SEC charges: Rishi Kapoor and Location Ventures defrauded investors

Rishi Kapoor is in deeper trouble. Last week, the U.S. Securities and Exchange Commission sued Kapoor, his former firm, Location Ventures, and its subsidiaries and affiliates, for allegedly defrauding more than 50 investors who contributed $93 million for his real estate projects. 

The civil lawsuit, filed Dec. 26 in Miami federal court, is the culmination of a year-long SEC investigation into Kapoor’s management of Location Ventures, the Coral Gables-based development firm he founded in 2016. The company is at the center of a series of scandals that torpedoed Kapoor’s ascent as one of South Florida’s major real estate players. One of the scandals involved Location Ventures’ affiliate, Urbin, paying Miami Mayor Francis Suarez a $10,000 a month consulting fee for nearly two years when Kapoor sought city approvals for a Coconut Grove co-living and co-working mixed-use project. 

In July, Kapoor resigned as CEO of Location Ventures. The company’s remaining investors brought in retired judge Alan Fine to liquidate all of its assets to pay off creditors amid an avalanche of lawsuits filed by vendors, law firms and investors involved with Location Ventures and its affiliates. 

On Dec. 27, Chief U.S. District Judge Cecilia Altonaga, who is presiding over the SEC case, froze all of Kapoor’s assets, including funds in five bank accounts. Altonaga also ordered that Kapoor provide a sworn accounting of all his assets and prohibited him from destroying any documents related to Location Ventures and its real estate projects. 

Kapoor, who is also facing criminal investigations at the county and federal level, denied wrongdoing. 

“After months of cooperation with the SEC, and then silence for quite some time, we are deeply disappointed that they have taken this rash action without further opportunity for dialogue,” Kapoor said via email. “The allegations, put forward by a limited set of adverse relationships, are unfounded, twisted and/or flat out false.”

Real estate investment scheme

The SEC complaint alleges that Kapoor, Location Ventures and its affiliates operated a real estate investment scheme from January 2018 until March of last year that violated anti-fraud provisions of federal securities laws. 

For instance, Kapoor allegedly induced investors by falsely claiming that he and members of his family contributed $13 million to launch Location Ventures, the lawsuit states. They never contributed “any cash” to Location Ventures, the SEC alleges. 

Kapoor told The Real Deal that the SEC’s allegation “is both laughable and reckless in its lack of accuracy.”

To further his scheme, Kapoor allegedly intentionally understated construction and other estimated costs for real estate projects in pro forma budgets to make it appear prospective investors would realize higher returns, according to the complaint. Kapoor withheld information from investors when the actual project costs exceeded the estimates in the pro formas. And he directed Location Ventures employees to revise or remove damaging financial data from reports and meeting minutes, the SEC claims. 

Kapoor regularly ignored corporate formalities and commingled investor funds by executing more than $60 million in intercompany transfers, the lawsuit alleges. For instance, Kapoor allegedly moved about $4.5 million in buyer deposits for units at Urbin co-living projects in Coconut Grove and Miami Beach that were released from escrow, and used the funds for purposes unrelated to the construction of those projects. 

The SEC also accuses Kapoor and some of his subordinates of using investor funds for lavish purchases for himself.

“Kapoor and other insiders misappropriated at least $6 million of investor funds — $4.3 million of which Kapoor misappropriated for himself,” the complaint states. “During the same period, Kapoor purchased a 2023 68.7-foot yacht for over $5 million, a dock at the Cocoplum Yacht Club for $695,000, leased a 2020 600LT Spider McLaren sports car, and paid a private chef $10,000 per month.”

Prior to his resignation, Kapoor transferred more than $19 million, nearly all of Location Ventures’ remaining cash, to the company’s largest investor, an entity managed by Miami Beach couple Alex Kleyner and Diana Ulis, the complaint alleges. The husband and wife have a pending lawsuit in Miami-Dade Circuit Court against Kapoor that alleges he still owes them another $25 million that they invested in Location Ventures and two of its projects. 

Kapoor looks forward to fighting the allegations “and clearing the air,” he said in his emailed response. “Like others have unfortunately experienced in this current climate, we believe that this action is an overreach by the SEC,” Kapoor said. “To those that have made a point to try and hurt me and our company for your own gain, we look forward to the truth finally coming out in the right venue, and prevailing in this matter.”

Kapoor allegedly put his personal interests first

The SEC complaint cites a resolution by Location Ventures’ board of directors that accused him of putting “his personal interests before the interests of the members and the company by taking millions of dollars from the company” without authorization in any approved budget. 

For instance, Kapoor was supposed to be paid an annual salary of $350,000 that could not be increased above $400,000 without the board’s approval, the lawsuit states. But in 2021 and 2022, Kapoor paid himself $629,000 and $1.7 million, respectively, without board approval. Kapoor also allegedly failed to remit about $1.4 million in federal payroll taxes, despite deducting the funds from the paychecks of Location Ventures employees. 

Kapoor allegedly admitted to taking some actions that “misappropriated and misused assets of the company and/or company affiliates,” according to an SEC filing that cites the Location Ventures board’s resolution. The board also noted that Kapoor’s alleged misconduct had led to investigations by the SEC and the FBI. 

Since leaving Location Ventures, Kapoor’s life has unraveled. A lender is seeking to foreclose on his Cocoplum waterfront home that he bought for $6 million in 2021. And in November, the U.S. Marshals Service seized Kapoor’s new yacht after another lender sued him and his wife for allegedly defaulting on a $4.3 million boat loan. 

In his emailed response, Kapoor said the SEC ignored opportunities to interview “unbiased stakeholders who we are confident will rebut what has been accused.” Kapoor alleged a whistleblower — former Location Ventures CFO Greg Brooks — demanded a $270,000 payment, or else he was going to file a lawsuit with “a laundry list of twisted or unfounded claims.” Brooks, who disclosed the business arrangement between Urbin and Mayor Suarez, settled a wrongful termination complaint against his former employer in September. 

Kapoor also alleged that an unnamed investor whom “we had an unfortunate series of conflicts with, including personal and financial threats against myself and others,” also made false accusations against him. 

“This is all the result of a select few actors weaponizing and manipulating a government agency for their own agendas,” Kapoor said. “With [all due] respect, the SEC has acted without corroborating these allegations.”