The Merger Scam Playbook: How to Spot Fraud and Save Your Money Before It's Too Late

Investors, listen up! When companies merge, it's supposed to be a win-win—synergies, growth, and higher shareholder value. But what happens when the merger is built on lies? That's exactly what's playing out in the Broadmark Realty Capital (BRMK) class action lawsuit, and it's a cautionary tale for anyone holding merger-related stocks.

Let's break down the risks, the opportunities, and why you need to act fast if you're caught in this web of deception.

The Broadmark Case: A Textbook Example of Merger Fraud

The lawsuit, filed against Broadmark Realty Capital and Ready Capital Corporation, alleges that their May 2023 merger was based on false proxy statements that hid critical risks. Here's what investors weren't told:

1. Financially Troubled Borrowers: A chunk of Ready Capital's borrowers were drowning in debt due to sky-high interest rates.
2. Overbuilt Multifamily Markets: The surge in apartment buildings left renters unable to pay enough to cover loans.
3. The $500M Ritz-Carlton Disaster: A major development project acquired through Mosaic Real Estate Credit was a money pit—plagued by delays, cost overruns, and funding gaps.

The proxy statement failed to disclose these red flags, painting a rosy picture of inflated earnings projections, dividends, and book value. The result? Ready Capital's stock plummeted 60% post-merger, wiping out the promised 41% premium.

Why Merger Fraud is a Recipe for Disaster

Mergers are high-stakes deals, and proxy statements are the playbook investors rely on. But when companies omit material risks, they're not just breaking laws—they're luring investors into a trap. Here's why this matters to you:

• Inflated Projections: If earnings or dividends are based on unrealistic assumptions (like ignoring bad loans), the crash is inevitable.
• Credit Losses: Understating Current Expected Credit Losses (CECL) reserves means the company is sitting on a time bomb. When reality hits, losses explode, wiping out shareholder value.
• Contagion Risk: Fraudulent mergers can tank the entire sector. If Broadmark's case exposes broader issues in CRE lending, other firms like Annaly Capital (NLY) or Two Harbors (TWO) could face scrutiny.

The Silver Lining: How to Fight Back

This isn't just a story of loss—it's an opportunity for investors to recover. Here's what you need to do:

1. Check Your Holdings: If you owned Broadmark common stock as of the merger's record date (May 30, 2023), you're eligible to join the class action.
2. Act by July 28, 2025: That's the deadline to file as a lead plaintiff. Even if you're not lead, joining the class ensures you can share in any settlement.
3. Leverage Contingency Fees: Law firms like Robbins Geller and The Schall Law Firm work on a no-win, no-fee basis. There's no upfront cost—just a small cut if they win.

The Bottom Line: Fraud is a Buyer's Market

Class actions are the last line of defense for investors burned by lies. Broadmark's case isn't an outlier—it's part of a pattern where merger mania meets misrepresentation.

Take Action Now:
- Contact a securities lawyer immediately.
- Review your merger-related holdings for red flags (e.g., sudden stock drops post-deal).
- Stay vigilant—other firms may face similar lawsuits.

The clock is ticking. July 28 is not a suggestion—it's a deadline that could cost you millions if ignored.

Final Thought: In investing, knowledge is power. Use this case to sharpen your radar for fraud—and remember, when companies lie, the truth always surfaces… and so does the fallout.

This is not financial advice. Consult a professional before making investment decisions.