SEC v. AR Capital, LLC, et al. Case No. 19-cv-06603 (S.D.N.Y.)

On July 16, 2019, the Commission filed a complaint (the “Complaint”) against AR Capital, LLC (“AR Capital”), Nicholas S. Schorsch (“Schorsch”) and Brian S. Block (“Block”) (collectively, the “Defendants”). The Complaint alleged that the Defendants violated the federal securities laws by making material misstatements and omissions and engaging in other improper conduct in connection with two mergers, in 2013 and 2014, involving American Realty Capital Properties, Inc. (now known as VEREIT, Inc.), and improperly obtained millions of dollars from their violations. See Complaint.

The Defendants were ordered, and paid a total of $34,063,856 in disgorgement, prejudgment interest, and penalties to the Commission. The Commission was ordered to hold all funds, together with interest and income earned thereon (collectively, the “Fund”), pending further order of the Court. See AR Capital’s Final Judgment; Schorsch’s Final Judgment, and Block’s Final Judgment 

On October 22, 2019, the Court entered an Order that established a Fair Fund for the $34,063,856 in disgorgement, prejudgment interest, and penalties paid by the Defendants, plus interest and income earned (the “Fair Fund”). The Order also appointed Miller Kaplan Arase LLP as the Tax Administrator to fulfill the tax obligations of the Fair Fund. See the Court’s Order. 

On April 16, 2020, the Court entered an Order that appointed Kurtzman Carson Consultants LLC as the Distribution Agent to oversee the administration and distribution of the Fair Fund to harmed investors. See the Court’s Order.

On September 14, 2020, the Commission filed a motion for an Order approving a proposed distribution plan, together with the distribution plan (the “Plan”). See the Commission’s Motion together with the Plan.

The Plan provides for the distribution of the Fair Fund on a pro rata basis to eligible shareholders pursuant to the methodology described therein.

On October 13, 2020, an objection was filed to the Commission’s Plan by Vereit, Inc. (“Vereit”) as successor-in-interest to Defendant, AR Capital, LLC. Vereit objected, among other things, to the Commission’s plan to distribute the Fair Fund to eligible shareholders instead of Vereit itself. See the Objection. 

On December 8, 2020 the Commission filed Reply in Opposition to the Objection. In their Reply, the Commission asked the Court to deny the Objection and approve the Plan as filed. See the Reply.

On May 18, 2021, the Court entered an order, which overruled the objections to the Plan and granted the Commission’s Motion. See the Court’s Order.

Additional funds from the related matter, In the Matter of Vereit, Inc., Admin. Proc. File No. 3-19831, will be added to the Fair Fund and distributed pursuant to the Plan approved by the Court. See the Commission’s Order: Release No. 34-97854 and the approved Plan.

For more information, please contact the Fund Administrator:

Kurtzman Carson Consultants
Telephone Number: 1-866-727-6411
Fair Fund Website: ARCapitalFairFund.com
Email: info@ARCapitalFairFund.com