Rishi Kapoor faces new lawsuits from South American investors seeking nearly $10M

Nearly three dozen South American investors allege Rishi Kapoor bamboozled them into placing deposits on co-living condo units that are not getting built, and are seeking nearly $10 million.

The 33 investors — who hail from Argentina, Colombia and Ecuador — allege Kapoor and the development entities for his canceled co-living condominium projects in Coral Gables, Coconut Grove and Miami Beach owe them a combined $9.6 million in deposits that were either diverted to other real estate ventures or lined Kapoor’s pockets, according to five separate lawsuits filed in Miami-Dade Circuit Court. The complaints were filed between Jan. 31 and Feb. 21. 

Kapoor allegedly convinced the investors to purchase co-living units in the three projects by offering them incentives, including that his company, Urbin, would lease the condos from them upon closing, and eventually purchase back the units at a higher sales price, the lawsuits allege. 

Some investors allegedly paid 100 percent of a co-living unit’s purchase price, the complaints state. 

Kapoor denied the allegations through his attorney, Fred Schwartz. While he is not representing his client against the most recent litigation, Schwartz said in an email that the “claims made in these lawsuits follow the same false narrative against Mr. Kapoor, who we strongly maintain received no inappropriate compensation, nor committed any other wrongdoing.”

“Too good to be true” 

Jay Tome, a former state prosecutor representing the 33 investors, accuses Kapoor of committing fraud and civil theft against his clients. Kapoor’s alleged inducements were “super attractive when you think about it,” Tome said. “This is a classic case of ‘it’s too good to be true,’ because it wasn’t. It was fraud.” 

Kapoor sympathizes with and shares the buyers’ frustrations, Schwartz wrote. “The acts not of Mr. Kapoor, but of a select few other parties, are what caused Location Ventures’ projects to come to a halt,” Schwartz wrote. “Further, Mr. Kapoor has offered to help the receiver ascertain how to maximize the recovery proceeds for all relevant project sites…for the benefit of all buyers and investors.”

Bernice Lee, a receiver appointed by a Miami federal judge to manage Urbin, its parent company Location Ventures, and various affiliates, declined comment. Chief U.S. District Judge Cecilia Altonaga gave Lee authority to conduct a full accounting of all of Location Ventures’ and Urbin’s assets, as well as a forensic audit of what happened to every single dollar that flowed into Kapoor’s real estate ventures.

Judge Altonaga, who also froze all of Kapoor’s assets, is presiding over a civil lawsuit against the embattled developer and his former companies filed by the U.S. Securities and Exchange Commission. The SEC alleges that Kapoor orchestrated a scheme to defraud more than 50 investors who contributed $93 million in equity for development of his real estate projects.

On Monday, Kapoor filed an amended affirmative defense, accusing the SEC of making false and misleading allegations against him based on “statements by a disgruntled former employee and two grasping Russian investors.”

“The SEC tried to verify the false claims by utilizing a forensic accountant,” the affirmative defense states. “That accountant did not understand the dynamics of the formation of the Location Ventures entities and the method of operations, and thus reached incorrect conclusions upon which the SEC relied.”

For instance, Kapoor disputed an allegation that he paid $10,000 a month for a private chef using Location Venture funds, by attaching an agreement between his former company and a hospitality firm. The agreement states that Location Ventures would pay the hospitality firm $10,000 a month to develop restaurant concepts for various real estate projects. 

Kapoor also challenged an allegation that he received $4.6 million in compensation for which he was not entitled. While his Location Venture salary was capped at $350,000 a year, each individual operating agreement for his real estate projects included fees between 1 percent and 4 percent he earned for loan guarantees, site acquisitions and raising investor funds, the affirmative defense states. 

“If Rishi guaranteed a $20 million loan, he was entitled to a $400,000 fee,” the affirmative defense states. “The purpose of the fees was to provide the guarantor with funds from which he could pay the lender a part of the loan amount if [Location Ventures] defaulted.”

New lawsuits will have to wait

While the five new lawsuits represent another dose of trouble for Kapoor, those cases will not be heard any time soon. 

Altonaga issued a stay in all pending litigation against Kapoor, Urbin, Location Ventures and various affiliates that applies to the five new lawsuits. 

According to those complaints, Kapoor engaged in “deceitful practices” designed to “lure, induce and trap” the 33 investors into signing purchase agreements for co-living units. Kapoor’s alleged incentives included a contractual promise to pay the investors quarterly no less than a 7 percent return on investment that would begin when deposits and purchase contracts were signed, the lawsuits allege. The payments would allegedly continue until the closing. 

Urbin would also “lease back the unit at closing, and then post-closing, sublease out the unit to third parties with a promised and represented guaranteed flow of rental income,” the lawsuits state. After a specified period of time after selling the units, Urbin would “buy back their units at a set purchase price amount,” the investors allege. 

Kapoor and Urbin allegedly collected $6 million in deposits from 21 investors who signed purchase contracts for units in the Miami Beach project. Another four investors allegedly made a combined $1.3 million in deposits for units in the Coconut Grove project. And eight investors allegedly paid $2.3 million in deposits for units in the Coral Gables project. All three developments have been canceled. 

The lawsuits accuse Kapoor of taking their deposits and using them to pay expenses at unrelated real estate projects, as well as misappropriating some of their funds for “personal matters and personal pleasures,” including a new yacht and boat dock.

Schwartz, Kapoor’s attorney, said his client will be vindicated once Kapoor’s forensic accountant gains access to records for Location Ventures, Urbin and the related affiliates. “We will be able to rebut all of the false claims about Mr. Kapoor,” Schwartz said. “Even at this early stage we have seen evidence that Mr. Kapoor received no improper compensation from the Location Ventures entities, and that neither his boat nor dock were purchased with any diverted funds.”