Yieldstreet investors impacted by failed ship-scrapping deals are facing more bad news: the company has told clients it is keeping the entire $5 million from a recent settlement to cover legal expenses. For investors already grappling with significant losses, this development shows how financial advisors and platforms may prioritize their own costs over investor recovery.
If you or someone you know has suffered significant investment losses working with Yieldstreet or another brokerage firm, don’t hesitate to reach out to Meyer Wilson Werning today. Our attorneys are experienced in securities fraud cases and will help to guide you through the process with a free consultation to determine whether your losses are the result of actionable misconduct.
What Happened with Yieldstreet’s Ship-Scrapping Investments
Yieldstreet built its reputation as an “alternative investment” platform offering opportunities in areas like real estate and shipping. One category was investments backed by ship-scrapping loans—the process of dismantling ships for scrap or reuse. Unfortunately, many of these investments proved problematic.
Key developments include:
- Failed ship-scrapping deals: Borrowers defaulted on loans tied to dismantling vessels, leaving investors at risk of losing their principal.
- SEC settlement in 2023: Yieldstreet paid $1.9 million after the SEC alleged it failed to disclose critical information in a $14.5 million offering tied to ship-scrapping.
- Ongoing legal actions: The company pursued borrowers internationally, eventually reaching a $5 million settlement in August 2024.
Rather than being returned to investors, that settlement has been absorbed by Yieldstreet for legal and enforcement costs.
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Why Investors Received Nothing from the $5 Million Settlement
In a letter to clients, Yieldstreet explained that the funds “incurred significant litigation and enforcement expenses across four countries.” Those expenses exceeded the settlement amount, leaving little to nothing for investors.
This decision raises major concerns:
- Investors excluded from recovery: Clients who expected some relief instead learned they would see “de minimis” (minimal) distributions.
- Questions about transparency: Industry voices have suggested that investors should demand to see the legal bills tied to these cases.
- Pattern of losses: This settlement follows reports that some Yieldstreet real estate deals left investors with 100% losses, adding to client frustration.
The result highlights the risks when financial advisors and investment platforms prioritize recovery of their own expenses rather than making investors whole.
Yieldstreet’s Position and Ongoing Criticism
Yieldstreet has defended its actions, stating the settlement proceeds were applied in line with the investment documents and not used for corporate profit. The company emphasized it assumed “significant unreimbursed expenses” and did not collect management fees during the recovery process.
Still, attorneys representing investors argue that the purpose of pursuing settlements should be to recover money for clients, not just to reimburse the platform’s expenses. With Yieldstreet overseeing $1.86 billion in client assets and operating as both a broker-dealer and investment advisor, the handling of these ship-scrapping investments has drawn intense scrutiny.
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How Meyer Wilson Werning Can Help Investors
If you invested through Yieldstreet and suffered losses in alternative investments or felt that you were given advice that was unsuitable for your portfolio, contact our team at Meyer Wilson Werning today. With over 20 years of experience and $350 million in recovered losses for our clients, we are well-versed in handling cases against brokerage firms.
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Frequently Asked Questions
What went wrong with Yieldstreet’s ship-scrapping investments?
Borrowers defaulted on loans tied to dismantling ships, leaving investors exposed to significant losses. The SEC later alleged that Yieldstreet failed to disclose important details about these deals, leading to a $1.9 million settlement in 2023.
Why didn’t investors receive any money from the $5 million settlement?
In August 2024, Yieldstreet announced a $5 million settlement with borrowers but used the funds to cover its own international litigation costs. As a result, investors received little or nothing from the recovery effort.
Has Yieldstreet faced regulatory action over these deals?
Yes. The SEC charged Yieldstreet with failing to disclose key risks in a $14.5 million ship-scrapping offering, resulting in a $1.9 million settlement. This adds to broader concerns about transparency and investor protections.
What risks do Yieldstreet investors face with alternative investments?
Alternative investments on Yieldstreet, like ship-scrapping and certain real estate deals, often carry risks such as illiquidity, high volatility, and limited transparency. Some have resulted in 100% losses for investors.
How can Meyer Wilson Werning help Yieldstreet investors?
We represent investors who suffered losses due to unsuitable or misrepresented investment products. Our team can evaluate whether your advisor or Yieldstreet failed in their duties and pursue recovery through arbitration or litigation.
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