Texas securities regulators have withdrawn fraud allegations against Lasater RE Fund, a private real estate vehicle that had drawn a cease-and-desist order in June. The Texas State Securities Board dropped the claims in August after the fund committed to returning investor capital, according to regulatory documents.
The fund, Lasater RE Fund 14, raised approximately $5.6 million from more than 50 investors, with commissions totaling $750,000—a 13.4% payout rate, according to a Regulation D filing dated May 5. That rate is notably higher than the typical 7% to 10% range for high-risk private placements sold to accredited investors.
Stephen D. Patterson, a registered representative with J. Alden Associates Inc. since 2022, is listed as a sales compensation recipient in the SEC filing. Patterson, based in Plano, Texas, is not named in the cease-and-desist order. J. Alden Associates, headquartered in Wayne, Pennsylvania, has been operational since 1996 and employs roughly 100 registered reps across eight branch offices, according to FINRA records.
The June enforcement action alleged that Lasater Capital, the sponsor, controlled KeyCity Capital and failed to disclose material information about the financial condition and operational history of affiliated entities and prior real estate offerings. The order detailed significant financial distress among those entities, including loan defaults exceeding $100 million, foreclosures, Chapter 11 bankruptcy proceedings, receivership actions, investor litigation, and multimillion-dollar judgments.
Lasater RE Fund 14 was marketed as an opportunity to invest in diversified multi-family and real estate-related assets, with promises of quarterly cash flow distributions, equity appreciation, and targeted returns of up to 20%. The fund had sought to raise approximately $10 million.
Lee Calfo, CEO of J. Alden Associates, did not return calls seeking comment. An attorney for Lasater Capital also did not respond to a request for comment.
The case highlights the regulatory scrutiny surrounding private real estate offerings, particularly those involving high commission rates and affiliated entities with troubled histories. Advisors should be aware of the risks and disclosure requirements associated with such investments. For more on related regulatory actions, see a Texas advisor's Ponzi scheme and an SEC case involving misused funds.
The withdrawal of fraud claims does not negate the initial concerns raised by regulators. Investors in similar offerings should conduct thorough due diligence, especially when commissions are above market norms and when sponsors have a history of financial distress among affiliates.
