On a summer day in 2018, Cathy Shubert, then 58, hopped in her Toyota Rav 4 and drove to the Jacksonville, Florida, office of Mario Payne, an investment adviser at the financial services firm Raymond James. She had a lot on her mind. She was not happy with her job at a local bank branch and wanted to see if Payne thought she had saved enough to retire.
“He said what I was retiring with would carry me and everything would be wonderful,” she remembered. “I went home and told my husband, ‘Oh my God, I want you to go meet him.’”
After giving notice she would be leaving her job, Shubert said, she signed the back of her retirement check and handed more than $250,000 over to Payne, who over time put her 401(k) savings into “structured notes”, “leveraged ETFs” and other risky products usually intended for wealthy, sophisticated investors.
By 2024, her attorney said, many of these investments had tanked. More than half of her money was gone.
These are perilous times for small investors like Shubert. Wall Street firms seeking to boost their share of the $48tn in US retirement accounts are salivating at the prospect of selling even more high-risk “alternative investments” to so-called “mom and pop” investors. Retirement accounts are a “pot of gold that all sorts of industry players want to get their hands on”, said Barbara Roper, a former senior adviser at the US Securities and Exchange Commission (SEC).
The potential for big losses and the high fees associated with alternative products can wreck the financial hopes of inexperienced investors with modest amounts of money to put in play, according to former regulators, securities fraud lawyers and investors themselves.
And a growing number of small investors may be at risk in the months and the years to come – thanks to a push by the financial industry, federal lawmakers and the Trump administration to loosen protections for small investors.
In August, Donald Trump issued an executive order that promised his administration will make it easier for Americans to stash cutting-edge investments in their retirement accounts. The order – titled “Democratizing Access to Alternative Assets for 401(k) Investors” – touts “the potential growth and diversification opportunities associated with alternative asset investments”. Americans had $13.9tn in 401(k)s and other employer-based retirement plans at the end of September 2025.
Three months later, Trump commuted the prison sentence of the former GPB Capital Holdings CEO David Gentile, who was found guilty in 2024 for his role in a years-long scheme that involved alternative investments. Investor advocates criticized Trump for freeing Gentile, who was at the center of the $1.6bn fraud that harmed thousands of teachers, nurses and other less experienced investors.
“It’s a signal that it is not a priority to protect your mom and pop investors,” said Adam Gana, a lawyer at the Chicago firm Gana Weinstein who has represented hundreds of clients who lost money in private equity deals set up by GPB. “It’s unbelievable. People’s lives were ruined, ruined by their investments in GPB.”
The White House did not provide detailed answers to questions from the Guardian about the Gentile case or Trump’s efforts to open up alternative investments to more Americans.
In an emailed statement, a White House spokesperson said: “The Trump administration is committed to expanding optionality for retail investors. All Americans are, of course, encouraged to appropriately weigh the risks that come with any investment decision, including for traditional equity and debt securities.”
All in
The weakening of protections for small investors and the push to sell them riskier products come at a time when many Americans are worried about inflation and the high cost of living. Buffeted by soaring prices for everything from groceries to electricity, 92% of US retirees fear their assets are being eaten away, according to a survey by the asset manager Schroders. In a poll of 401(k) plan participants by the financial services giant Charles Schwab, 57% cited inflation as a top obstacle to reaching a comfortable retirement.
These concerns can leave small investors vulnerable to come-ons for products that promise high yields and protection from inflation.
“A new inflation hedge has arrived,” boasts MarketX Ventures, which describes itself on its website as a “one-stop shop” for high-growth private tech investment opportunities. It suggests investors diversify into private markets “like the super-rich do”. MarketX’s CEO, Cathryn Chen, said in an email that most of her firm’s clients were sophisticated, tech-savvy investors, and that less sophisticated investors were given “extra help” and “extra resources” to help them understand her firm’s investments and their risks.
Alternative investments – often called “alts” in industry shorthand – include an array of products that don’t fall into the plain vanilla categories of stocks, bonds or money markets. Among the most aggressively marketed alts are private placements, which receive less scrutiny from securities regulators and lack the disclosure requirements about risks and financial results that are required for stocks and bonds. Other higher-risk alts include promissory notes, structured products and cryptocurrencies.
At the SEC, officials are all-in on Trump’s executive order. In remarks to the agency’s investor advisory committee in September, the SEC chairman, Paul S Atkins, said he was “delighted” by Trump’s order to increase small investor access to alternative assets.
Yet securities regulators know that rules meant to protect investors already are being broken when advisers pitch alts. In 2022, the SEC’s division of examinations issued a risk alert after examining registered investment advisers that manage private funds, flagging problems that included misleading performance and marketing disclosures and failing to conduct reasonable investigations of the investments they were selling.
A 2025 study by the Financial Industry Regulatory Authority (Finra) showed the public lacks basic understanding of markets – an ominous state of affairs at a time when risky alt products are proliferating. When Finra gave an 11-question financial knowledge quiz to 2,861 investors, the average score was 5.3 – just under 50%. To see if investors could recognize warning signs of a fraudulent investment, Finra asked if they would invest in a product “that promises a guaranteed, risk-free 25% annual return every year for the next 5 years”. Half of the investors said they would.
Michael Bixby, a Florida securities lawyer who represents Shubert and more than 100 other people in two lawsuits tied to Payne’s alleged misconduct, said the complexity and murkiness of alts makes it nearly impossible for small investors to understand what they’re getting into. When the Guardian asked the lawyer how many of his clients understood the investments they had purchased on Payne’s advice, Bixby answered with a precise number.
“None,” he said. “On the structured products, I can barely understand it.”
The Guardian reached Payne by phone, but he hung up after he was asked if he would discuss the questions about investor losses that a reporter had sent him. His regulatory records show that he continues to be licensed with the SEC as a registered investment adviser.
Payne is not named as a defendant in Finra arbitration claims and lawsuits that Bixby has filed against Raymond James, the financial firm where Payne previously worked. But the lawsuits include descriptions of alleged misconduct by Payne during his time at Raymond James and after he was fired by the firm – claiming he misled small investors by telling them that high-risk investments were “safe” and “guaranteed”.
The two suits, filed in state court in Florida, claim Raymond James failed to notify the SEC and Finra about Payne’s alleged misconduct, depriving Shubert and other investors of information that could have warned them away from working with him. Raymond James told regulators his termination was related to “failure to meet performance expectations” and not his sales practices, according to Finra records.
Spokespeople and lawyers for Raymond James did not respond to requests for comment from the Guardian. In court filings, Raymond James said it was “misleading” for the plaintiffs to say that it had not properly supervised Payne or that the investments he bought for them were not in their best interests. The company has asked that both cases be dismissed, arguing that the plaintiffs failed to file their suits in a timely manner and that many of them didn’t become Payne’s clients until after he was fired from Raymond James.
Bixby said Shubert lost money in structured notes while Payne was at Raymond James, but most of her losses with Payne came after he left the firm.
Shubert said she wasn’t familiar with the kinds of investments Payne put her in. She tried to read a prospectus associated with one of her investments, but didn’t make it through to the end. “There is a lot of stuff in those and, to be honest with you, I didn’t understand all that,” she recalled. “I thought ‘It’s his job – he knows what he’s doing.’”
She is grateful to have another source of income from a family member, but said it was still a significant hit, financially and emotionally. Many nights, she said, she lay in bed asking herself: “Oh my God, I only have this much money left – how many years will this last me?”
‘Perverse incentives’
Along with the risks of slippery salesmanship and big losses, many alternative assets also carry high fees that can eat into even positive investment gains.
And less regulated “alt” investment deals often carry greater risks for losses and fraud, according to studies led by Craig McCann, an economist and securities expert.
In so-called “Regulation D” offerings, by private companies, hedge funds, private equity funds and others, investors typically pay upfront fees including sales commissions and acquisition costs, according to a 2023 research paper by McCann’sconsulting firm, SLCG. These costs, the paper said, reduce returns and create “perverse incentives and conflicts of interest” between investors and the industry players who are creating, managing and selling investment deals.
In a separate study in 2015, McCann’s firm looked at publicly traded REITs – real-estate investment trusts – and alternative REITs that are traded privately. This research found that annual investor returns from private REITs averaged 6.3%, compared with 11.6% in the Vanguard REIT Index Fund of traded REITs. More than half of non-traded REITs’ underperformance was due to upfront fees that are mostly pocketed by salespeople, the study said.
Fees can also cut into the returns for private placements, which use financial advisers and others to market company shares directly to investors rather than through public offerings traded on stock exchanges.
Kristian Kraszewski, a Massachusetts securities lawyer, filed an arbitration claim against the brokerage firm Concorde Investment Services in February 2025 alleging that his client was “promised steady returns” from Passco Palm Desert LLC, which offered private investments in residential apartment complexes. His client lost $125,000 of the $132,000 he put in, Kraszewski said in the claim, which he filed with Finra, but the broker made 6% on the sale.
Concorde said in an emailed statement that it couldn’t comment on the arbitration, which is pending. But it said that its offering documents “clearly disclosed” that the investment, which was offered in 2019, “involved substantial risk”, adding that real estate projects nationwide were affected by the Covid-19 pandemic, market disruptions and interest-rate increases.
The company said it “conducts rigorous due diligence” and that it was continually enhancing its systems, training and oversight.
According to a 2019 private placement document reviewed by the Guardian, 13.4% of Passco’s $25m offering was expected to go to brokerage fees and other expenses. Executives at Passco did not respond to emails and a phone message from the Guardian.
‘Financial prison’
These days, Kathleen McCauley won’t even indulge in a coffee at Dunkin’. At 69, she mows her own lawn and strains to come up with ideas for no-cost outings when she gets a day with her three grandsons. Her nightmare scenario: that social security might not exist in 10 years.
“I feel like I’m in a financial prison,” she told the Guardian.
It is not the life she had expected after squirreling away $600,000, which she had saved up in the jobs she had worked after finishing high school – delivering Pepperidge Farm cookies and Edy’s ice cream to stores and later doing retail sales for Verizon Wireless.
In 2022, McCauley said, she started to think about “how old I was” and realized she needed to “beef up” her 401(k). So she entrusted $450,000 to Vincent Camarda, a financial adviser in Massapequa, New York.
She said Camarda “made it seem like there was no risk” when he suggested she invest in a private equity fund called Windsor Capital Fund. She remembers the chilly fall day when she sat in his office going over her assets and expenses.
“He said: ‘How would you feel if I told you that you could retire right now?’” she recalled. “I felt my eyes welling up with tears.”
Two weeks later, she returned to sign the paperwork – a half-inch stack of documents sprinkled with “sign here” tabs. “I wasn’t really given an opportunity to read any of it,” she said.
One of those tabs was attached to Windsor’s Private Placement Memorandum, which said she would qualify to invest only if she was an “accredited investor” – a term of art that describes the supposedly sophisticated investors who have a net worth of $1m or $200,000 in annual income. With $600,000 in savings and a modest income, she didn’t come close to qualifying, according to a lawsuit McCauley filed against Camarda and others in 2024 in federal court in Brooklyn.
“I couldn’t even tell you what an accredited investor is,” McCauley said.
The fund began to default on its monthly payments to her in early 2024, but when she demanded her money back, Camarda refused to return her savings, her lawsuit alleges. The suit accuses Camarda and other defendants of fraud, breach of contract and “unjust enrichment”. In an answer to McCauley’s suit, the defendants denied the allegations, including McCauley’s claim that Camarda said she had enough money to retire.
Neither Camarda nor his lawyers responded to requests for comment.
McCauley and Shubert are not alone in finding their lives changed after being persuaded to invest retirement savings in alternative financial assets.
One Florida retiree, 66, told the Guardian she started visiting local food banks after losing more than $200,000 at the hands of a broker who put her retirement money in structured notes. “It’s so hard,” she said. “Friends say ‘Let’s go out to eat.’ I say ‘I’m not hungry,’ or ‘I already ate.’ I’ve never lived like this.”
An 85-year-old Long Island investor said she lost more than $500,000 in promissory notes that were supposed to yield 12% interest. Her money is gone. “I’m in debt over my head and I just signed up with National Debt Relief,” she said.
A 64-year old Florida woman said she lost “almost everything” after investing more than $500,000 in leveraged ETFs and structured notes.
“It’s very gut-wrenching,” she said. “We don’t go on trips, we don’t do anything. I should be enjoying this part of my life and I’m not.”
In the GPB case, lawyers for the company’s CEO, Gentile, argued there was no proof investors lost money as a result of the frauds he was convicted of committing – and that shareholders in a private equity fund at the heart of the case were sophisticated investors.
“You had to be rich to invest in this fund,” one of Gentile’s attorneys said during the trial.
The government’s attorneys pushed back.
“The victims of the defendant’s crimes are hardworking everyday people,” prosecutors said in a sentencing memo. “They include small business owners, farmers, a retired electrician who served in the Vietnam war, teachers and nurses.”
Among them is a married couple who said they raised three children and saved their retirement nest egg by sharecropping, waiting tables and running an auto repair and towing business. “All of the literal blood, sweat and tears we shed to work hard and be successful was taken from us,” one of the spouses wrote in a victim statement.
Another investor wrote: “I was bilked out of $25,000, which may not seem like a lot to some, but at my age it will be very difficult to save up that sum of money again. My wife and I made many sacrifices to save $25,000.”
In a separate lawsuit, New York state authorities alleged that investors’ funds were used to cover the costs of private jets, Gentile’s 50th birthday party and a $355,000 Ferrari FF driven by Gentile.
Gentile denied the allegations against him. A Trump spokesperson blamed the executive’s conviction on the “weaponization of justice” by the Biden administration. Gentile’s attorneys did not respond to requests for comment.
Trump’s clemency order freed the executive from prison after he had served 12 days of a seven-year sentence – and wiped away any requirement that he pay restitution to the victims.
On Thanksgiving, Trump’s pardon czar, Alice Marie Johnson, said on social media that she was “deeply grateful to see David Gentile heading home to his young children”, calling his release an example of “the extraordinary power of second chances”.
‘A dignified, comfortable retirement’
There have been protections in place for nearly a century that seek to rein in abusive practices in the marketplace for private securities and other alternative investments.
In the wake of the Wall Street crash of 1929, the federal government passed laws to establish new standards for companies that wished to sell securities to the public. Under the new laws, companies that had large numbers of shareholders and were traded on stock exchanges had to provide detailed information about their risks and finances and issue regular reports. Companies not traded on public stock exchanges were required to provide far less information.
Over time, the SEC has offered more and more exemptions to allow companies to avoid disclosure requirements. In 1982, it issued Regulation D, which expanded the number of companies that could sell private securities and widened the universe of investors who could buy them, designating investors with a net worth of $1m or $200,000 in annual income as “accredited investors”.
In 2012, the Jobs Act further loosened restrictions, increasing the number of shareholders a company had to have before being forced to go public and allowing issuers to pitch their private offerings to more investors.
Roper, the former SEC adviser, said the idea that investors in this financial category don’t need protection of federal securities laws is a fiction. “Most accredited investors lack the market power to demand access to information” and “lack the financial sophistication to value those securities”, she said.
Today’s deregulatory momentum seeks to tear down even more of the modest safeguards that limit advisers’ ability to sell alternative investments.
In December, the House of Representatives passed the Invest Act, a sweeping document that would expand the number of companies that can offer shares without providing audited financial statements, reduce regulations and generally make alternative investments more available to the public.
The proposed legislation complements Trump’s August executive order, which asserted that “regulatory overreach” and “lawsuits filed by opportunistic trial lawyers” had stifled innovation and prevented Americans’ 401(k) retirement accounts from “achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement”.
Atkins, the SEC chair, said in an op-ed in the Wall Street Journal in December that the market’s most fundamental purpose was “placing American might in the hands of citizens instead of the regulatory state”. While he endorses the idea of making private markets more accessible to everyday investors, Atkins has frequently said that protections are necessary.
An SEC spokesperson did not respond to detailed questions, but referred the Guardian to a statement by Atkins in September that the markets would need “appropriate guardrails” that “address the important issues and potential pitfalls inherent to this genre of investments”.
Amid these shifts, experts expect sales of alternative investments to the public will soar. The Deloitte Center for Financial Services has projected that retail investors’ allocations to private investments will grow from $80bn to $2.4tn by 2030.
Investor advocates worry this growing wave of smaller investors will enjoy fewer of the upsides – and more of the downsides – from alternative investments than sophisticated players.
“If you have a really good investment opportunity and need to raise money, you are probably not going to try to sell to every random truck driver,” said Benjamin Edwards, an associate dean at University of Nevada Las Vegas and expert on corporate governance and consumer protection. “So the firms that are offering these investments to retail investors probably can’t find anyone else to buy it.”
Along with the challenges of understanding complex investments, experts say, mom and pop investors usually don’t have the background to evaluate the firms and advisers that are peddling these deals.
McCauley’s lawsuit says she was not aware when she met her adviser, Camarda, that he had already been sued by the SEC for selling the fraudulent securities of Par Funding, a lending company whose CEO was sentenced to 186 months in prison in March for securities fraud and other crimes. The SEC said in its complaint that, in exchange for Par paying down debt that Camarda’s company had taken on, Camarda would solicit investors to buy Par’s securities. In court papers, Camarda and his co-defendants denied that charge and denied that they had failed to disclose conflicts of interest to investors. The trial is scheduled for August.
Timothy J Dennin, McCauley’s attorney, said everyday investors tend to trust persuasive salespeople who have the trappings of success. “They are either uninclined to investigate such a person or unaware of the tools out there that may raise red flags.”
Seeking justice
For investors like McCauley and Shubert, it has never been easy to seek justice – and the obstacles are likely to multiply in the months and years ahead.
Financial firms will not open an account unless a customer agrees in writing to give up the right to sue, which means that investors who lose money in alts must seek justice through Finra arbitration, where hearings take place behind closed doors and litigation documents are not public.
Small investors seeking restitution after losing $50,000 or less in alts often face significant hurdles, according to Nicholas J Guiliano, a lawyer who represents investors in arbitration. It is “exceedingly difficult” to find lawyers for small cases, he said, and investors who press a case in the Finra forum on their own “never fare well” compared with those who have lawyers. On its website, Finra lists arbitration clinics that sometimes are able to represent investors who can’t afford lawyers.
Big investors with access to the best lawyers, though, have had recent success in holding financial firms to account – and Wall Street has fought back. Arbitrators at Finra awarded $132m last year to a wealthy family that said it lost $19.5m in alts at the hands of Chuck A Roberts, a former adviser at the financial services firm Stifel Nicolaus.
During hearings in 2024, the investors’ lawyer presented a text in which Roberts assured one of the family members: “You send me the $15MM, I will double the whole ball of wax in less than 5 years.”
In another text, the adviser boasted to a colleague that he had just pitched a different customer to buy structured notes. The customer “gladly did this round of notes”, he wrote, adding: “I’m calling and chiseling every motherf**ker.” Roberts’s lawyer, Susan Schroeder, declined to comment on his behalf.
Roberts, who has 23 pending customer disputes on his Finra record, was barred from the securities industry in July, after telling Finra that he would not continue to testify in a review of the arbitration complaints against Stifel that revolved around his behavior. Stifel did not respond to a request for comment.
The big award didn’t sit well with lawyers at the Securities Industry and Financial Markets Association (Sifma), Wall Street’s lobbying group. Referring to “recent extreme outlier punitive damages awards”, Sifma has pressed Finra to make its arbitration process less friendly to investors – urging it to help rein in punitive damages awards, make it easier to dismiss investors’ arbitration claims and allow financial firms to take “high dollar” disputes to other arbitration forums, which lack Finra’s systems that police unpaid awards.
Sifma did not respond to a request for comment.
In an emailed statement, Richard Berry, an executive vice-president at Finra, said the organization “strives to provide a fair, efficient and effective arbitration forum for all participants”.
In his executive order, Trump’s bid for putting more 401(k) money into alts is paired with a call to make it harder for investors to pursue compensation for wrongdoing by employers, advisers and other players that control those plans.
Both Trump and Atkins, the SEC chair, have described their quests to open alternative investments to everyday investors as righting a wrong. In their view, retail investors have been denied the opportunity that wealthier people have to invest in these securities.
This effort comes as the SEC’s strongest voice for investor protection has been sidelined. In December, the Senate banking committee declined to move forward with the reappointment of the SEC commissioner Caroline Crenshaw.
With the departure of Crenshaw, the lone Democrat on the agency’s governing board, the commission now has a 3-0 Republican lineup – producing what the financial reform group Better Markets calls “a one-party echo chamber” that “lacks a commissioner who is willing to stand up to the financial industry”.
Crenshaw had railed against the latest deregulatory efforts – pointing out that private markets were specifically designed for wealthier, more knowledgeable investors because of their high risk, limited information and hidden fees.
In December – in her last speech as an SEC commissioner – Crenshaw said the financial regulatory environment now resembles “the period prior to the stock market crash in 1929”.
Opening private markets to more mom and pop investors, she predicted, “will come back to bite regulators – but not before Main Street Americans’ savings have been looted”.
