An investment-advisory firm was promoting ‘guaranteed’ annual yields of up to 17.1%—until our columnist started asking questions.
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For more than a year, earning high income has been as easy as rolling out of bed, with low-risk Treasury bills and money-market funds yielding at least 5%. Now, the Federal Reserve is expected to lower interest rates in September and yields are already shrinking.
So investors need to be on their guard against the inevitable rise in come-ons that prey on people’s craving for high income.
It takes a lot to surprise a crusty old cynic like me, but a series of online offerings from an investment-advisory firm called Yield Wealth made my eyebrows go up recently. Earlier this week, several websites using Yield’s name were promoting 10-year “term deposits” offering annual yields of up to 17.1%. Those numbers are extraordinary; high-yield bond funds yield about 7%.
Yield’s products, according to the Douglassville, Pa.-based firm, were “setting a new standard in banking” and were “guaranteed” by up to $10 million in insurance coverage through a network including Lloyd’s of London.
An online marketing brochure for one of Yield’s products, Mega High-Yield Term Deposit, says it offers “Colossal Yields Without the Risk,” adding that “any interest you earn is ‘locked in’ and can’t be lost.”
You can “Lock in 15% APY in Perpetuity,” adds the brochure, implying that annual percentage yield would be available forever.
Now my eyebrows were really twitching.
Yield isn’t a bank and these “term deposits” aren’t bank accounts. Even so, this week websites affiliated with Yield featured other “deposits” claiming to be insured up to $2 million by the Federal Deposit Insurance Corp.
FDIC deposit insurance is generally limited to $250,000 per depositor per institution. What’s more, if an entity isn’t a bank, it can’t market FDIC coverage unless its customers’ money is properly deposited at an FDIC-insured bank.
After I contacted the firm this week to ask about its term deposits, Yield took most of the websites offline.
Kenneth Boyle, the firm’s chief executive, says “these products were never launched, and Yield Wealth has now been dissolved without ever taking in funds.” Some of the online marketing was by third parties who were “not authorized” to promote Yield’s products, he says, and all the materials were “part of a testing phase.”
He told me via email that Yield is withdrawing the term-deposit offerings pending a merger with Intellicapital Advisors, an investment firm in Ponte Vedra Beach, Fla., that managed about $68 million as of a regulatory filing in June.
Boyle also says Yield Wealth’s products “were never live,” meaning no investors had ever bought them.
Yet, this week, a Yield website and an online brochure featured what purported to be testimonials from people who’ve invested millions in its high-yield products—including “Carol,” a “retired plastic surgeon” who supposedly invested $3.24 million in a 10-year term deposit yielding 9%.
Boyle says that website was only a “placeholder” and “should be ignored.”
Substantial risks
Yield Wealth, as of a regulatory filing dated Aug. 6, had no clients and no money under management. Asked how a firm managing no assets could secure $10 million of insurance coverage per accountholder, Boyle says Yield had cultivated “solid relationships” with “leading providers…built on merit and confidence in our strategic vision.” (Lloyd’s of London doesn’t comment on specific policies or policyholders, says a spokeswoman.)
In April, Yield filed two of its term-deposit offerings for sale under Regulation D, a Securities and Exchange Commission rule that permits private sales of securities with minimal disclosure.
Boyle says he is a military veteran and software developer with no experience as a banker or money manager. He says he wants to use innovative financial technology to “create a platform that truly enriches lives.” His collgeaue, Chris Owens, is an insurance agent in Douglassville, Pa.
How would these guys achieve yields that Wall Street titans would kill to get?
I’ve viewed a private placement memorandum, or offering document, for Yield’s Mega term deposit. Dated March 20, 2024, it warns that Mega involves “substantial risks,” the stated yields might not be achieved and investors should “be able to withstand a total loss of their investment.”
So much for colossal yields with no risk.
Taking it to the next level
One of Yield’s websites said this week that the money would be invested in “multiple industries, including the lucrative sectors of mining and rare minerals.”
There went my eyebrows again. Mining isn’t particularly lucrative, and it’s odd that a fledgling firm with no investment experience would focus on it.
Yield modeled the proposed investment strategy for its term deposits after portfolios run by a “successful” firm called Next Level Holdings, says Boyle.
Who is Next Level? Claiming to offer “fully insured and guaranteed” investments “with fixed rates of return of up to 15.5% per year,” Next Level is run by a man named Paul Regan. He has said he generates big profits by taking advantage of differences in the price of gold across global markets.
Boyle says Yield obtained debt financing from Next Level and that its websites included some products that Regan had recommended featuring.
Earlier this week, Regan’s profile on LinkedIn said he was formerly a high-yield bond trader at Goldman Sachs. When I asked Goldman if this was true, the firm said it had no record that he was ever employed there. After I asked Regan about this, his LinkedIn page disappeared. He later emailed me and said he regretted that the profile “contained inaccuracies,” adding, “I did not work for Goldman Sachs, and I apologize for any confusion this may have caused.”
Under the name Henry Paul Regan Jr., Regan was barred for life from the securities industry in 2004 for failing to respond to inquiries from what is now known as the Financial Industry Regulatory Authority, which oversees the brokerage business. In 2005, Henry Paul Regan Jr. was fined $60,000 by Oregon state securities regulators for allegedly forging documents and stealing approximately $140,000 from an elderly customer with dementia.
According to Boyle, after I asked about Paul Regan’s background, he confronted Regan this week. He says Regan admitted to him that he had been barred from the securities industry when he was “young and foolish.”
‘I deeply regret my past’
Regan says Next Level isn’t actively raising capital for its own offerings. He initially told me, “you most definitely do not have your facts straight.” But in his later email he “regretfully” confirmed that he was Henry Paul Regan Jr.
“I concealed my full name because I deeply regret my past and did not want to disclose the disbarment,” Regan wrote. “I understand the importance of transparency, and I sincerely apologize for not being forthcoming about this earlier. I want to clarify that neither Next Level Holdings, Yield, nor Mr. Boyle were aware of this.”
Even so, that doesn’t get Yield off the hook for promoting such high returns while implying that they were risk-free. Asked about this, Boyle says the term deposits “went through multiple iterations, which has led to some discrepancies.”
He adds, “It seems our IT and marketing teams need to perform a lot of cleanup.”
And investors need to perform a lot of due diligence—more than ever. Yield’s offerings won’t be the last of their kind if interest rates fall. They’re likely among the first in an onslaught of supposedly high-yield, no-risk offerings.
The old cliché, “If it sounds too good to be true, it probably is,” is wrong. If it sounds too good to be true, it definitely is.
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Written by Jason Zweig at intelligentinvestor@wsj.com