SEC Freezes Assets Of Developer Rishi Kapoor, Says He Defrauded Investors Of Millions

Embattled developer Rishi Kapoor, whose growing list of controversies ensnared Miami Mayor Francis Suarez, swindled investors and bankrolled a lavish lifestyle with misappropriated funds, according to a lawsuit filed by the Securities and Exchange Commission and unsealed in federal court this week.

The SEC alleges that Kapoor committed seven violations of securities laws as he “shuffled investor funds” among various entities and misappropriated at least $6M, including pocketing $4.3M himself, and misled investors about his personal investments in projects associated with Location Ventures and its Urbin affiliate. 

As part of the suit, the agency won a ruling from U.S. District Judge Cecilia Altonaga on Dec. 28 to freeze Kapoor's assets. 

The order from the U.S. District Court for the Southern District of Florida blocks Kapoor from accessing funds in five bank accounts and any of his other financial holdings. Altonaga ordered Kapoor to provide an accounting of all of his assets within two weeks and directed Kapoor, his business associates and corporate entities to preserve records related to the charges.

Through the complaint, the SEC is seeking to recover investor funds with interest, bar Kapoor from acting as an officer or director of any company that issues securities and impose civil monetary penalties.  

The suit names as defendants Kapoor and nearly two dozen corporate entities, including Location Ventures, the development firm he led before being forced out in July.

In an emailed statement to Bisnow, Kapoor said he was “deeply disappointed” by the SEC’s “rash action,” describing the suit as “the result of a select few actors weaponizing and manipulating a government agency for their own agendas.”

“The allegations, put forward by a limited set of adverse relationships, are unfounded, twisted and/or flat out false,” he said. “Like others have unfortunately experienced in this current climate, we believe that this action is an overreach by the SEC, and look forward to fighting these allegations and clearing the air.”

Kapoor raised around $93M from 50 investors between January 2018 and March 2023, according to the filing, which alleges that Kapoor made several misrepresentations to investors about the funding of Location Ventures, its structure and how their money would be spent. 

“Kapoor was the architect of a multi-pronged real estate offering fraud that misappropriated millions from more than 50 investors,” Eric Bustillo, director of the SEC’s Miami office, said in a statement that added the agency's investigation was ongoing.

The move to freeze Kapoor’s assets while the case proceeds “reflects our commitment to protecting investors and holding those who defraud them accountable for their actions,” Bustillo said.

The suit says Kapoor told investors that he and his partner had made a $13M cash investment in Location Ventures through an entity called Patriots United LLC, despite having never contributed the funds. 

Kapoor disputed that he and his partner hadn't provided funding to Location Ventures, describing the allegation as “both laughable and reckless in its lack of accuracy.”

The SEC also claimed Kapoor deliberately understated construction and other estimated costs on financial documents to entice prospective investors with higher projected returns. 

When actual costs exceeded those reported on the documents, Kapoor withheld the information from investors, directed employees to revise or remove financial data from reports, and continued to use the pro forma projections to raise additional funds, the SEC said in the suit, which quotes a Location Ventures employee as saying that “the budgets were a fiction.” 

Investors were also told their funds would go toward specific projects, with each development a distinct investment, but Kapoor instead regularly commingled the money, the SEC alleged.

Over the course of five years, more than $60M was moved between Location Ventures’ entities, including $4.5M in sales deposits for Urbin projects in Coconut Grove and Miami Beach that were released from escrow and used to fund activities unrelated to their construction, according to the lawsuit.  

“It was not uncommon for Kapoor to use investor funds from one project to pay for the expenses of another,” SEC attorneys alleged in the suit, which described the moves as a “complete disregard for corporate formalities.”  

The SEC said Kapoor made several luxury purchases while at the helm of Location Ventures, including the purchase of a 69-foot yacht for more than $5M, a lease on a 2020 McLaren Spider sports car and the hiring of a private chef for $10K a month. 

The U.S. Marshals Service seized the yacht in November as part of a separate lawsuit from a lender that alleges Kapoor defaulted on a loan used to purchase the boat. Kapoor’s $6M home is also facing foreclosure. 

Kapoor also boosted his annual salary well above limits set out in Location Ventures budgets, the suit alleges. His salary was capped at $350K, but Kapoor paid himself $629K in 2021 and $1.7M in 2022. The complaint claims that while Location Ventures withheld payroll taxes from its employees, it failed to pay nearly $1.4M in those taxes to the federal government.

The SEC also accused Kapoor of transferring $1.5M in funds from a Location Ventures entity directly to his bank account “for no apparent legitimate purpose” and alleged that a $1.2M payment was disbursed to Patriots United despite the entity having never contributed capital to the development firm or its subsidiaries.

The lawsuit marks the latest turn in a rapid fall from grace for Kapoor, a 39-year-old University of Miami graduate whose profile was rising in Miami real estate.

Kapoor and his development firm began facing scrutiny after the Miami Herald published a report in September that revealed Urbin had paid Suarez at least $170K in consulting fees as Kapoor sought help advancing a proposal for a Coconut Grove condo project. 

The report led to investigations from the SEC and FBI, which is probing whether the payments to Suarez constituted bribes. The SEC suit and Altonaga’s ruling make no mention of the payments or the FBI inquiry. Suarez, a real estate attorney, is allowed to work in the private sector while serving as mayor.

Kapoor was forced out as the head of Location Ventures in July, and Alan Fine, a former judge, was appointed by the firm’s board as a receiver to oversee the liquidation of the company’s assets to repay investors. 

Developments associated with Kapoor faced mounting lawsuits from unpaid bills and stalled amid permitting issues. Location Ventures or its affiliates have been hit with a $12M foreclosure lawsuit over a 61K SF office building at 299 Alhambra Circle, a $2M foreclosure suit at a Coral Gables development site at 1200 Minorca Ave., and a $4M suit over unsold condos at 515 Valencia Ave.

UPDATE, JAN. 3, 5 P.M. ET: The story has been updated to include a statement from an SEC official and add further details about the allegations against Kapoor.