Ex-LuxUrban Leaders Settle Investos’ Fraud Lawsuit

As LuxUrban plods along through liquidation and insolvency proceedings, two of its former chief executive officers are ridding themselves of a class-action lawsuit that predates the hotel operator’s collapse.

The firm’s one-time CEOs Brian Ferdinand and Shanoop Kothari settled a class-action case where they were accused of misleading investors about hotel leases, Bisnow reported. The $3 million agreement was revealed in filings with the U.S. District Court for the Southern District of New York.

Investors filed the lawsuit in 2024, alleging that a handful of hotel leases LuxUrban claimed to have signed without finalizing them constituted fraud. Ferdinand and Kothari were co-CEOs at the time of the suit.

After several leadership shakeups, a judge denied a motion to dismiss the lawsuit, ruling it “virtually inconceivable” that Ferdinand and Kothari were in the dark about the incomplete leases. The company was ultimately released from the case after it filed for Chapter 7 liquidation in October.

If the court approves the settlement, payment will come from LuxUrban’s directors and officers liability insurance. None of the parties involved commented publicly in the aftermath of the settlement.

The short-term hotel operator’s Chapter 11 case was converted to Chapter 7 in late October after federal officials accused company leadership of “gross negligence” and mismanagement. The move handed control of the firm to an independent trustee. At the time, there were more than 400 creditors who together claimed to be owed roughly $123.6 million.

Nearly $119 million of that stems from unpaid state taxes and penalties owed to New York’s Department of Taxation and Finance. LuxUrban’s lawyers consented to the liquidation order, saying there were “no meaningful assets” to recover.

LuxUrban filed for bankruptcy the previous month after abruptly shuttering its leased hotels while still accepting online reservations and payments. Guests reportedly showed up to locked doors and dark lobbies.

In January, Ferdinand filed for Chapter 7 personal bankruptcy, reporting more than $98 million in debt. The overwhelming majority of his liabilities are tied to personal guarantees he signed on the company’s failed New York City master leases.

— Holden Walter-Warner