Nicholas Schorsch’s Empire and the Resulting Cetera Financial Group

Nicholas “Nick” Schorsch was once a huge star in the investment world, building a successful, publicly-traded company, sponsoring numerous real estate investment trusts (“REITs”), and acquiring numerous businesses in the process. His investment empire fell with one of the only remnants being Cetera Financial Group and its numerous companies.

Schorsch was known as the REIT king. His story frequently touts his humble beginnings, never finishing college, and rose to a peak estimated worth of $1.5 billion. Over time, his worth and business drastically crumbled and, in the words of an InvestmentNews report, “lost his mojo.”

Schorsch’s first major entry into the Wall Street world was when he launched publicly-traded REIT American Financial Realty Trust (“AFRT”) in June 2003. The REIT blossomed with a $4.6 billion portfolio peak, but ended up seeing 32.6% from IPO to its sale to another REIT in 2008.

In 2007, Schorsch linked up with former AFRT trustee William Kahane and created American Realty Capital (“ARC”). This company, eventually becoming American Realty Capital Properties Inc. (“ARCP”), is where Schorsch’s trademark security, the non-traded REIT, brought him his most financial success.

The idea behind a non-traded REIT is to raise a pool of money from investors, quickly buy a portfolio of properties and create an income stream for investors from the rents of the tenants who lease them. Unlike publicly-traded REITS, the shares of non-traded REITs generally have to be held for five to seven years until the REIT is sold or listed on an exchange. The sales of these non-traded REITs may accrue high commissions for the brokers and fees that can drive up the cost of non-traded REITs to 12%, making it difficult to earn a return of principal.

From 2007 to 2014, Schorsch created an intricate web of businesses with similar sounding names, many of which did business with each other. ARC would make the REITs and RCS Capital Corporation (“RCS”) a formerly publicly-traded corporation owned by Schorsch, would sell them. RCS acquired numerous other broker dealers, including Cetera Financial Group and its brokerage firms such as VSR Financial Services, Inc. (CRD# 14503), Summit Brokerage Services, Inc. (CRD# 34643), First Allied Securities, Inc. (CRD# 32444), and the notorious J.P. Turner & Company, L.L.C. (CRD# 43177) among others. Our firm has published a full list of Cetera Advisor Networks LLC (CRD# 13572) brokerage firm subsidiaries here.

A huge blow was inflicted on Schorsch’s empire when news came up that ARCP misstated its adjusted funds from operations by over $22 million in two quarters of 2014 and misstated losses in one of those quarters by $9.2 million. Making matters worse, ARCP admitted in an SEC filing that two of its senior executives knew about the misstatements but intentionally left them uncorrected. Because of all the interrelated companies, Schorsch could to separate the ARCP scandal from RCS Capital and his other holdings.

RCS Capital declared bankruptcy in March 2016, going private and making its brokerage firm network, Cetera Financial Group, the public centerpiece. Silver Law Group has compiled a list of the REITs sponsored and sold by Schorsch and his entities/brokerage firms.

If you have lost money investing in the REITs Schorsch and his entities sponsored, you may be entitled to recover some of your investment losses. Please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345 to speak to an attorney to find out how we may be able to help you recover some of your investment losses.