HOTEL SCAM! 11 Hotels Promised, Only 1 Delivered! Investors Fooled!

SEC v. Phoenix American Hospitality, LLC, William Lee Nelson — U.S. Securities and Exchange Commission Litigation Release No. 26560, dated June 5, 2026.

Phoenix American Hospitality, LLC and its president, William Lee Nelson, are accused of misleading over 2,000 retail investors. They allegedly misrepresented the number of hotels owned by one fund and falsely claimed consistent profit distributions of up to 12% annually for two hotel-focused investment funds. In reality, distributions were funded by investor capital, and the funds were not profitable.

In Plain English

Imagine you invested in a special savings account that promised to grow your money by 12% every year, like getting a steady bonus. But instead of earning that bonus, the bank was just giving you back some of your own money to make it look like you were earning it. That's similar to what Phoenix American Hospitality and its president are accused of doing with two investment funds. They allegedly told investors the funds owned many hotels and were making good profits, but the funds weren't actually profitable, and the money given back to investors was mostly their own money.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Establish Investment Funds Phoenix American Hospitality, LLC (PAH), led by William Lee Nelson, created two hotel-focused investment funds, REIT I (formed in 2018) and REIT II (formed in 2023), to raise capital from retail investors.
2. Market Funds to Retail Investors PAH and Nelson marketed these funds as real estate investment trusts, raising approximately $86 million from over 2,000 retail investors between March 2022 and July 2024.
3. Misrepresent Asset Holdings PAH, through Nelson, falsely claimed that one of the funds owned as many as 11 hotels. In reality, this fund initially held only a preferred equity interest in a single hotel until January 2024, when it acquired interests in other hotels.
4. Misrepresent Profitability and Distributions PAH and Nelson also made untrue statements that both funds generated regular profit distributions of up to 12% per year to investors.
5. Fund Distributions with Investor Capital Contrary to the claims of profitability, neither fund was actually profitable. The distributions made to investors were primarily funded by returns of investor capital, not actual earnings.
6. Engage Third-Party Marketing Nelson directed a consulting firm to create and disseminate these same untrue statements about asset ownership and profitability in marketing materials to investors and potential investors.

The Enforcement Action

On June 4, 2026, the SEC filed a settled action against Phoenix American Hospitality, LLC (PAH) and its president, William Lee Nelson. Without admitting the allegations, PAH and Nelson consented to a final judgment permanently enjoining them from violating antifraud provisions. PAH agreed to pay a $591,127 civil penalty, and Nelson agreed to pay a $118,225 civil penalty and received a five-year officer and director bar.

Named in this action: Phoenix American Hospitality, LLC, William Lee Nelson.

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