The SEC has filed a settled action against Waldon Fenster, founder of the private fund marketed as Last Mile Loan. Fenster allegedly raised approximately $3.6 million by claiming the fund would make high-interest bridge loans to small businesses and generate returns exceeding 20%. The SEC says no loans were issued and that more than $2.5 million was diverted to gambling, travel, living expenses and preferential repayments to selected investors.
U.S. Securities and Exchange Commission (SEC)
Official Release:
https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26628
NEWS:
The Securities and Exchange Commission filed a settled civil action against Waldon Fenster, an unregistered investment adviser who operated a private pooled investment vehicle legally named Next Generation Legacy Fund, LLC and marketed under the name Last Mile Loan. The SEC's complaint describes a fund whose stated strategy changed substantially before the alleged misconduct. When the vehicle was formed in 2021, its operating agreement said it would invest in securities issued by early-stage and emerging companies. Fenster raised approximately $578,000 from nine investors under that original strategy, but the investments were allegedly unsuccessful. In early 2023, he amended the fund agreement and repositioned the vehicle as a private-credit strategy. Marketing materials claimed that Last Mile Loan would provide short-term, high-interest bridge loans to small businesses needing additional cash to qualify for larger financing from traditional lenders. The fund would supposedly conduct extensive due diligence, issue the interim loan and receive repayment once the borrower secured the larger financing. Investors were told that this model could produce returns exceeding 20%, while promotional materials described a target return of 20% to 30% on each transaction. Fenster also disclosed a proposed 2% management fee and 20% performance fee. According to the SEC, however, portions of the marketing presentation—including descriptions of prior loans, historical returns and due-diligence procedures—were copied from unrelated funds. The cited transactions had allegedly been completed by those other funds rather than by Last Mile Loan, creating what the SEC says was a false track record designed to give the new strategy credibility.
From January 2023 through March 2024, Fenster allegedly raised approximately $3.6 million from 23 individual investors located across the United States. Most invested between $50,000 and $200,000, while one investor contributed more than $1 million. The investors generally came from Fenster's professional network or were introduced through referrals, a distribution channel that may have increased trust without providing independent verification of the underlying loan program. The SEC alleges that Last Mile Loan never issued a single bridge loan and that Fenster did not perform the borrower-level due diligence described in the marketing materials. Instead, investor money was transferred to entities he controlled and used for gambling, trips and personal living expenses. The complaint states that Fenster regularly visited casinos and, during one period, entered a single casino more than 200 times. His personal expenses allegedly reached approximately $30,000 to $40,000 per month and included cars, childcare and groceries, far exceeding the 2% management fee described to investors. Other investor money was returned selectively to people who had referred new investors or to an investor who threatened litigation. When withdrawal requests increased in late 2023, Fenster allegedly reported returns that did not exist, including a claimed 56% return for one investor, and blamed withdrawal delays on loans that had not yet been repaid. He later attributed the freeze to an accounting oversight supposedly identified by legal and accounting teams, although the SEC alleges that the fund had neither. Even after privately acknowledging to certain investors that the money was gone, Fenster allegedly continued soliciting new capital, with the final investor deposit arriving in March 2024. The SEC calculates that investors ultimately lost $2,516,120.80, with most affected investors losing their entire contributions.
Without admitting the allegations, Fenster consented to a proposed final judgment that remains subject to court approval. The settlement would permanently enjoin him from violating the antifraud provisions of the Securities Act, Exchange Act and Investment Advisers Act. It would require disgorgement of $2,516,120.80, prejudgment interest of $450,012.39 and a civil penalty of $236,451. The judgment would also prohibit Fenster from participating in the issuance, purchase, offer or sale of securities—apart from transactions in his own personal account—and from associating with a broker, dealer or investment adviser. For private-credit investors, the case illustrates why a detailed presentation and apparent history of successful deals should be tested against primary evidence. A genuine bridge-loan fund should be able to provide a loan schedule, executed agreements, borrower identities, maturity dates, collateral records, payment histories and bank-account reconciliation showing that investor capital actually reached the borrowers. Claimed past transactions should be matched to the legal entity that funded them rather than accepted as experience belonging to the manager or a newly created vehicle. Investors should also investigate whether the fund uses an independent administrator, auditor or custodian; whether security interests have been perfected; and whether reported interest income corresponds with borrower payments instead of new subscriptions. Returns above 20% do not establish fraud by themselves, but they require a credible explanation of borrower economics, default rates, recovery procedures and why conventional lenders are unwilling to provide the same financing. The Last Mile Loan allegations show that referral relationships, periodic account updates and reported gains can create an impression of legitimacy even when no underlying loans can be verified.
KEY POINTS:
- Waldon Fenster allegedly raised approximately $3.6 million from 23 investors through Next Generation Legacy Fund, marketed as Last Mile Loan.
- Investors were told that the fund would issue high-interest bridge loans to small businesses and could generate returns exceeding 20%.
- The SEC alleges that no bridge loans were made and that marketing materials included due-diligence claims and prior transactions copied from unrelated funds.
- More than $2.5 million was allegedly used for gambling, travel, personal living expenses and preferential repayments to selected investors.
- The proposed settlement includes $2.516 million in disgorgement, $450,012 in prejudgment interest, a $236,451 civil penalty and broad securities-industry restrictions.