On November 5, 2011, the Chairman and Chief Executive Officer of Energy 11 GP, LLC, the general partner of Energy 11, L.P. (“Energy 11”), sent a letter to investors of Energy 11 notifying them that partial distributions would resume after a nearly two-year hiatus. The amount of the distribution will be 50% of the regular monthly distribution.

In March 2020, Energy 11 suspended monthly distributions to its limited partners as the partnership took on massive debt. Unbeknownst to many investors, the distributions were merely a return of the limited partner’s original capital investment, not a dividend. Energy 11 currently owes 21 months of unpaid distributions to its limited partners, totaling approximately $42 million.

According to Energy 11’s latest 10-Q filing with the SEC, Energy 11 had $44.48 million in total liabilities as of September 30, 2021. The regulatory filing also disclosed that during October and November 2021, Energy 11 made principal payments of $7 million to pay down the balance on its BF Credit Facility from $34 million to $27 million. As a result of the disclosed principal payments, it is estimated that Energy 11 currently has approximately $37.5 million in total outstanding liabilities.

Between missed distributions to limited partners ($42 million) and total current estimated liabilities ($37.5 million), Energy 11 needs approximately $79.5 million to pay off its debt and make all past-owed distributions to limited partners.

In addition, Energy 11 needs more than $2 million a month, or $6 million a quarter, to make regular monthly distributions based on a 7% annualized distribution rate. According to the November 5^th investor letter, Energy 11 hopes to resume its regular monthly distribution in December 2021.

Additionally, Energy 11’s most recent unaudited financial statements filed with the SEC disclosed that the partnership had a net income of $7 million for the third quarter of 2021.

What does that mean for Energy 11 investors?

If Energy 11’s net income remains $7 million each quarter (which is a big if in the volatile energy sector) and the partnership needs $6 million each quarter to make future scheduled distributions, it will have approximately $1 million in excess cash each quarter. That is $4 million in excess cash per year to pay down its debt and catch up on past distributions.

With $79.48 million in outstanding debt and past-owed distributions, it would take Energy 11 nearly 20 years to draw level under this scenario.

Bottom line, although regular monthly distributions may resume in December 2021, it will likely take Energy 11 years of good fortune to pay down its debt and make past owed distributions to limited partners.

Customers of David Lerner Associates, Inc. that have purchased Energy 11 should contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as David Lerner Associates, Inc.

David Lerner Associates, Inc.

David Lerner Associates, Inc. (“David Lerner Associates”) is facing numerous customer complaints about its sale and marketing of Energy 11, L.P. The complaints allege that Energy 11, an illiquid non-traded limited partnership that invests in the volatile energy sector, was unsuitable for investors with modest financial means, low or moderate risk tolerance, and liquidity needs. The complaints also include allegations that David Lerner Associates and its financial advisors misrepresented material features and risks associated with these illiquid, concentrated, and high-fee products, as well as ongoing misrepresentations related to when distribution payments would resume.

David Lerner Associates was the exclusive dealer-manager for Energy 11 and received 6% in selling commissions. David Lerner Associates is also entitled to a contingent incentive fee of up to an amount equal to 4% of gross proceeds of units sold. Based on public disclosures, it appears that David Lerner Associates has received over $22 million in seller commissions for selling Energy 11 to its customers and is potentially entitled to an additional $15 million in contingent incentive fees.

Iorio Altamirano LLP is investigating claims on behalf of David Lerner Associates’ customers that purchased Energy 11. To read more about the investigation, please click on the following link: Energy 11, L.P. and Energy Resources 12 L.P.: How to Recover Investment Losses from David Lerner Associates, Inc.

David Lerner Associates has also received several customer complaints about brokers’ recommendations to purchase the Spirit of America Energy Fund (SOAEX). To read more about the Spirit of America Energy Fund, please click on the following link: Spirit of America Energy Fund (SOAEX): How to Recover Investment Losses From David Lerner Associates, Inc.

Earlier this year, the Financial Industry Regulatory Authority (“FINRA”) suspended former David Lerner Associates financial advisor Charles Bonilla from the securities industry for five months for recommendations of what is believed to be SOAEX and Energy 11. FINRA concluded that Mr. Bonilla lacked a reasonable basis to recommend these products because he did not perform reasonable diligence before making the recommendations and failed to understand their fundamental features and risks. To read more about the suspension of Charles Bonilla and FINRA’s allegations, click on the following link: Former David Lerner Associates Financial Advisor, Charles Bonilla, Suspended by FINRA for Unsuitable Energy-Sector Securities – Boca Raton, FL

If a broker at David Lerner Associates recommended Energy 11 to you, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential consultation. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP.

• Energy 11 has not made distributions to its limited partners since March 2020.
• Energy 11 owes its limited partners 18 months of unpaid distributions, totaling more than $36 million.
• On May 13, 2021, Energy 11 entered into a new loan agreement, borrowing approximately $40 million.
• According to the terms of the loan, Energy 11 is not allowed to make any distributions to limited partners until the loan balance is paid down from its current balance of $39 million to $30 million (representing one half of its current maximum borrowing amount of $60 million).
• Energy 11 is required to make a monthly payment of $1 million to pay down the loan’s principal. According to the firm’s most recent financial statements, based on its cash flow over the first six months of 2021, Energy 11 does not appear to be able to afford to pay down the loan balance any quicker.
• Even when Energy 11 does pay down the loan balance and is contractually able to resume distributions, Energy 11 is not required to resume distributions at that time.
• Energy 11’s debt has tripled since the end of 2018, whereas its assets have remained relatively stable.
• Based on the amount of Energy 11’s outstanding debt, unpaid distributions, and recent cash flow, investors are not likely to receive distributions anytime soon.

Customers of David Lerner Associates, Inc. that have purchased Energy 11 should contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as David Lerner Associates, Inc.

Energy 11, L.P.

Energy 11 is an illiquid, non-traded limited partnership sold as private placement security by David Lerner Associates, Inc. The limited partnership invests in the oil, gas, and energy sector, which has been extremely volatile the past several years. Energy 11 is not suitable for most conservative or retired investors.

Energy 11 sought to acquire interests in both producing and non-producing oil and gas properties located onshore in the United States. In other words, Energy 11 was speculating that non-producing leaseholds would eventually produce.

In March 2020, Energy 11 suspended distributions to its limited partners. Energy 11 currently owes 18 months of unpaid distributions to its limited partners, totaling more than $36 million.

However, pursuant to the terms of Energy 11’s latest loan agreement, Energy 11 cannot make any distributions until the loan is paid down to one-half of the account maximum borrowing amount of $60 million. The loan balance as of July 31, 2021, was $39 million. Accordingly, Energy 11 cannot resume distributions to investors until it pays down its current loan balance by $9 million, from $39 million to $30 million.

Energy 11 is required to make a monthly payment of $1 million to pay down the principal of the loan.

[On May 13, 2021, Energy 11 entered into a new $60 million revolving credit facility with BankFirst. At closing, the Partnership borrowed approximately $40 million. The proceeds were used to pay the $40 million outstanding balance and accrued interest on the Partnership’s prior loan arrangement. Any further advances under the revolving credit facility with BankFirst are to be used to fund capital expenditures for the development of the Partnership’s undrilled acreage. The revolving credit facility with BankFirst is secured by a mortgage and first lien position on at least 90% of the Partnership’s producing wells.]

Energy 11’s August 6^th letter to investors stated that the Partnership intends to pay down the loan balance from excess monthly cash flow. However, Energy 11 might not have enough excess cash flow to pay much more than the monthly minimum required amount of $1 million. According to Energy 11’s latest 10-Q filing with the SEC, the Partnership’s net cash flow from operating and investing activities for the first six months of 2021 was approximately $9.5 million, or an average of $1.58 million each month.

Based on Energy 11’s most recent financial statements and its cash flow over the first six months of 2021, Energy 11 does not appear to be able to afford to pay down the loan balance any quicker. Consequently, it is possible that Energy 11 will not be able to resume distributions for another 8 to 9 months.

Even when Energy 11 does pay down the loan balance and is contractually able to resume distributions, Energy 11 is not required to resume distributions at that time.

After paying down its loan balance, will Energy 11 be able to afford to pay back investors? The answer to that remains uncertain. However, the Partnership’s financials are not likely to give investors much confidence.

For starters, for each month that passes without the payment of distributions, the amount owed to limited partners, which was about $36 million at the end of June 2021, will likely grow by an additional $2.25 million.

In addition, over the past two and a half years, the Partnership’s debt has exploded. In contrast, the Partnership’s assets and revenues have not. From the end of 2018 through June 2021, Energy 11’s debt has tripled from approximately $17.5 million to around $53.5 million. While the Partnership’s liabilities have increased over 300%, the Partnerships’ assets only increased by approximately 5%, from about $323 million on December 31, 2018, to about $341 million on June 30, 2021.

Even assuming that Energy 11 gets back to 2018 income levels by 2022 ($18.6 million / year) (which one could argue is a generous assumption), it appears that it is going to take the Partnership years of good fortune to be able to pay down its debt, resume regularly scheduled distribution, and make past owed distributions to limited partners.

David Lerner Associates, Inc.

David Lerner Associates, Inc. (“David Lerner Associates”) is facing numerous customer complaints related to its sale and marketing of Energy 11, L.P. The complaints allege that Energy 11, an illiquid non-traded limited partnership that invests in the volatile energy sector, was unsuitable for investors with modest financial means, low or moderate risk tolerance, and liquidity needs. The complaints also include allegations that David Lerner Associates and its financial advisors misrepresented material features and risks associated with these illiquid, concentrated, and high-fee products, as well as ongoing misrepresentations related to when distribution payments would resume.

David Lerner Associates was the exclusive dealer-manager for Energy 11 and received 6% in selling commissions. David Lerner Associates is also entitled to a contingent incentive fee of up to an amount equal to 4% of gross proceeds of units sold. Based on public disclosures, it appears that David Lerner Associates has received over $22 million in seller commissions for selling Energy 11 to its customers and is potentially entitled to an additional $15 million in contingent incentive fees.

Iorio Altamirano LLP is investigating claims on behalf of David Lerner Associates’ customers that purchased Energy 11. To read more about the investigation, please click on the following link: Energy 11, L.P. and Energy Resources 12 L.P.: How to Recover Investment Losses from David Lerner Associates, Inc.

David Lerner Associates has also received several customer complaints related to brokers’ recommendations to purchase the Spirit of America Energy Fund (SOAEX). To read more about the Spirit of America Energy Fund, please click on the following link: Spirit of America Energy Fund (SOAEX): How to Recover Investment Losses From David Lerner Associates, Inc.

Earlier this year, the Financial Industry Regulatory Authority (“FINRA”) suspended former David Lerner Associates financial advisor Charles Bonilla from the securities industry for five months for recommendations of what is believed to be SOAEX and Energy 11. FINRA concluded that Mr. Bonilla lacked a reasonable basis to recommend these products because he did not perform reasonable diligence before making the recommendations and failed to understand their fundamental features and risks. To read more about the suspension of Charles Bonilla and FINRA’s allegations, click on the following link: Former David Lerner Associates Financial Advisor, Charles Bonilla, Suspended by FINRA for Unsuitable Energy-Sector Securities – Boca Raton, FL

If a broker at David Lerner Associates recommended Energy 11 to you and you have suffered investment losses, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential consultation. Customers may be entitled to compensation without paying any out-of-pocket fees or costs through a contingency fee arrangement with securities arbitration law firm Iorio Altamirano LLP.

Martin Lerner has been the subject of six customer complaints, which include one pending dispute and five resolved disputes that ended with monetary compensation being paid to a customer. The pending dispute is a securities arbitration claim filed by a customer against Martin Lerner and David Lerner Associates concerning energy-sector securities. The customer alleged that the recommendations to invest in Energy 12 L.P., an illiquid, non-traded limited partners, and Spirit of America Energy Fund (SOAEX), an energy mutual fund, were unsuitable. The customer also alleged that Martin Lerner made material misrepresentations or omissions regarding both energy-sector securities.

If you have invested in Energy 11, Energy 12, SOAEX, or lost money with broker Martin Lerner or David Lerner Associates, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.

David Lerner Associates, Inc.

David Lerner Associates, Inc. is an SEC-registered broker-dealer and FINRA member with branch offices in White Plains, NY; Westport, CT, Lawrenceville, NJ; Syosset, NY; and Boca Raton, FL.

Martin Lerner appears to be the only broker located at David Lerner’s branch office in Boca Raton, Florida.

Earlier this year, the Financial Industry Regulatory Authority (“FINRA”) suspended former David Lerner Associates financial advisor, Charles Bonilla, from the securities industry for five months for recommendations of what is believed to be SOAEX and Energy 11. FINRA concluded that Mr. Bonilla lacked a reasonable basis to recommend these products because he did not perform reasonable diligence before making the recommendations and failed to understand their fundamental features and risks. To read more about the suspension of Charles Bonilla and FINRA’s allegations, click on the following link: Former David Lerner Associates Financial Advisor, Charles Bonilla, Suspended by FINRA for Unsuitable Energy-Sector Securities – Boca Raton, FL.

Iorio Altamirano LLP recently filed a securities arbitration claim against David Lerner related to unsuitable recommendations made by President and CEO Martin Walcoe.

Energy Resources 12 L.P. and Spirit of America Energy Fund (SOAEX)

David Lerner Associates, Inc. (“David Lerner Associates”) is facing numerous customer complaints related to its sale of Energy 11, L.P. (“Energy 11”) and Energy Resources 12, L.P. (“Energy 12”). The complaints allege that Energy 11 and Energy 12 were not suitable investments and that David Lerner Associates failed to supervise the sales and marking of the investments. The complaints also include allegations that David Lerner Associates and its financial advisors misrepresented material facts rattling to the risks associated with these illiquid, concentrated, and high-fee products.

Energy 11 and Energy 12 are illiquid, non-traded limited partnerships sold as private placement securities. The limited partnerships invest in the oil, gas, and energy sector, which has been extremely volatile the past several years. Energy 11 and Energy 12 were not suitable for most conservative or retired investors.

Investors have reported that Energy 11 has failed to make any dividend payments since January 2020.

To read more about Energy 11 and Energy 12, click on the following link: Energy 11, L.P. and Energy Resources 12 L.P.: How to Recover Investment Losses from David Lerner Associates, Inc.

Several customers have filed securities arbitration claims against David Lerner Associates Inc. (“David Lerner Associates”) related to brokers’ recommendations to purchase the Spirit of America Energy Fund. The energy mutual fund invests 80% of its assets in energy and energy-related companies. Class A shares of Spirit of America Energy Fund (NASDAQ: SOAEX) have declined from over $91 per share in August 2014 to around $14.50 per share in mid-May 2021. Class C shares of Spirit of America Energy Fund (NASDAQ: SACEX) have declined from over $47 per share in January 2017 to around $13.50 per share in early mid-May 2021.

The Spirit of America Energy Fund primarily invests in energy-related entities such as exploration companies, production companies, transmission companies, and Master Limited Partnerships (MLPs). The fund’s investment objective is to provide investors long-term capital appreciation and current income. The energy fund is not likely suitable for customers with conservative risk tolerances, short-time horizons, or liquidity needs.

To read more about the Spirit of America Energy Fund, click on the following link: Spirit of America Energy Fund (SOAEX): How to Recover Investment Losses From David Lerner Associates, Inc.

Financial Advisor Martin Lerner (CRD No. 1255769)

Martin Lerner has 35 years of experience in the securities industry and has been associated with the following brokerage firms:

• David Lerner Associates, Inc., from 1994 – the present.
• David Lerner Associates, Inc., from 1980 – 1988.
• First Investors Corporation, from 1979 – 1980.

At David Lerner Associates, Martin Lerner has been the subject of six customer complaints:

• Customer Dispute (October 2020): A customer alleged $100,000 in damages resulting from unsuitable investment recommendations concerning Energy 12 L.P. and Spirit of America Energy Fund (SOAEX). The customer also alleged that Martin Lerner made material misrepresentations or omissions regarding both energy-sector securities. The dispute is pending.
• Customer Dispute (July 2013): A customer filed a securities arbitration complaint alleging $160,424 in damages related to a real estate security. The matter was settled by the firm for monetary compensation.
• Customer Dispute (June 2013): A customer filed a securities arbitration complaint alleging $92,181 in damages related to a real estate security. The matter was settled by the firm for monetary compensation.
• Customer Dispute (May 2013): A customer filed a securities arbitration complaint alleging $431,622 in damages related to APPLE REIT investments. The matter was settled by the firm for monetary compensation.
• Customer Dispute (May 2010): A customer filed a lawsuit in Nassau County, New York, alleging fraud, forgery, misrepresentation, and breach of contract connected with a 2001 replacement of an insurance policy. The matter was settled by the firm for monetary compensation.

Martin Lerner claims that he was named in the 2013 disputes solely because his name “appears on Form BD.”

In 2006, Martin Lerner and FINRA entered into an Acceptance, Wavier & Consent agreement that resulted in a fine and 20-day suspension. The sanctions arose after FINRA alleged that Margin Lerner was functioning as a principal of the firm without being properly registered in that capacity. FINRA also alleged that Martin Lerner failed to comply with New York State Insurance Department Regulation No. 60 and failed to supervise the firm’s employees with a view towards preventing violations of the regulation. The regulation is related to the sale of life insurance and variable annuities.

David Lerner Associates, Inc. – Supervisory Duties

Brokerage firms like David Lerner must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you or a loved one were a customer of Martin Lerner or David Lerner Associates and either sustained financial losses or suspect that the firm did not have your best interest in mind when recommending investments or account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.