Las Vegas Sun

March 28, 2024

Vestin real estate lenders settle investor lawsuits

Las Vegas hard money real estate lender Michael Shustek and some of his companies have settled a group of lawsuits filed by disgruntled investors.

The settlements were disclosed today by Shustek, Vestin Realty Mortgage I Inc., Vestin Realty Mortgage II Inc. and Vestin Mortgage Inc.

The suits were filed in 2006 and 2007 by investor groups led by Kenneth Klaas, Tom Sirintr and Spectrum Capital LLC.

In Securities and Exchange Commission filings commenting on the cases today, Vestin Realty Mortgage I and II said: "The settlement agreement provides for the settlement and complete release of all claims" against the Vestin/Shustek parties.

"The settlement was made without admission of liability" by the defendants, each filing said. "The financial aspects of the settlement are confidential."

Shustek is a longtime hard money lender who pools the funds of investors and loans the funds to real estate developers for projects that generally are riskier than those commercial banks will fund. While this industry boomed in Las Vegas in the early and mid 2000s, investors have lost substantial amounts during the recession as many of the funded projects ended up in foreclosure.

In their lawsuit, Klaas and other investors charged the Vestin entities with misrepresentations and that they had breached an investment contract agreement with a "REIT Conversion" deal.

The investors said this conversion harmed their interests by, among other things, depriving them of rights to withdraw funds from their investment accounts.

The conversion deal involved Vestin II LLC being restructured as a real estate investment trust.

The Vestin entities in court papers and SEC filings denied wrongdoing.

Separately, a 2008 suit Vestin filed against Klaas is pending in federal court in California. That suit alleges Klaas misappropriated and sold millions of dollars worth of Vestin's trade secrets in the form of a list of investors that Klaas sought in order to contact them regarding Vestin Fund II.

Klaas has denied those allegations.

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