Puleo, et al. v. Nelson, et al. was filed in the Central District of California on August 10, 2021, seeking damages based on more than thirty claims for violation of various state and federal securities laws, elder financial abuse, fraud, negligent misrepresentation, and conspiracy to commit fraud in connection with a real estate Ponzi scheme.

Plaintiffs are numerous individual and trustee investors who invested in student housing projects either as individuals, through their business enterprises, or as trustees of trusts.  Defendants are Nelson Partners, a California limited liability company that sponsored the offering of the real estate interests, Patrick Nelson as the sole owner, president, and chief executive officer of Nelson Partners (collectively, “Nelson Partners”), Axonic Capital LLC, a hedge fund (“Axonic”), and various other individual and corporate investment advisors and funds affiliated with Nelson Partners and Axonic.

The scheme involved investments in off-campus student housing projects and real estate interests.  Nelson Partners sponsored the investment opportunities and represented to Plaintiffs that an investment would give them a beneficial ownership in student housing projects. Defendants Nelson Partners and Axonic represented that the investment structure would provide Plaintiffs with significant tax benefits.  Plaintiffs allege that instead of using investor funds to purchase student housing projects, Nelson Partners misappropriated investments by using those funds to finance the next project instead of repaying current expenses.  Nelson Partners allowed Axonic to seize control of the investments—held as property in trust–and together, the Defendants deliberately concealed the scheme and tried to sell the student housing interests to eliminate Plaintiffs’ entire investments.

In connection with their claims, Plaintiffs seek nearly $35 million in damages or restitution, punitive damages, and attorneys’ fees and costs.  Notably, Plaintiffs do not assert their claims as a class of investors; instead, they have joined nearly 120 parties comprised of individuals and trustees.