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Northridge to Stop Making Interest Payments to Investors

Northridge Holdings and Glenn Mueller recently released a letter to investors acknowledging the complaints and the cease and desist orders from four states as well as an investigation from the Securities Exchange Commission (“SEC”). The letter states that while the complaints and orders from state securities agencies are pending, Northridge can no longer make interest payments or distributions to investors.
As expressed in a previous article posted by the securities attorneys of Lubiner, Schmidt & Palumbo, Northridge has received complaints, as well as cease and desist orders from the four aforementioned state securities agencies as well as the SEC. The complaints charge Northridge with selling unregistered securities in addition to acting as an unregistered broker dealer. Northridge presented itself in marketing material as being exempt from federal registration requirements for securities, however they never filed any of the necessary forms for exemption with any state securities agency or the SEC.
The recent announcement of a stop to distributions and interest payments will have a devasting impact on retired investors relying on the interest payments from Northridge to cover living expenses. In addition, investors who were set to have their principal or total investment returned to them on the maturity date listed on their promissory notes will have to wait now for an indefinite period of time.
Northridge is a real estate investment and property management company based in Illinois that has been operating since 1984. Since about 2005, Northridge began selling investors promissory notes offering monthly interest payments that are well above the benchmark for fixed income securities in the present market. Mueller and Northridge have 32 companies and partnerships including Eastridge Holdings, Southridge Holdings, Unity Investment, Cornerstone II Limited, amongst others. The Massachusetts Securities Bureaus has labeled Northridge a “monumental and byzantine investment empire”. The Massachusetts complaint goes onto state that Northridge has taken in $47 million of investor funds through unregistered promissory notes and limited partnerships. To assist in the marketing of Northridge Promissory Notes, Mueller relied on brokers and investment advisors to attract new investors in exchange for compelling commissions.
As stated in the Massachusetts complaint, the Northridge and Mueller’s involvement in the marketing and sale of these promissory notes turned their property management and real estate business into a quasi-broker dealer. Northridge was careful to market its promissory notes as extremely safe, referring to them as alternative Certificates of Deposit. Certificates of Deposits, or CD’s for short, are FDIC insured and are considered the amongst the safest investments in the capital markets. In one Northridge investment letter, Northridge bills its promissory notes as something for investors looking for a safe investment. Northridge claims in one of their investor letter’s to have been generating investment returns of 20-50% and some of over 100% not including the tax benefits. Mueller and Northridge would offer assistance to investors on setting up self-directed IRA accounts, taking investors’ hard earned retirement money into Northridge. For these investors with limited liquidity and cash options, Northridge’s decision per the advice of their attorneys to cease making interest payments and to hold investor assets until a resolution is reached will have severe consequences.
The biggest and most important issue investors are presently facing is whether Northridge will have the funds to pay the civil monetary penalties assessed by the SEC and state securities agencies, disgorge all commissions and payments made in connection with marketing of Northridge, and be able to offer rescission to investors who acquired the promissory notes.
If you are an investor who has acquired Northridge promissory notes please contact the law firm of Lubiner, Schmidt and Palumbo for a consultation.

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