SEC Sues Miami Developer Rishi Kapoor for Allegedly Defrauding Investors
Judge orders Kapoor’s assets to be frozen
By Julia Echikson January 4, 2024 6:14 pm
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Troubles continue to mount for Rishi Kapoor, the Miami developer who is facing allegations of financial wrongdoing, and whose close relationship with Miami Mayor Francis Suarez has come under scrutiny. The Securities and Exchange Commission (SEC) sued Kapoor, accusing him of defrauding investors and misappropriating funds.
U.S. District Judge Cecilia Altonaga granted the SEC’s motion to freeze Kapoor’s assets, writing that there was “good cause to believe that, unless it imposes an asset freeze, Kapoor could dissipate, conceal, or transfer from the jurisdiction of this court.”
Altonaga noted that, even with the injunction, Kapoor, who raised $93 million from investors, likely does not have the means to repay investors and pay a fine were the SEC to impose one.
In two weeks, Kapoor will have to provide “sworn accounting” of all his assets, including five bank accounts and his home in Coral Gables, which he bought for $6 million in 2021 and which are now facing foreclosure. In July, Kapoor stepped down from Location Ventures, the Coral Gables-based development firm he founded in 2016, which specialized in condo and multifamily properties.
In the 36-page civil lawsuit filed on Dec. 27 and unsealed Tuesday, the SEC lays out a series of allegations that amount to something of a ponzi scheme, accusing Kapoor of improperly funneling funds from one project to another, as well as providing false budgets and embezzling funds for himself.
“This is going to be a very difficult case for Kapoor to defend himself, based not only on the allegations made here, but also the evidence backing it up,” said Jeffrey Schneider, an attorney at Levine Kellogg Lehman Schneider + Grossman in Miami, who specializes in receiverships and is not involved in the case.
Kapoor is alleged to have misappropriated at least $6 million of investor funds, including taking $4.3 million for himself. He used the money to buy a 68-foot yacht for over $5 million and a dock at the Cocoplum Yacht Club for $695,000, to lease a McLaren sports car, and to pay a private chef a monthly $10,000 salary, according to court documents.
Another accusation revolves around Kapoor’s fundraising tactics. Kapoor told prospective investors that he had invested $13 million into Location Ventures.
But the SEC alleges that Kapoor never made the investment and instead “attempted to conceal the $13 million deficit within a web of companies, subsidiaries, and affiliates that grew to at least 36 companies and 15 real estate projects at various stages of acquisition and development.”
The SEC also alleges that Location Ventures’ budgets were works of “fiction,” in which construction costs were often misrepresented and for which Kapoor failed to get approval from the company’s board. For example, Kapoor’s yearly salary was supposed to be capped at $400,000. But the developer allegedly paid himself $629,600 in 2021 and $1,686,303 the following year without the board’s approval.
The 2022 salary was largely funded by the $14.7 million sale of a co-living building, called 800 Dixie. SEC alleges Kapoor took $1.328 million for himself, instead of repaying investors.
Kapoor could not be reached for comment, though he told the Miami Herald that he denied the allegations.
The case is likely to take at least two years to resolve, and will likely end with the SEC and Kapoor striking a deal, Schneider said. The agreement could include a fine and might bar Kapoor from working in real estate in some capacity.
In the meantime, the court is expected to appoint a receiver to recoup as much money as possible for investors and divy up the funds. Location Ventures’ projects, which include a rental development in Miami Beach under Location Ventures’ Urbin brand geared toward young professionals, will likely be sold off.
Some projects have already changed hands. In October, an investor who is currently suing Kapoor and Mumbai-based MICL Global bought a 1.6-acre site, where an Edition-branded condo project in Fort Lauderdale was planned, for $30 million.
Kapoor’s troubles blew into public view in May when the Miami Herald reported that Kapoor had paid Mayor Suarez a total of $170,000 — in $10,000 monthly payments — to help get a condo project in Coconut Grove approved.
Both Suarez and Kapoor have previously denied any wrongdoing, though the revelation prompted the FBI to open an investigation a month later.
Julia Echikson can be reached at jechikson@commercialobserver.com.
