Investors in Lightstone Value Plus REIT are facing growing concerns regarding the liquidity of their investments, following a class action lawsuit and allegations of misleading financial disclosures. The central issues revolve around charter amendments that allegedly blocked liquidation options and stripped away key fiduciary protections for shareholders. For investors who relied on these products for stable income or eventual liquidity, these developments have raised serious questions about the future of their capital.
If you have suffered significant losses in Lightstone Value Plus REIT or other alternative investments, you are not alone—the securities fraud lawyers at Meyer Wilson Werning can help. Reach out today to discuss your next steps with us.
Class Action Lawsuit Filed Over Lightstone REIT Liquidation and Disclosures
On November 7, 2024, a class action lawsuit was filed against Lightstone in New Jersey Federal Court. This legal action reveals severe allegations regarding the management and governance of the REIT.
According to the complaint, the company is accused of:
- Breach of Contract: Failing to uphold obligations to investors regarding the management and potential liquidation of assets.
- Fiduciary Duty Violations: Allegedly prioritizing management interests over those of the shareholders.
- Misrepresentation of Financial Performance: Providing misleading information regarding the stability and value of the REITs.
- Withheld Dividends: Investors claim that dividends were withheld, further eroding the expected returns from the investment.
- False Proxy Statements: Allegations that proxy statements contained false or missing information, preventing investors from making informed voting decisions.
These legal challenges underscore the “liquidation” controversy, where investors claim they were misled into approving charter amendments that effectively blocked the liquidation of their investments, leaving them trapped in an illiquid asset.
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2023 Charter Amendments and the Elimination of Fiduciary Duties
A critical aspect of the controversy involves governance changes that have reduced investor protections. SEC filings reveal that charter amendments made in 2023 rescinded previous changes, resulting in the elimination of core fiduciary responsibilities.
These governance shifts reportedly included:
- Eliminating Board Fiduciary Duties: The amendments removed the fiduciary duties that the boards owed to the Lightstone REITs and their shareholders.
- Removing Supervision Requirements: The changes also eliminated the directors’ fiduciary duties to supervise the relationships between the Lightstone REITs and their external advisers.
For investors, these changes are alarming. They suggest a reduction in oversight and accountability, potentially allowing conflicts of interest to go unchecked while limiting the recourse available to shareholders when management decisions negatively impact investment value.
Red Flags Investors Should Watch For
If you are invested in Lightstone Value Plus REIT, certain warning signs may indicate that your brokerage account has been mishandled or that you are the victim of unsuitable recommendations.
Investors should be vigilant if they experience any of the following:
- Substantial Losses: unexpected or unexplained drops in account value.
- Unsuitable Recommendations: being sold high-risk, illiquid REITs when you requested low-risk or liquid investments.
- Misrepresentation: your broker failed to disclose the risks of illiquidity or the high commissions attached to the REIT.
- Unauthorized Transactions: noticing trades or changes in your account that you did not approve.
- Lack of Communication: your broker is not returning calls or emails regarding your concerns.
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How Meyer Wilson Werning Helps Investors Recover Losses
The allegations against Lightstone Value Plus REIT—ranging from blocked liquidations to the elimination of fiduciary duties—paint a concerning picture for investors. While class action lawsuits address broad corporate misconduct, individual investors often find that arbitration provides a more direct and streamlined path to recovering specific investment losses caused by broker negligence or unsuitability.
If you or someone you know has been impacted by a securities or investment scam, the experienced attorneys at Meyer Wilson Werning are here to help. With more than 20 years in the industry and over $350 million recovered for our clients, our focus on investment fraud and securities litigation has helped many investors recover their losses. Contact us today for a free consultation to discuss your case and learn how we can assist you in protecting your financial interests.
Frequently Asked Questions
What is the Lightstone REIT liquidation controversy?
The controversy centers on allegations that Lightstone investors were misled into approving charter amendments that effectively blocked the liquidation of their investments. This has left many investors with illiquid holdings and limited exit options, sparking a class action lawsuit filed in November 2024.
What are the risks of investing in non-traded REITs like Lightstone?
Non-traded REITs are highly illiquid, meaning they cannot be sold easily on a stock exchange. They also often carry high fees and commissions (up to 15%), which can erode returns. Furthermore, recent governance changes at Lightstone have allegedly reduced the fiduciary duties owed to shareholders.
Can I recover losses from Lightstone Value Plus REIT?
If your financial advisor recommended Lightstone REITs unsuitably—disregarding your risk tolerance or liquidity needs—you may be able to recover losses through arbitration. This process is distinct from class action lawsuits and focuses on the duties your broker owed to you.
What governance changes were made to Lightstone REITs in 2023?
SEC filings indicate that 2023 charter amendments eliminated the fiduciary duties that boards owed to the REITs and their shareholders. Additionally, the amendments removed the directors’ duties to supervise external advisers, raising concerns about oversight and conflicts of interest.
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