Tony Thompson and Thompson National Properties Defrauded Investors in TNP Notes Programs, According to FINRA Complaint

FINRA recently filed a complaint against real estate investor Tony Thompson and his broker-dealer, TNP Securities, LLC. FINRA alleges that Thompson and TNP Securities deceived and defrauded investors who purchased $50 million in high yield promissory notes sponsored by Thompson National Properties, LLC, which are the TNP 12% Notes Program LLC, the TNP 2008 Participating Notes Program LLC and the TNP Profit Participation Program LLC (collectively, “TNP Notes”).

TNP Notes were sold by Thompson National Properties and other independent broker dealers between 2008-2012. To induce investors to fund Thompson’s real estate ventures, the TNP Notes offerings featured an express guaranty of principal and interest by Thompson National Properties. One of the series of private notes is in default, while two others have stopped making payments to clients, according to FINRA’s complaint.

Investors have complained that the TNP Notes were pitched as suitable for conservative income-seeking investors in search of safe returns and low risk when, in fact, the TNP Notes were speculative, high risk, and illiquid. FINRA now alleges that none of the offering documents (also known as private placement memorandum or “PPMs”) or supplements for the three TNP Note programs disclosed the increasing likelihood that Thompson National Properties would be unable to meet the guaranties of principal or interest. FINRA also alleges that the information available to investors in these documents were insufficient for investors to evaluate the risks that the TNP Notes would default and that the guaranty would be abandoned.

In particular, FINRA asserts that by the end of 2008, Thompson National Properties, the parent company, had no more than $1,272,000 in total equity, and had suffered losses of $8,461,000.00 in its first 11 months of operation. These material changes in Thompson National Property’s financial condition only increased over time, yet they were not reflected in the offering documents or “private-placement memorandum” for the TNP 12% Notes Program, LLC or the TNP 2008 Participating Notes Program, LLC, according to FINRA’s complaint.

In 2009, Thompson National Properties had lost at least $25 million, and had total negative equity of $13.5 million, alleges FINRA. Things continued to worsen, such that by April 2010 when offering of the TNP Profit Participation Program began, Thompson National Properties had lost another $7 million in the first quarter of 2010, and its total equity had dropped to negative $18 million. Yet, the private-placement memorandum for the TNP Profit Participation Program failed to include a balance sheet or otherwise disclose the magnitude of Thompson National Properties’ losses, according to FINRA’s complaint.

As a result, FINRA charges that Thompson and TNP Securities have violated the Securities and Exchange Act of 1934, FINRA Rule 2020, which prohibits the use of manipulative, deceptive or other fraudulent devices by registered representatives and broker-dealers, and FINRA Rule 2010, which requires registered reps and broker-dealers to adhere to high standard of commercial honor and trade.

Legal woes for Thompson and Thompson National Properties have been building steadily. In September 2012, for example, investors in Colorado filed suit in federal court against Thompson National Properties regarding their $100,000 investment in the TNP 12% Notes Program. The investors, Doug and Sheryl Hitchens, seek damages from the company’s breach of a guarantee on the note, failure to pay interest on the note and refusal to redeem the note. In January 2013, Thompson and Thompson National Properties were sued again by investors in Colorado federal court over failure to make interest payments on the TNP 12% Notes Program.

In addition, in June 2013, an investor in the TNP 6700 Santa Monica Boulevard, also known as TNP Kodak, filed a prospective class action against Thompson and other executives associated with Thompson National Properties in federal court in California. The investor, Carol Prock, alleges that Thompson and his team’s “misrepresentations, mismanagement, misappropriation of investor funds and other misconduct” with regard to the TNP 6700 Santa Monica Boulevard investment was the “modus operandi” in several other deals sponsored by Thompson National Properties, a fact that was not disclosed to investors.

Similarly, in July 2013, another investor filed a prospective class action against Berthel Fisher & Co. Financial Services Inc., in federal court in Iowa regarding the firm’s failed deal with Thompson National Properties. The investor, Jon Hanson invested in the TNP 2008 Participating Notes Program, which went into default last year, alleges that Berthel Fisher failed to perform due diligence on the TNP 2008 Participating Notes Program and make proper disclosures to investors.

If you invested in the TNP 12% Notes Program LLC, TNP 2008 Participating Notes Program LLC, TNP Profit Participation Program LLC or any other investment associated with Tony Thompson or Thompson National Properties, and suffered investment losses, please contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 844-689-5754 or complete our “contact form.”