'As Many as 11 Hotels' vs. One Preferred Stake: Hotel Fund Manager and President Settle SEC Case Over $86 Million Raise

Published Oct. 12, 2026. Case statuses are current as of that date, based on SEC records.

Retail investors were told one hotel fund owned as many as 11 hotels and that both funds paid regular distributions of up to 12% a year. According to the Securities and Exchange Commission, the fund owned a preferred equity stake in a single hotel for most of that period, and neither fund was profitable.

On June 4, 2026, the SEC filed a settled action in the U.S. District Court for the Northern District of Texas against Phoenix American Hospitality, LLC ("PAH"), a Texas-based manager of real estate investment vehicles, and its president, William Lee "Perch" Nelson of Dallas [1]. The case is SEC v. Phoenix American Hospitality, LLC and William Lee "Perch" Nelson, No. 3:26-cv-01846-B.

Status at a glance: PAH and Nelson each consented without admitting or denying the allegations. The final judgments were subject to court approval when the SEC announced them; we did not confirm entry on the docket.

What the SEC alleged

According to the complaint, PAH and Nelson raised about $86 million from more than 2,000 retail investors in two hotel-focused funds from March 2022 through July 2024 [1]. The SEC alleged that PAH, through Nelson:

1. Overstated the assets. Claimed one fund owned as many as 11 hotels, when it actually owned only a preferred equity interest in a single hotel until January 2024, when it acquired interests in other hotels.
2. Misdescribed distributions. Said both funds made regular profit distributions of up to 12% a year, when neither fund was profitable and distributions were primarily funded by returns of investor capital.

The settlement terms

Each agreed to be permanently enjoined from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 [1]. If approved, the judgments would order:

• PAH: a $591,127 civil penalty;
• Nelson: a $118,225 civil penalty and a five-year officer-and-director bar.

The release does not mention disgorgement or a criminal case.

"Distributions" are not the same as profits

Many private real estate and income funds pay monthly or quarterly distributions. Investors often assume that money is income the fund earned. It may not be. When a fund pays distributions out of investors' own capital, it is returning their money to them while describing it as a yield, and the fund's real value shrinks. Fund documents and audited financial statements should say where distributions come from; if they don't, ask.

How an SEC civil case works

The Securities and Exchange Commission is a civil regulator. It cannot send anyone to prison. When it sues, it asks a federal judge for remedies such as an injunction (a court order not to break the securities laws again), disgorgement (giving up money obtained through the alleged violations), prejudgment interest, civil penalties, and sometimes bars from serving as a company officer or director or from working in the securities industry. Criminal charges, when they exist, are brought separately by the Justice Department.

A complaint is the SEC's side of the story. Until a court rules, or a defendant settles, the claims in it are allegations. Many defendants settle "without admitting or denying" the allegations, which means they accept a judgment and its penalties without conceding that the SEC's account is accurate. A "consent" that is "subject to court approval" is not final until a judge signs it. A "bifurcated" settlement resolves liability and the injunction now while leaving the dollar amounts for the judge to decide later. A default judgment is entered when a defendant does not respond to the lawsuit; it is a ruling against that defendant, but it is not a finding after a trial.

Red flags in income-fund pitches

• High, steady "distributions" from a fund that has not disclosed its earnings.
• Portfolio claims, like the number of properties owned, that you can't match to deeds or filings.
• No audited financials showing distributions are covered by income.
• Glossy marketing aimed at retail investors for a complex private fund.

Before you hand anyone money for an investment

• Check the seller. Search the person and firm on Investor.gov and FINRA BrokerCheck. People who sell securities for commissions generally must be registered.
• Check the offering. Search the company name in the SEC's EDGAR database and your state securities regulator's enforcement actions.
• Treat "guaranteed" returns as a warning. Real investments carry risk. Promises of fixed monthly profits, or a guarantee that you can't lose your principal, are hallmarks of Ponzi-style schemes.
• Watch for pressure and secrecy. Deadlines, "sold out" claims, or requests to wire money to a personal or unfamiliar account deserve a pause.
• Ask how you get your money out. Excuses, delays, or new conditions when you try to withdraw are a serious red flag.

If you think you were affected

1. Save your records: account statements, wire confirmations, emails, texts and marketing materials.
2. Report it to the SEC at sec.gov/tcr and to your state securities regulator. If money was stolen, you can also report to the FBI at ic3.gov.
3. Follow the court case. If a receiver or fair fund is created, notices about claims are usually posted on the court docket or a receiver's website. The SEC does not charge fees to return money.
4. Beware of "recovery" offers. Scammers often target people who already lost money, promising to get it back for an upfront fee.

Case status (as of Oct. 12, 2026)

Defendant	Court	Status	Source
William Lee "Perch" Nelson	U.S. District Court, N.D. Tex. (No. 3:26-cv-01846-B)	Settled action filed June 4, 2026; consented without admitting or denying ($118,225 penalty; 5-year officer/director bar); subject to court approval	[1]
Phoenix American Hospitality, LLC	Same	Settled; consented without admitting or denying ($591,127 penalty); subject to court approval	[1]

Statuses can change. An SEC complaint contains allegations, not findings, unless a court has ruled.

Sources

1. U.S. Securities and Exchange Commission, Litigation Release No. 26560, "SEC Files Settled Action as to Real Estate Investment Manager and its President for Allegedly Making Untrue Statements to Retail Investors," June 5, 2026. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26560
2. SEC complaint. https://www.sec.gov/files/litigation/complaints/2026/comp26560.pdf

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