National investment loss lawyers are investigating brokerage firms and financial advisors who unsuitably recommended investments in JER Investors Trust, Inc. to their customers.
Recent filings reveal that JER Investors Trust has filed for Chapter 11 bankruptcy protection following a staggering loss of over $1 billion in mortgage-backed securities. The filings indicate debts exceeding $100 million against assets valued at less than $50 million, leaving many investors concerned about the safety of their principal.
If you or someone you know has suffered significant investment losses working with JER Investors Trust 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.
The JER Investors Trust Bankruptcy
JER Investors Trust is a mortgage real estate investment trust (mREIT) that primarily invests in mortgage-backed securities and debt instruments linked to commercial real estate. The company is partially owned by the private equity firm C-III Capital Partners.
On December 29, 2023, the REIT filed for Chapter 11 protection in the United States Bankruptcy Court for the District of Delaware (Case No. 23-12109).
Key details from the bankruptcy filing include:
- Massive Debt Disparity: The trust reported over $100 million in debts compared to less than $50 million in assets.
- Major Creditors: The largest creditor is The Bank of New York Mellon Trust, owed approximately $93.9 million.
- Market Pressure: The filing aligns with broader trends of real estate companies buckling under rising interest rates and the lingering effects of the COVID-19 pandemic.
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Why Investors Are Facing Losses
Many investors may have been misled regarding the risks and liquidity issues associated with JER real estate investments.
Unlike traditional stocks, non-traded REITs like JER are often illiquid, meaning investors cannot easily sell their shares when values drop. Reports indicate the investment was illiquid even at a share price of $15.
Mortgage REITs (mREITs) pose specific risks because they are highly sensitive to interest rate fluctuations and changes in the housing market. Despite these risks, brokers often recommend them because of the high sales commissions they generate—sometimes as high as 15%.
Broker Liability and Red Flags
Brokerage firms have a legal duty to ensure that investment recommendations are suitable for their clients. If a financial advisor recommended JER Investors Trust to a client with a low risk tolerance or failed to disclose the liquidity risks, the firm may be liable for the resulting losses.
Warning signs of broker misconduct include:
- Unsuitable Recommendations: Recommending complex, high-risk mREITs to conservative investors.
- Overconcentration: Failing to diversify a portfolio, leaving the client exposed to a single market sector.
- Undisclosed Conflicts: Pushing products to earn higher commissions rather than to benefit the client.
- Lack of Communication: Brokers failing to return calls or emails regarding declining accounts.
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How Meyer Wilson Werning Helps JER Investors
The bankruptcy of JER Investors Trust emphasizes the dangers of unsuitable investment recommendations in the alternative asset space. At Meyer Wilson Werning, we represent investors who have suffered losses due to broker misconduct, negligence, and supervisory failures.
If you invested in JER Investors Trust or other alternative investments and experienced significant losses, contact us today so our team can evaluate your case and help you pursue recovery through arbitration or other legal avenues.
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Frequently Asked Questions
What is JER Investors Trust and why did it file for bankruptcy?
JER Investors Trust is a mortgage REIT (mREIT) investing in commercial real estate debt. It filed for Chapter 11 bankruptcy after losing over $1 billion in mortgage-backed securities and facing debts exceeding $100 million.
What risks are associated with JER real estate investments?
Investments in JER are subject to high risks due to illiquidity and sensitivity to interest rate changes. Investors often face difficulties selling shares, even when prices decline.
Can I recover losses from my investment in JER Investors Trust?
Yes. If your financial advisor recommended JER Investors Trust unsuitably or failed to disclose the risks, you may be able to recover losses through FINRA arbitration.
Why do brokers recommend risky mREITs like JER?
Brokers are often incentivized by high commissions, which can be as high as 15% for alternative investments like non-traded REITs. This creates a potential conflict of interest.
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