More than five months after the founder of troubled real estate crowdfunding platform Prodigy Network stepped down, investors say the firm has gone quiet about its efforts to turn around faltering projects, leaving millions of dollars in investor funds hanging in the balance.
This week, a group of investors from Singapore filed a lawsuit against Prodigy, claiming the firm promised them an option to collectively redeem $1.8 million in debt and equity on a hotel project in Chicago, but had so far ignored their redemption requests dating back to June. It’s the second investor lawsuit filed against the company in the past six months.
At the same time, the company continues to advertise investment opportunities on its website, offering targeted returns of up to 18 percent.
Crowdfunding gained popularity around 2012 as a novel way to open real estate to a wider pool of investors, but many early firms have struggled to maintain momentum. Some have closed their operations while others have pivoted to working with institutional investors.
Prodigy’s founder and CEO, Rodrigo Niño, built his company in 2011 after being treated for cancer, galvanizing a base of investors from all over the world to pour $690 million into at least five real estate projects. In 2019, as accusations mounted of financial misappropriation, investment losses and poor communication, Niño told The Real Deal that he would step down as CEO to focus on his health, as his cancer had returned.
Since then, multiple investors say the company has failed to make good on promises to communicate with them formally about their investments, and at least one has contacted the Securities and Exchange Commission, according to emails reviewed by TRD.
“I fear that I was … betrayed,” said Fernando Acedo Diaz, a Venezuelan investor who previously worked in real estate and now imports goods to sell in his country. Acedo invested $70,000 — money he said he was saving for his six-year-old daughter’s education — into Prodigy’s extended-stay property known as AKA Wall Street, in the Financial District.
According to an August capital statement reviewed by TRD, the value of Acedo’s investment has fallen by roughly $41,000. It’s the last statement he received.
“It’s very difficult,” he said.
To investors and the public, the company’s plan to rebuild also remains unclear. Late last year, Niño said a potential buyer was conducting due diligence to acquire the firm, but the status of the deal has yet to be made public.
Niño declined to comment for this story, and representatives for the company did not respond to messages. Prodigy’s partners in New York and Chicago — Shorewood Real Estate Group, Korman Communities, Marc Realty Capital and DDG — also did not respond to messages seeking comment.
A real estate developer based in Mexico said his wife invested $100,000 into a Prodigy project on Park Avenue South about two years ago, believing Prodigy’s marketing that they could receive up to 20 percent returns.
Last year, the couple flew to New York to meet with a Prodigy employee, hoping to get answers about their investment, which has plummeted in value.
The developer said the last official report on his wife’s investment was seven months ago. He is now trying to corral other investors in Mexico to consider legal options.
“We don’t know what to do here in Mexico because it’s expensive to have a lawyer in the United States,” he said.
The latest complaints from investors are part of a pattern that has dogged Prodigy for more than a year, after investors stopped receiving payments from Prodigy’s developments toward the end of 2018.
Niño told TRD last year that investors would need to wait until they exited their investments to know how much they had gained or lost. He acknowledged some of the firm’s projects had struggled financially, but said The Assemblage, Prodigy’s wellness-focused co-working brand, was slowly gaining ground.
Niño also insisted the company would bounce back, and had hired two real estate firms to work on the portfolio. A spokesperson for one of them, Newmark Knight Frank, said the firm was providing leasing advisory services to Prodigy only. The other, Eastdil Secured, was tasked with appraising the value of AKA Wall Street. A spokesperson for the firm declined to comment.
A third case, from a Florida-based investor who poured $1.5 million into Prodigy’s Chicago hotel development, is also ongoing. The suit claimed Prodigy was refusing to return the investor’s money and had mismanaged investor funds. In court records, Prodigy said investor monies were “appropriately spent” and that the 16-story development is active.
Jerome Dineen contributed to this article.