw.com or call The Law Firm of David R. Chase at (800) 760-0912 or visit securitiesfraudattorneys.com.