Monthly Archives: April 2021

Mitchell Kossoff (Photo via Kossoff, PLLC)

Real estate investors who say theyve been scammed out of millions in escrow funds from attorney Mitchell Kossoffs law firm now want to push the firm into bankruptcy.

A group of four investors filed a petition for involuntary bankruptcy Tuesday against Kossoff PLLC, listing slightly more than $8 million in misappropriated escrow funds, filings with New Yorks Southern District bankruptcy court show.

A representative for the Kossoff firm could not be immediately reached. The company has taken down its website since The Real Deal first reported last week that founder Mitchell Kossoff seemed to have disappeared, leaving several of the citys biggest multifamily landlords concerned about what happened to their escrow funds. Tuesdays lawsuit also contends he has not been located.

The Manhattan district attorneys office is also investigating Kossoff, Law360 previously reported.

The largest debtor of the four investors who filed suit, Miami-based developer Gran Sabana Corporation, also filed a civil claim in federal court alleging Mitchell Kossoff violated the contract on their $4.5 million escrow fund.

Rather than hold the money for the anticipated real estate transactions as Kossoff agreed to do (and was bound to do by legal and ethical requirements) Kossoff siphoned Gran Sabanas funds, as well as the funds of other clients, out of the escrow account for his own personal use, the lawsuit claimed.

The other creditors in the bankruptcy case are United American Land, which says its missing about $2.4 million, Louis and Jeanmarie Giordano, who say theyre missing about $1 million and Thomas Sneva, who claims hes missing more than $57,000.

The allegations echo those in at least two other lawsuits filed against Kossoffs firm last week. Westchester-based investor Rob Yaffa and Long Island-based investor SSM Realty Group each filed complaints over nearly $2 million missing escrow funds combined.

Contact Rich Bockmann

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Landlords try to push AWOL attorney Kossoff into bankruptcy - The Real Deal

Queen were so heavily in debt before the release of 1975's A Night At The Opera, they would have been forced to split if the album had not been a success.

The bands fourth album, which featured the hits Bohemian Rhapsody and Youre My Best Friend, became a lifesaver for the rockers, who would have been forced to give up on their dreams if it had flopped.

"We were not only poor, but we were in debt," guitarist Brian May says in a new video posted on the group's YouTube page.

"All the sound and lighting companies and the people that we worked with hadnt been paid. So we were at a really crucial point. We might have had to break up if that album hadnt done well. It was an expensive album, enormous complexity on there. Even looking at it now, I wonder how we did some of that stuff."

Bandmate Roger Taylor adds, "I remember when we went into the studio to make A Night At The Opera, it felt like make or break."

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Queen were close to bankruptcy before A Night at the Opera success - Music News

By T. D. Thornton

Two weeks after being granted an extra month to determine if Ahmed Zayat is hiding assets while seeking Chapter 7 bankruptcy protection, the court-assigned trustee in the case told a federal judge Friday that the allegedly insolvent owner and breeder of Triple Crown champ American Pharoah (Pioneerof the Nile) is still trying to evade scrutiny by withholding records.

And trustee Jeffrey Testa further warned that the longer the case drags on, the higher the risk is that Zayat will wipe away cloud-storage financials before the trustee can examine those documents.

Testa now wants the judge to compel turnover of Zayat's trove of electronic records, and to direct Zayat to cooperate with the investigation, according to an Apr. 16 United States Bankruptcy Court (District of New Jersey) filing.

In that document, the legal team for the trustee wrote that because of the serious and disturbing allegations of fraud at play in this case, the court should not leave it to chance that Mr. Zayat or his designees will act competently to maintain the integrity of the evidence.

Given the overwhelming allegations of fraud and expected sought-after delay, the Chapter 7 Trustee simply cannot wait any longer for access to the Cloud, the filing states. Although Mr. Zayat has represented that the Cloud is secure and that he is aware of his obligations, the longer the information on the Cloud remains in the hands of Mr. Zayat the more susceptible it is to manipulation or destruction, and this ongoing and unreasonable delay impedes the Chapter 7 Trustee's investigation.

The job of trustee in a voluntary bankruptcy case is to make sure that a debtor's claim of insolvency is on the up-and-up. In Zayat's case, he alleged in his initial filing last September that he has $19 million in debt but only $314.22 in assets, with a huge chunk of that money owed to Thoroughbred-related creditors.

People who file for bankruptcy protection generally try to cooperate with their assigned trustees, because without the trustee's seal of approval, their debt likely won't get forgiven by a judge.

But Zayat's case has been riddled with accusations of his stonewalling and evasion since the outset of the initial hearings. Zayat, through his attorney, has repeatedly denied those claims and stated that he has been a willing and cooperative petitioner.

Not only can a trustee file an objection if aspects of the filing don't seem legit, but if alleged fraud is uncovered in a bankruptcy petition, the Federal Bureau of Investigation can investigate, and the U.S. Department of Justice can prosecute.

The trustee's request to the judge on Friday capped a week of drawn-out, back-and-forth demand letters and phone conferences between the trustee and Zayat's legal team over whether and how the access to his cloud-storage records would be granted.

According to the filing, just when the trustee thought the parties had agreed on safeguards that would satisfy Zayat's concerns about not wanting anyone to read his family's personal emails, Zayat on Apr. 15 instead proposed an unworkable alternative, which essentially was that the trustee should ask for specific financials it believed were stored in the Cloud and Zayat would retrieve them for the trustee.

This proposed process was simply a close cousin of Mr. Zayat's previous proposals designed, in the Trustee's view, to dictate and control the process contrary to law [and] leave the Cloud unsecured, delay, and make Mr. Zayat the lynchpin of any document search and review, the filing states.

Mr. Zayat's primary basis for refusing to grant the requested access is that the Cloud allegedly commingles and contains his emails and those of his family members that are supposedly unrelated to the Debtor's business and that might comingle and contain, among other things, HIPAA-implicated, non-business, and attorney client-privileged communications, the filing continues.

The fact that Debtor's principal and his family members supposedly decided to mix business and non-Debtor affairs does not negate Debtor's statutory duty to turn over property of the estate and recorded information to the Chapter 7 Trustee, the filing asserts. There is simply no valid reason why the Chapter 7 Trustee should not be granted access to independently secure the Cloud. The law does not support Mr. Zayat's position

Given these circumstances and Mr. Zayat's decision not to allow the Chapter 7 Trustee to have access to and independently secure the Cloud and its contents raise serious concerns on the part of the Chapter 7 Trustee that the cloud and its contents might not be secure while under Mr. Zayat's exclusive possession and control, and that the Chapter 7 Trustee might be obstructed in reviewing documents that can lead to recoveries for the benefit of all creditors.

The Chapter 7 Trustee has already taken steps to engage a reputable IT partnerEpiqto take control of the Cloud, preserve it, and copy its contents. Mr. Zayat will have access copies to any information on the Cloud once it is secured; thus there is and will be no prejudice to Mr. Zayat or his family members, the filing states.

MGG Investment Group, LP, the lender that is separately suing Zayat and his family members for allegedly obtaining a $24-million loan by fraud and then not repaying it, has alleged in court documents that the trustee needs to examine bank accounts in the names of Zayat's wife (Joanne Zayat) and son (Justin Zayat) because they appear to have been used as conduits through which Sherif El Zayat, the Debtor's brother, loaned money to Ahmed Zayat.

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Bankruptcy Trustee Warns of Risk that Zayat Will Wipe Away Electronic Records - Thoroughbred Daily News

Galla Parkopened in October 2018 as a restaurant and bar at Third Street and Joe Nuxhall Way, a few stepsfrom the entrance to Great American Ball Park.(Photo: Enquirer file)

The operator of Galla Park at The Banks, PMG Cincinnati, Inc., announced Tuesday it had filed for Chapter 11 bankruptcy protection.

A press release notes Galla Park will stay open and continue to employ its roughly 60employees, but the restaurant and bar is urging supporters to defend it against the city of Cincinnati's allegations that the business is a nuisance.

The city filed a nuisance complaint against Galla Park last week in Hamilton County Common PleasCourt and is asking a judge to shut the business down for a year.

The complaint outlined underage drinking, bar fights and repeated police intervention among the reasons for seeking the designation.

Galla Park management has said it takes 'full responsibility for any and all reported circumstances within our control."

A court hearing on the matter has not yet been scheduled.

"Galla Park remains committed to the Downtown and Banks communities, and we are encouraged by the incredible support and words of encouragement we have received from our loyal employees, guests, and patrons," the press release posted on Galla Park's Facebook page said.

"We want to use that strength to preserve our investment in the Downtown and Banks communities, and if you want to help Galla Park to continue to thrive, then we encourage you to dine with us, and support us on your evenings on the town," the press release goes on to say. "After all, without you, none of what we have been able to achieve would have been possible."

It then asks supporters to "share your feelings of support with the City Manager and the Mayor's Office with the same enthusiasm you have shown us in the last week."

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Amid nuisance allegations, Galla Park at The Banks files for bankruptcy; pledges to remain open - The Cincinnati Enquirer

A drilling rig operates in the Permian Basin oil and natural gas production area in Lea County, New Mexico, U.S., February 10, 2019. REUTERS/Nick Oxford/File Photo

Bankruptcies by North American oil producers rose to the highest first-quarter level since 2016, according to a report released on Thursday by law firm Haynes and Boone, as some energy firms struggled to recover from the 2020 crash in oil prices.

There were eight bankruptcies by North American oil and gas producers in the first quarter of 2021, versus 17 in the first quarter of 2016 - the last time U.S. crude futures dipped under $30 a barrel. Prices have bounced back from year-ago lows, trading around $63 a barrel on Thursday.

The first quarter was marked by filings from relatively smaller firms, with just $1.8 billion in aggregate debt for the quarter. Last year, companies that filed for bankruptcy held $53 billion in aggregate debt, the highest total since 2016, when debt among filers totaled $56.8 billion, according to the report.

HighPoint Resources Corp was the largest debt-holder to file for the quarter, with $905 million in secured and unsecured debt.

Five oilfield service companies also filed for bankruptcy in the first quarter. Offshore driller Seadrill Ltd (SDRL.OL) accounted for most of the sector's $7.2 billion debt, according to the report.

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North American oil bankruptcies hit highest Q1 level since 2016 -Haynes and Boone - Reuters

Courtyard by Marriott Dallas Market Center, one of Hospitality Investors Trust's properties at the time of its bankruptcy.

The economy's recent improvements didn't take effect quickly enough to save a hotel REIT focused on urban properties.

Hospitality Investors Trust, a public, nontraded REIT formerly known as American Realty Capital Hospitality Trust, is preparing to hand over all of its assets to Brookfield Asset Management in a prepackaged bankruptcy deal, Bloomberg reports. The REIT announced in itsyear-end Securities and Exchange Commission filingthat it expected to run out of cash needed to pay debt obligations in the first half of this year.

In the same filing, HIT noted that Brookfield would be the only potential source of additional liquidity and that it already owns all of the company's preferred equity, worth $441M. HIT ended 2020 with over $1B in debt obligations and is under forbearance with its mezzanine lenders through the first half of this year, Bloomberg reports. Law firm Proskauer Rose and investment bank Jefferies Financial Group have been advising HIT on its portfolio decisions.

HIT owns around 100 hotels across the U.S., focused in the Southeast but with a scattering of properties in the Northeast and as far west as California. The hotels it manages are all operated under the banners of brands owned by Marriott International, Hilton Worldwide Holdings or Hyatt Hotels Corp.

Though BAM's preferred equity makes up only 43% of the common stock shares of the company, its ability to assume HIT's debt in a takeover would likely wipe out all other ownership shares, Bloomberg reports. Brookfield's ownership deal called for regular cash payments, which HIT hadalready converted to payment in kind before the latest development.

Though improving weather and widening availability of coronavirusvaccinations havebegun to unleash the pent-up demand for travel in the U.S. economy, hotels that depend more on business travel or other nontourism business have not been included in that early turnaround. Eagle Hospitality Trust was a similar casualty, filing for bankruptcy in February.

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Hotel REIT To Turn Control Over To Brookfield In Bankruptcy Deal - Bisnow

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(Bloomberg) -- China Evergrande New Energy Vehicle Group Ltd.s expansive pop-up showroom sits at the heart of Shanghais National Exhibition and Convention Center. With nine models on display, its hard to miss. The electric car upstart has one of the biggest booths at Chinas 2021 Auto Show, which starts Monday, opposite storied German automaker BMW AG. Yet its bold presence belies an uncomfortable truth -- Evergrande hasnt sold a single car under its own brand.Chinas largest property developer has an array of investments outside of real estate, from soccer clubs to retirement villages. But its the recent entry into electric cars thats captured investors imaginations. Shareholders have pushed Evergrande NEVs Hong Kong-listed stock up more than 1,000% over the past 12 months, allowing it to raise billions of dollars in fresh capital. It now has a market value of $87 billion, greater than Ford Motor Co. and General Motors Co.Such exuberance over an automaker that has repeatedly pushed back forecasts for when it will mass produce a car is emblematic of the froth that has been building in EVs over the past year, with investors plowing money into a rally that briefly made Elon Musk the worlds richest person and has some concerned about a bubble. Perhaps nowhere is that more evident than in China, home to the worlds biggest market for new energy cars, where a mind-boggling 400 EV manufacturers now jostle for consumers attention, led by a cabal of startups valued more than established auto players but which have yet to turn a profit.Evergrande NEV was a relatively late entrant to that scene.In March 2019, Hui Ka Yan, Evergrandes chairman and one of Chinas richest men, vowed to take on Musk and become the worlds biggest maker of EVs in three to five years. Tesla Inc.s Model Y crossover had just had its global debut. In the two years since, Tesla has gained an enviable foothold in China, establishing its first factory outside the U.S. and delivering around 35,500 cars in March. Chinese rival Nio Inc. earlier this month reached a significant milestone when its 100,000th EV rolled off the production line, prompting Musk to tweet his congratulations.Read more: Nio, Xpeng Exude Optimism as EVs Boom: Shanghai Auto ShowDespite his lofty ambitions and Evergrande NEVs rich valuation, Hui has repeatedly pushed back car-production targets. The tycoons coterie of rich friends, among others, have stumped up billions, but making cars -- electric or otherwise -- is hard, and hugely capital intensive. Nios gross margins only flipped into positive territory in mid-2020, after years of heavy losses and a lifeline from a municipal government.Speaking on an earnings call in late March after Evergrande NEVs full-year loss for 2020 widened by a yawning 67%, Hui said the company planned to begin trial production at the end of this year, delayed from an original timeline of last September. Deliveries arent expected to start until some time in 2022. Expectations for annual production capacity of 500,000 to 1 million EVs by March 2022 were also pushed back until 2025. Still, the company issued a buoyant new forecast: 5 million cars a year by 2035. For comparison, global giant Volkswagen AG delivered 3.85 million units in China in 2020.Its not just Evergrandes delayed production schedule thats raising eyebrows. A closer look under the companys hood reveals practices that have industry veterans scratching their heads: from making selling apartments part of car executives KPIs, to attempting a model lineup that would be ambitious for even the most established automaker.Weird CompanyIts a weird company, said Bill Russo, the founder and chief executive officer of advisory firm Automobility Ltd. in Shanghai. Theyve poured a lot of money in that hasnt really returned anything, plus theyre entering an industry in which they have very limited understanding. And Im not sure theyve got the technological edge of Nio or Xpeng, he said, referring to the New York-listed Chinese EV makers already deploying intelligent features in their cars, like laser-based navigation.A closer look at Evergrande NEVs operations reveals the extent of its unorthodox approach. While its established three production bases -- in Guangzhou, Tianjin in Chinas north, and Shanghai -- the company doesnt have a general car assembly line up and running. Equipment and machinery is still being adjusted, according to people who have seen inside the factories but dont want to be identified discussing confidential matters.In a response to questions from Bloomberg, Evergrande NEV said it was preparing machinery for trial production, and would be able to make one car a minute once full production is reached.The company is targeting mass production and delivery next year of four models -- the Hengchi 5 and 6; the luxe Hengchi 1 (which will go up against Teslas Model S); and the Hengchi 3, according to people familiar with the matter. The company has told investors it aims to deliver 100,000 cars in 2022, one of the people said, roughly the number of units Nio, Xpeng Inc. and Li Auto Inc., the other U.S.-listed Chinese EV contender, delivered last year, combined.Its workers are also being asked to help sell real estate, the backbone of the Evergrande empire.New hires are required to undergo internal training and attend seminars that drill them on the companys property history and have nothing to do with car making. In addition, employees from all departments, from production-line workers to back-office staff, are encouraged to promote the sale of apartments, whether through posting ads on social media or bringing relatives and friends along to sale centers to make them appear busy. Managerial-level staff even have their performance bonuses tied to such endeavors, people familiar with the measure said.Meanwhile, the ambitious targets have Evergrande NEV turning to outsourcing and skipping procedures seen as normal practice in the industry, people with knowledge of the situation say.While its hiring aggressively and recently scored Daniel Kirchert, a former BMW executive who co-founded EV startup Byton Ltd., the firm has contracted most of the design and R&D of its cars to overseas suppliers, some of the people said. Contracting out the majority of design and engineering work is an unusual approach for a company wanting to achieve such scale.14 Models At OnceOne of those companies is Canadas Magna International Inc., which is leading the development of the Hengchi 1 and 3, one of the people said. Evergrande NEV has also teamed with Chinese tech giants Tencent Holdings Ltd. and Baidu Inc. to co-develop a software system for the Hengchi range. It will allow drivers to use a mobile app to instruct the car to drive via autopilot to a certain location and use artificial intelligence to switch on appliances at home while on the road, according to a statement last month.A spokesperson for Evergrande said it was working with international partners including Magna, EDAG Engineering Group AG and Austrian parts maker AVL List GmbH in developing 14 models simultaneously. Representatives from Magna declined to comment. A Baidu spokesperson said the company had no further details to share, while a representative for Tencent said the software venture is with a related firm called Beijing Tinnove Technology Co. that operates independently. Tinnove didnt respond to requests for comment.Rather than staggering model releases, Evergrande NEV appears to be rolling out every type of car all at once under its Hengchi brand, which sports a roaring gold lion on the badge and translates loosely to unstoppable gallop. The nine models being launched span almost all major passenger vehicle segments from sedans to SUVS and multi-purpose vehicles. Prices will range from about 80,000 yuan ($12,000) to 600,000 yuan, although the final costs could change, a person familiar said.Thats a completely different product development strategy to EV pioneers like Tesla, which only has four models on offer. Nio and Xpeng have also chosen to focus on just a handful of marques, and even then are struggling to break into the black.The market has proved the effectiveness of the one product in vogue at one time strategy, said Zhang Xiang, an automobile industry researcher at the North China University of Technology. Evergrande is offering many products and expects a win. Theres a question mark over whether this will work.Without any long-term carmaking nous, Evergrande has issued uncompromising directives to meet its latest production targets, according to the people. Two models, including the Hengchi 5, a compact SUV that rivals Xpengs G3, are targeting mass production in a little over 20 months. To hit that timing, certain industry procedures, like making mule cars, or testbed vehicles equipped with prototype components that require evaluation, may be skipped, people familiar with the situation said. Evergrande told Bloomberg it has entered a sprint stage toward mass production.As it is, Bloomberg could only find one instance where the Hengchi 5 has been showcased in public, in photos and grainy footage released by Evergrande in February as the cars drove around a snow-covered field in Inner Mongolia. The companys shares surged to a record.Glossing over those steps is unusual, said Zhong Shi, a former automotive project manager turned independent analyst.Theres a standard engineering process of product development, validation and verification, which includes several laboratory and road tests in China and everywhere else, Zhong said. Its hard to compress that to shorter than three years.While theres no suggestion Evergrandes approach violates any regulations, its stock-market run could be in for a reality check. After similarly hefty market gains, some EV startups in the U.S. that have yet to prove their viability as revenue-generating, profitable entities have lost their shine over the past few months amid concern about valuations and as established carmakers like VW move faster into EV fray.Read more: The End of Teslas Dominance May Be Closer Than It AppearsThe industrys multi-billion dollar surge also hasnt escaped Beijings attention. Evergrande NEV shares dipped lower last month after an editorial from the state-run Xinhua news agency highlighted concerns about how the EV sector is evolving. Of particular worry are companies that are shirking their responsibility to build quality cars, a blind race by local governments to attract EV projects, and high valuations by companies that have yet to deliver a single mass-produced car, according to the missive, which named Evergrande specifically in that regard. The huge gap between production capacity and market value shows there is hype in the NEV market, it said.Still, Evergrande NEVs stock has gained 18% since then, buoyed by the outlook for Chinas electric-car market. EVs currently account for about 5% of Chinas annual car sales, BloombergNEF data show, with demand forecast to soar as the market matures and electric-car prices fall. EV sales in China may climb more than 50% this year alone, research firm Canalys said in a February report.With competition also on the rise, some outside Evergrande NEVs loyal shareholder base remain skeptical.The market is getting crowded but unless you have a preferred lane, theres not much chance to win, Automobilitys Russo said. Maybe theres some synergy with the property businesses but right now its an EV story, and a pretty expensive one.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.2021 Bloomberg L.P.

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18 Restaurant Chains That Have Filed for Bankruptcy - Yahoo Finance