The Expert Podcast

Well you can't say we didn't warn you we didn't tell you about a year ago we featured a story about nria national real estate investment advisors we did this video on may 23 2021 it's now beginning in june 2022 it took a while but in our video we talked about how nria had some very troubling possible events happening one of their executives maybe had some criminal background allegedly one of their other executives maybe had some false mortgage applications they were doing and quite frankly there was some concern about the business model for this company we featured it in our video then talking about how the business model may not be sustainable how maybe a house of cards how it was possible that they were just taking new investor money to pay out existing investors.

Well at the time we really couldn't release as much about the story because it was an ongoing investigation but sure enough it came to pass just the other day nria national real estate investment advisors filed bankruptcy and our good friend jacob edelman at barons broke the story he's been working on this story for a while and this company was taking investments from individuals consumers it was a high profile company high flyer you probably saw their ads on cnbc you heard it on radio on xm radio and they were collecting tens of millions of dollars i think at one point they claimed to have over 500 million half a billion dollars from investors.

Now what's going to happen with that investor money is unknown it's not guaranteed by fdic or many other investment protection government agencies so it'd be unclear to see what happens with the investor money so how exactly did nri work and again we're not saying anything fraudulent or that they did anything wrong it just may be that they um they ran out of money right so it's at this point there's no criminal investigation against the company now there's no criminal charges as far as we know it's just that they filed chapter 11 bankruptcy.

So what does chapter 11 mean chapter 11 means that they don't have assets to pay for the liabilities that they have accrued it may be that they spent too much on advertising and maybe that they spent too much on developing properties it'll be interesting to see how this plays out but having a bankruptcy reduce the amounts for creditors could be problematic for the investors in fact the spokesperson for the company says they plan to have full or substantial recovery to all stakeholders so what they're intending to do is have everybody be made whole.

How are they going to do that well they're going to liquidate their estates presumably that means liquidate the properties and redeem subscribers meaning that anybody who's an investor will get their money back for that investment and terminate contracts so if they have contracts and arrangements maybe leases maybe employment contracts are going to terminate those is that going to be enough to make everybody whole it really depends depends on what they are able to get through liquidation.

And look even in subsequent disclosures by the company they admitted that they were going to use cash from new investors to pay existing ones they announced that that's kind of the definition of a ponzi scheme whether or not you can disclose it and make it legal is unknown i know that there are some questions about that type of acknowledgement whether or not that's appropriate or not maybe it is regardless it is a risky way for a fund to operate because it requires new participants to pay into the fund rather than making money from its business.

So if it requires new investors to get that targeted return of 21 what happens if there are no new investors well if the company goes bankrupt like it has or files chapter 11 you're not going to get as many new investors and you may not be able to promise 21 percent to the new investors which means that you may have to dilute your portfolio in the last year they did get rid of 60 employees cut it down to eight and reduce the pay of those remaining eight people so you know going that small with a head count really means something about what's happening with your business.

Whether or not this company turns out to be able to liquidate enough return capital for investors is still unknown we'll be following the story if you have questions about a potential investment or something that you put money into that maybe you're not getting back the type of answers or return that you thought let us know you can reach us through our website we'll keep an eye on this story for you as it's an example of a company that offered much higher returns in the market and also stable returns that's one of the red flags many times that indicates possible weakness in a financial strategy.

If the company offers the same return all the time regardless of market it means that it's not really depending on the market depending upon some artificial evening out of processes again at this point there are no criminal charges against the company they're not accused of doing anything wrong filing bankruptcy technically isn't a crime it may result in losses to investors or others but at this point it's just one step in the saga of the company and we'll see how it works out.