If I were grading The Real Asset Investor / Dave Zook on his response to one of his deals going south, or on managing attorneys/litigation to recover investors’ money, I’d give him 5 stars.
But I’m not. I’m grading him as a promoter/syndicator of the Prestige ATM Funds (on here as Prestige Investment Group). I’m grading him on his ability to choose deals and principals to raise money for and on doing the necessary due diligence to keep his investors’ money safe.
In this capacity, he’s shown that he can’t be counted on.
He raised tens of millions of dollars for a deal that I invested in which has recently been revealed to be a Ponzi scheme.
While he claims to have done extensive due diligence on the deal and its principal, Daryl Heller, his own admissions appear to contradict this.
For example, he sold investors on the funds purchasing and owning portfolios of ATM machines that Paramount Management Group managed. As part of his extensive due diligence, Dave claims to have chosen a simple random sample of ATMs from the portfolio, visited the physical ATMs and confirmed their existence and operation, among other steps.
However, since suing Daryl Heller, it’s been discovered that the actual size of the owned and operational ATM network was less than 1/3 of investors were told.
One would think that any competent audit of a portfolio that is 2/3 non-existent would yield a clear discrepancy.
Additionally, it seems careless on its face for Dave to have agreed to raise money into an investment structure where the principal (Daryl) had controlling interest in the management company that managed the assets as well as the funds that owned the assets, effectively putting transparency into the finances of the venture in Daryl’s sole discretion until we sued for it. At the very least, if he was going to agree to a structure with an inherent conflict of interest, there should have been significantly more access (to data) negotiated into it.
Finally, once this deal went south, he tried to align himself with the investors as a victim by telling us that Daryl was a compulsive liar who could not be trusted (yet he raised money for Daryl for 10 years before realizing?) and reminding us that he has millions of his own money in the deal. It’s the old “skin in the game” argument. But that argument only holds up if the money Dave invested into the deal as an LP exceeds the money he made as a promoter/syndicator, raising tens or hundreds of millions of dollars - and I’m skeptical at best on this.
Promoters love to say to LPs, “Do your own due diligence” after they’ve sold you on the claim that they’ve done extensive due diligence on it, but LPs investing $50,000-$100,000 are rarely, if ever, given adequate access to key information to do it. Instead, we’re fed the scarcity routine (“We’re oversubscribed. If you want in…”).
The reality is that we have to count on the people selling the deal, who have direct relationships with the principals and inner circle, to do it.
Intermediaries (promoters/syndicators/FOFs) need to be trustworthy in that capacity.
Dave appears to not be.
