Another Broker-Dealer On The Ropes Raises New Questions About Private Placements Hot

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DeWaay Financial Network sold around $46 million in real estate notes from DBSI, which went under back in 2008. 


It estimates that client claims on those failed instruments could cost $24 million -- about seven times as much money as it has on hand.


As a result, management has asked for a temporary injunction on the claims it already has to pay, or else it will shut down.


DBSI was not a member of SIPC and so its products were not only higher-risk than the marketing copy might have indicated, but uninsured from disasters like this.


I don't know how DeWaay sold these instruments or how much due diligence they did.


At this point, all I know is that it looks like if the clients want to recover their losses, they can't get that money out of a dead firm.



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