Yieldstreet customer Justin Klish, who said he faces $400,000 in losses from investing on the platform.Courtesy: Justin KlishWhen Justin Klish stumbled upon an ad for Yieldstreet in February 2022, he said, it was the company’s tagline that stuck in his head.”Invest like the 1%,” the startup said.The ad spoke to his desire to build wealth and diversify away from stocks, which were then in freefall, Klish said. Yieldstreet says it gives retail investors such as Klish access to the types of deals that were previously only the domain of Wall Street firms or the ultrarich.So Klish, a 46-year-old financial services worker living in Miami, logged on to Yieldstreet’s platform, where a pair of offerings jumped out to him.He invested $400,000 in two real estate projects: A luxury apartment building in downtown Nashville overseen by former WeWork CEO Adam Neumann’s family office, and a three-building renovation in the Chelsea neighborhood of New York. Each project had targeted annual returns of around 20%.Three years later, Klish said he has little hope of ever seeing his money again. Yieldstreet declared the Nashville project a total loss in May, according to an investor letter, wiping out $300,000 of his funds. The Chelsea deal needs to raise fresh capital to avoid a similar fate, according to another letter. Both letters were reviewed by CNBC.”There isn’t a day that goes by without me saying, ‘I can’t believe what happened,'” Klish told CNBC. “I lost $400,000 in Yieldstreet. I consider myself moderately financially savvy, and I got duped by this company. I just worry that it’s going to keep happening to others.”Distributed riskYieldstreet, founded in 2015, is one of the best-known examples of American startups with the stated mission of democratizing access to assets such as real estate, litigation proceeds and private credit. To do so, it gathers funds from thousands of investors such as Klish, who typically put in at least $10,000 each for projects vetted by Yieldstreet managers.The startup’s central premise is that the world beyond public stocks and bonds — often called alternative assets or private market investments — provides both smoother sailing and the possibility of higher returns, a win-win proposition. This month, President Donald Trump signed an executive order designed to allow private market investments in U.S. retirement plans.But Yieldstreet customers who participated in its real estate deals in recent years say they’ve learned the flip side of the private markets: They face huge losses on investments that turned out far riskier than they thought, while their money has been locked up for years with little to show for it besides frustration.The company said in a statement that its real estate equity offerings from 2021 and 2022 were “significantly impacted” by rising interest rates and market conditions that pressured valuations industrywide.This article is based on dozens of investor letters that were sent to customers by Yieldstreet and reviewed by CNBC.The documents show investors put more than $370 million into 30 real estate projects that have already recognized $78 …
