FINRA Alleges Broker Gopi Vungarala Charged $11 million in Commissions for nontraded REITs and BDCs and Lied About it

The Financial Industry Regulatory Authority Inc. (“FINRA”) charged a broker for lying to a Native American tribe about $11 million in commissions he accumulated when he sold the tribe $190 million in nontraded real estate investment trusts and business development companies.

According to the complaint, Gopi Krishna Vungarala (CRD# 4856193), the broker, served as the unnamed tribe’s registered representative as well as its treasury investment manager. Vungarala used his position to fraudulently induce the tribe to invest hundreds of millions of dollars in nontraded REITs and BDCs and repeatedly lied about whether he and his firm received commissions for the sales.

The complaint alleges that Vungarala falsely represented to the tribe that he would not receive any commissions on purchases of the non-traded REITs and BDCs made in the tribe’s accounts in order to induce the tribe to make the purchases.

Vungarala was also aware of, but failed to disclose that the tribe was eligible to receive volume discounts on the purchases in the amount of $3.3 million, instead overcharging the tribe to add extra commissions.

Vungarala charged $11.4 million in commissions, according to the complaint, which went to his broker-dealer, Purshe Kaplan Sterling Investments, and included the $3.3 million overcharge. Out of the $11.4 million in commissions, Vungarala was paid $9.6 million of those Purshe Kaplan commissions.

FINRA is charging the broker and his firm, Purshe Kaplan Sterling Investments, with misrepresentation and omission of a material fact in connection with the sale of securities; failure to disclose to the client that it was eligible to receive volume discounts; failure to supervise Vungarala’s dual relationship with the tribe; and failure to supervise the sale of nontraded REITs and BDCs for the application of volume discounts.

This case is an example of how blind trust can easily leave an investor vulnerable to fraud. At Silver Law Group, we take the most pride not just winning cases for our clients but teaching people how to prevent those cases from happening in the first place.  Always be wary of your accounts, its transactions, and the advisor/s servicing them.

Silver Law Group represents the interests of investors who have been the victims of investment fraud. If you have questions about your legal rights, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.