Blau & Malmfeldt is investigating the sales practices of Hrycyk Financial, LLC (“Hrycyk”), based in Amarillo, Texas, and its principal Stephanie Hrycyk. Ms. Hrycyk is registered with FINRA through Gramercy Securities, Inc. (“Gramercy”), a broker-dealer firm headquartered in Rhode Island.
It appears that Hrycyk Financial concentrated many of its customers in risky and illiquid real estate investments. Included among these investments were Odyssey Diversified IX, LLC (“Odyssey IX”) notes and Inland American Real Estate Trust, Inc. (“Inland American”) stock. There was never any public market for the Odyssey IX or Inland American securities. Ms. Hrycyk and Gramercy received very large commissions for selling these securities. It appears that Ms. Hrycyk and Gramercy often ignored their customers’ welfare in pursuit of large commissions.
Odyssey IX was an entity through which funds were raised for real estate investments in Florida. Odyssey IX filed for bankruptcy in 2012; its note holders have lost the majority of their principal.
Inland American is a non-traded real estate investment trust (“REIT”). Inland American has decreased the estimated value of its stock from $10/share to less than $7 per share. Inland American suffered massive losses between 2008 and 2012. In order to give itself the appearance of viability, Inland American used the proceeds from new investors to pay large dividends to existing investors during this period. The book value of Inland REIT’s stock is presently less than $5 per share. Inland REIT’s stock has recently traded on private, secondary markets at prices in the vicinity of its book value.
FINRA rules require Gramercy to perform due diligence on non-traded securities before recommending and selling these securities to their retail brokerage customers. In addition, FINRA rules require Gramercy and Ms. Hrycyk to ensure that their investment recommendations are suitable for their customers in light of their investment objectives, net worth, age, and investment experience. It appears that Gramercy and Ms. Hrycyk may have violated FINRA rules when they concentrated their customers’ savings in non-traded real estate securities.
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