LiquidSpace, Inc. is an illiquid Regulation D private placement in which investors have lost their hard-earned retirement savings. LiquidSpace is a flexible office space rental start-up that rents office space and meeting rooms on an hourly or monthly basis. The first Regulation D offering by LiquidSpace was registered on December 16, 2012 for $412 and a second registered on the same day for $1,805,740. The second offering stated that $1,299,999 had already been sold. On June 2, 2014, Robertson Stephens, an investment bank that provides capital to entrepreneurial clients, affiliated with LiquidSpace and registered the Robertson Stephens LiquidSpace LLC in California. Subsequently, LiquidSpace Inc. filed a third Regulation D offering of $19,999,997 with $14,015,701 sold.
Stoltmann Law Offices is aware that this investment was sold by brokerage firm Uhlmann Price Securities, LLC. Gordon Fallone and James Kozak serve as the “Advisor to CEO” and “Board Observer” of LiquidSpace, respectively. They are also registered brokers of Uhlmann Price Securities. Fallone and Kozak are co-founders of OnPoint Analytics Capital Partners, which is a “boutique capital advisor firm dedicated to sourcing and introducing alternative investment opportunities to qualified investors around the world.” According to their FINRA BrokerCheck reports and the OPAC website, OPAC securities are offered through Uhlmann Price and OPAC advisors are compensated by Uhlmann Price. Fallone and Kozak’s involvement with LiquidSpace and employment by Uhlmann Price creates a conflict of interest that may have not been disclosed to Uhlmann Price clients who were sold this investment.
Investments in LiquidSpace were sold as “convertible promissory notes”. According to the “Convertible Note Purchase Agreement”, the outstanding principal and unpaid accrued interest of the client’s note would be converted into Conversion Shares upon the closing of a Qualified Equity Financing. Stoltmann Law Offices has addressed the issues with promissory note investments in other articles. It is common for clients to be sold investments in the form of promissory notes, which are considered securities. Unfortunately, it is also common for promissory notes to be used in fraudulent investment schemes, such as Ponzi schemes, selling away (i.e. when a broker sells you an investment that was not approved by the brokerage firm), and theft. Given that these investments also are not publicly traded, it is impossible for investors to know the true value of their investment. It also makes it extremely difficult, and in many cases impossible, for them to liquidate the investment, unless the investment becomes publicly traded or the investment offers a liquidation period. At least some investors have not received any distributions or income from their investment in LiquidSpace, and it is unclear when they will be able to liquidate their investment.