More than 70 investors are alleging in a Finra complaint that Triad Advisors failed to properly supervise two of the firm's former brokers when they put them in unsuitable investments that caused them to lose more than $30 million.

The claimants include retirees in their 80s and 90s and, for some of them, the losses amounted to life savings, according to their attorney.

The two Park Ridge, Ill., brokers, James Walesa and Kenneth Luccioni, have already settled similar claims by other investors, according to BrokerCheck. Walesa’s listed settlements totaled close to $7 million and there are five more cases pending. Luccioni’s settlements totaled $1.175 million. Investors have claimed they collected as much as $100 million for unsuitable investments.

“This is our third case involving Walesa,” said Jonathan Kurta, an attorney at Kurta Law in New York who represents the 70 claimants, adding that the case, which was filed earlier this year, is the largest involving the brokers in terms of both the number of clients involved and the potential damages. “Since we’ve already litigated this before, we know where the bodies are buried.”

For most of the 70 claimants, including 13 who are in their 80s and 90s, the assets allegedly given to the advisors to manage represented their life savings. For one, the assets were a windfall stemming from a lottery win, where the otherwise blue-collar worker suddenly had more than $1.5 million to invest after taxes and had been introduced to Walesa, the statement of claim said.

The client's claim asserted that Triad failed to look into the activities of Walesa and Luccioni even when the firm was made aware Walesa was involved in businesses outside the firm and raising capital for some of the companies.

“In doing so, [Triad] violated its supervisory obligations and is responsible for the losses sustained by claimants, which are substantial,” the statement of claim said. “Moreover, due to [Triad’s] tortious conduct, claimants have been deprived of the ability to generate the reasonable returns they could have reasonably expected had they been invested in a bona fide, well-managed, and diversified portfolio of stocks, bonds, and/or mutual funds during the relevant time period.”

Officials at Triad did not immediately respond to a request for comment.

In response to the Finra statement of claim, Triad in May filed a motion for a preliminary injunction in U.S. District Court for the Northern District of Illinois, Eastern Division, to prevent the Finra arbitration from advancing on the grounds that the clients were not Triad clients.

“None of these [clients] ever had any relationship with Triad, never opened an account with Triad, and Triad made no money on any of the purported investments,” the motion stated, adding that because of that, the firm was not required to arbitrate the claim.

But Finra’s Rule 12200 states that customers of a member firm or a member firm’s broker can compel a member firm to arbitrate, Kurta said, adding that Triad also had already signed an agreement to arbitrate prior to filing the motion.

The arguments for that motion will be heard in August, with a ruling expected in September, Kurta said. Meanwhile, he added, the Finra case is proceeding and has been expedited based on the ages of some of the claimants. One person among the 70 claimants is 97, according to the statement of claim.

At the center of the argument lies the question of whether or not the claimants were actually clients of Triad’s, as that’s where Triad’s liability would be found. Triad’s motion said they weren’t, while the statement of claim and opposition to Triad’s motion said they were.

Kurta asserted that all of the 70 were clients of Walesa and Luccioni while they were brokers with Triad. Regardless, Finra has a history of accepting “selling away cases” where the claims are brought by investors who did not open an account with a member firm, according to the opposition to the motion.

In the filings, neither side disputed what allegedly took place: Walesa and Luccioni allegedly convinced their clients to invest in various companies, but those investments were either fraudulent or unsuitable.

Walesa was a registered broker for Triad from November 2000 to September 2019, and Luccioni from November 2000 to December 2016.

While Luccioni was barred permanently in November 2018 for failing to produce documents for a Finra investigation into whether he had failed to disclose federal and state tax liens on his Form U4, Walesa went to Arkadios Capital in Park Ridge, Ill., from September 2019 to December 2021, according to BrokerCheck. That was Walesa’s last employment as a registered rep. 

According to the Finra statement of claim, which was filed February 8, while at Triad the two raised more than $100 million from their clients for investment in businesses in which the advisors had either ownership interest or were in an executive leadership position.

In addition to the company investments, the two brokers put their clients’ assets into alternative investments that were outside their risk profile and a mutual fund, the LJM Preservation and Growth Fund, that was a high-risk, high-fee fund that operated by selling “naked put options” on S&P500 futures, the claim stated. In the first week of February 2018, the fund lost 80% of its value, or $700 million.

Walesa and Luccioni, however, continually assured their investors that all was well while allegedly providing them with fake account statements and investment updates, some of which were on Triad letterhead, the statement of claim said. Some even referred to the investments in the companies as being “offered through Triad Advisors,” the claim said.

“Over the years, claimants received updates about various acquisitions and mergers by and between the entities in which they had invested and were told about how these corporate actions would increase profits and returns to investors,” the statement of claim said. “Until very recently, claimants believed that their investments were actually performing as the brokers promised. Indeed, it was not until only a few short months ago, in September 2023 when Walesa filed for personal bankruptcy, that claimants realized things may be amiss and began to fear that their investments had been lost.”

The statement of claim against Triad alleged breach of fiduciary duty, failure to supervise, suitability, fraud or negligence regarding material misrepresentations of investments, breach of contract and violation of various Finra rules. The claimants asked for unspecified compensatory and punitive damages, interest, attorney’s fees and forum fees.

Kurta said that an award could potentially be double the losses, or more than $60 million.