KlaymanToskes files $5 million FINRA claim over EcoVest losses

KlaymanToskes says it filed a FINRA arbitration claim seeking up to $5 million from DFPG Investments, International Assets Advisory and two advisors over EcoVest conservation easement deals. The case says investors now face major IRS-related liabilities after allegedly unsuitable recommendations made between 2016 and 2021.

Why it matters: - The claim centers on conservation easement investments that were marketed as tax-saving strategies but may now leave investors with large tax bills, penalties and interest. - The filing adds to growing legal pressure on firms that recommended EcoVest partnerships after IRS scrutiny began. - The investors seek to recover not just alleged investment losses, but also tax-related damages and professional expenses.

What happened: - KlaymanToskes filed a FINRA arbitration claim seeking up to $5 million in damages against DFPG Investments, International Assets Advisory, Matthew D. Poole and Jeremias Machado Francioli. - The case is FINRA Case No. 26-02571. - The claim concerns allegedly unsuitable EcoVest syndicated conservation easement investments recommended to multiple investors. - The investments were purchased between 2016 and 2021. - The claim names specific EcoVest partnerships, including Waterway Groves, Birkdale Landing, Harborgate at Seadrift, Santo Bay Resort, Turkey Creek Resort, Olive Farm and Santa Bahia.

The details: - The investors allegedly put about $1.8 million into EcoVest-sponsored conservation easement deals. - The investments were presented as legitimate tax strategies that would generate charitable contribution deductions of roughly four times the invested amounts. - The claim alleges the brokerage firms and advisors failed to adequately investigate or disclose valuation, tax, audit, penalty, liquidity and regulatory risks. - The filing says longstanding IRS warnings and a federal enforcement action against EcoVest began in 2018. - The claim alleges the respondents continued recommending the investments and assured customers the deductions were legitimate and adequately supported. - Preliminary tax liability estimates range from about $825,000 to $1.7 million per investor. - The claim alleges unsuitable recommendations, inadequate due diligence, misrepresentations and omissions, negligence, breach of fiduciary duty and failure to supervise. - The investors seek recovery for investment losses, tax-related damages, penalties, interest, professional expenses and other damages.

Between the lines: - The case shows how a tax-driven investment pitch can create a second layer of harm when the IRS challenges the underlying deductions. - The allegations also raise questions about whether advisors relied too heavily on the promised tax benefits and too little on independent review. - Lawrence L. Klayman said investors relied on their financial advisors and brokerage firms to determine whether the complex investments were appropriate. - Klayman also said brokerage firms must investigate and disclose the significant tax and financial risks, including the consequences if the IRS disallows the deductions.

What's next: - KlaymanToskes is urging investors who suffered losses from EcoVest conservation easements to contact the firm for a free and confidential consultation. - The firm says investors may have recovery options if they bought EcoVest investments through DFPG, International Assets Advisory, Matthew Poole, Jon Dunwell, Jeremias Francioli or another financial professional. - The arbitration process will determine whether the respondents are liable for the alleged damages.

The bottom line: - The filing turns EcoVest into another test case for how far broker-dealers and advisors must go to vet aggressive tax shelters before recommending them to clients.