Ridgewood Energy Fund Y Investment Fraud
The Ridgewood Energy Funds have cost investors millions of dollars. 13% of the amount invested in a Ridgewood Fund went to fees—right off the top. Some of this went to brokers and the brokerage firms that approved Ridgewood Energy Funds for sale. Unfortunately, they have declined in value as oil dropped. However, their value dropped more than the price of oil, in most cases, given the added burden of the internal fees. These average an additional 2-3% per year.
Ridgewood Energy Fund Y is a good example of why these speculative investments should have been sold only to high net worth, knowledgeable investors who wanted to speculate. Ridgewood Energy Y Fund raised over $42 million dollars from investors. However, as of the end of 2013, almost 25% of the amount raised was paid as management fees to Ridgewood and its affiliates. Of the 42 million dollars, fees were over $9.6 million dollars.
While the manager of Ridgewood Energy Y Fund made a lot of money, the investors lost money. The distributions from the fund have dropped, so they no longer make sense for someone who needs supplemental income. AND, investors who want to move their money to a safer, better-yielding investment cannot do that. There is no market for Ridgewood Energy Y fund. If you were sold Ridgewood Energy Y fund and are interested in pursuing your losses, please contact us.
Ridgewood Energy Update
Investors who have concentrated portfolios in oil and gas related investments have recently lost billions of dollars in the last two years. Oil and gas prices have declined sharply. In June 2014, the West Texas Intermediate spot price was over $106 per barrel. The spot price plunged to a low of $26.21 per barrel in February of 2016. This was a staggering 75% decline. Even with recent upturns, geopolitical problems have limited the anticipated recovery. Investors who have invested in Ridgewood Energy, Atlas, oil and gas MLPs and oil and gas mutual funds and ETFs have lost enormous sums. The Alerian MLP Index (AMLP), comprised of 24 energy Master Limited Partnerships has fallen sharply, as has the S and P Oil and Gas Exploration and Production ETF (XOP).
Energy companies constitute approximately 5% of the S & P index, which gained 11% since 2014. Oil and gas stocks have lost, on average, 50%. These stocks are known to be cyclical, rising and falling with the cost of oil. That volatility has negatively affected investors with more than 10% of their investments in oil and gas stocks or bonds. Most brokerage firms recommend that an investor put no more than 10% of their portfolio in any one sector.
Ridgewood Energy is a “direct placement program.” This means that its units are directly sold by brokers to customers. The Ridgewood Energy Funds are complicated, the units do not trade, and most brokers do not read the actual offering materials. Ridgewood Energy Funds are sold by brokers who receive 8% commission. There are other large fees taken out of any investment. For example, Ridgewood Energy Fund S (one of the “alphabet soup” of Ridgewood Energy Funds) takes out 4.5% of the investment as an “investment fee to the Manager”, 8% in sales commissions, 1% in “Placement Agent Fees,” and an additional 3.5% in “Organizational distribution and other fees”. So, of every dollar invested in Ridgewood Energy Fund S, only 83% actually went into the drilling program.
In addition, Ridgewood Energy Funds pay enormous management fees to its affiliated companies. These were so large that the Ridgewood Energy S Fund kept 26% of the Fund’s revenue as a “management fee”. Ridgewood Energy Fund U has taken an astounding 57% of all revenues as a management fee. By comparison, Vanguard Energy Fund only has an expense ratio of approximately .3%.
What is particularly egregious are the losses retirees have had in Ridgewood Energy funds sold to them for retirement income. In 2015, most Ridgewood Funds stopped making distributions. This was a surprise to its investors, who had been told that the funds were safe, income-generating investments. Brokers compared their distributions to the low returns offered by banks, bonds and C.D.s. However, these comparisons are inherently misleading. Ridgewood Energy Fund distributions are, to some extent, a return of capital. In addition, Ridgewood Energy funds are not traded and cannot be sold. A savings account or C.D. can be liquidated. A stock, bond, or mutual fund can be sold. A retiree who was sold Ridgewood Energy is stuck. There are some small firms that will buy funds. If you have Ridgewood Energy and are needing help understanding your investment or trying to recover money, please contact me.
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More on Ridgewood Energy
Ridgewood Energy’s direct placement programs have cost investors billions of dollars. Ridgewood Energy is an investment company that has established an “alphabet soup” of Energy Funds—Ridgewood Energy A, B, C, etc. All Ridgewood Energy funds have very high upfront fees, an annual management fee of 2.5%, and many conflicts of interests. Its subsidiaries also receive money from defrauded Ridgewood investors every year. What is the result? While Ridgewood energy investors have lost money, investors in simply oil and gas mutual funds have made money.
Ridgewood Energy has raised more than two billion dollars from investors. Its funds have been sold by brokers and investment advisors to customers by falsely stating that the fund was safe and would provide dependable income. Many of the investors had no business being in highly speculative and illiquid drilling partnerships.
These investments have consistently underperformed other investments, even other investments in publicly traded oil and gas companies. For example, Ridgewood Energy Y raised almost $100,000,000 in 2008 and 2009. It received an upfront fee of 16.5%, which it shared with the brokerage firms who sold it to investors. It has returned about one third of the amount invested by way of distributions. However, its value has plummeted. Its recent distribution history is dismal. People who bought it because their broker told them it would pay a nice, steady distribution, instead find themselves stuck with a certificate they can’t sell that is no longer paying them income.
If your broker sold you Ridgewood Energy funds in the last eight years, and you are looking for compensation, please contact us as we are forming groups of investors in Ridgewood Energy X, Ridgewood Energy Y, Ridgewood Energy A-1, Ridgewood Energy B-1,Ridgewood Energy V, Ridgewood Energy W, Ridgewood Bluewater Oil, Ridgewood Energy Bluewater Oil II and Ridgewood Bluewater Oil III.
Ridgewood Energy Fraud Information
Ridgewood Energy funds are approved only for accredited investors. This law firm represents investors who have losses in Ridgewood Energy. We allege these investments were: 1) high risk; 2) unsuitable for investors wanting safe income; and 3) that the brokerage firms failed to conduct the required due diligence as to Ridgewood Energy investments.
We represent groups of investors, and are putting together class actions and group arbitrations for investors in these Ridgewood Energy programs:
Ridgewood Energy Funds S-Z
Ridgewood Energy Funds AA – EE
Ridgewood Energy Bluewater Institutional Fund, LLC
Ridgewood Energy Bluewater Oil Fund II, LLC
Ridgewood Energy Bluewater Oil Fund III, LLC
Ridgewood Energy Bluewater Oil Fund IV, LLC
Ridgewood Energy Oil & Gas Fund, L.P.
Ridgewood Private Equity Partners Energy Access Fund LLC
If you invested in a Ridgewood Energy offering and would like to discuss your loss recovery options, please contact us for a free consultation.
Additional Ridgewood Energy Information
Ridgewood Energy has lost investors hundreds of millions of dollars. While investors have losses, the brokers who sold Ridgewood Energy investments made high commissions. Because of the high commissions, Ridgewood Energy raised over $1 billion over the last decade. Brokers who sold these illiquid, high commission and speculative products are having to repay investors if these investments were not suitable for them.
Ridgewood Energy charges upfront fees of 15-16%. So, of every dollar invested, only 84 or 85 cents actually went into an investment fund. In addition, Ridgewood Energy charges all investors a 2.5% annual management fee AND, Ridgewood Energy keeps 15% of any distributions—although it never invested in the direct placement program. That isn’t even all the fees: in addition, Ridgewood Energy subsidiaries charge Ridgewood Energy high fees every year for leasing, managing and administering the investments. No wonder that the only people who have made money in Ridgewood Energy are brokers who sold it and Ridgewood Energy.