This suit has been a long time coming. Both the SEC and the Department of Homeland Security have been aware of the issues with this project since at least as early as March 31, 2015.
Investors in this project filed suit against the regional center, the promoters, and others in March 2015. The hotel at the center of this suit has been mired in litigation since at least 2012. The “151 ft. yacht” allegedly purchased with investors’ funds is named “M/Y Alibi,” owned by a Cayman Islands corporation, and was the subject of a 2015 admiralty action seeking unpaid fees from Robert Matthews, a defendant here as well. The SEC’s complaint mentions at least two bankruptcies related to Mr. Matthews that were not disclosed to investors.
Affiliates and associates of the individuals and entities named in this suit have been suing each other for the past four years. These suits include:
- 160 Royal Palm v. Black – 160 Royal Palm, LLC is a relief defendant, which owns the real estate for the investment project. Mr. Black was, and may still be a member of the LLC that owns 160 Royal Palm. 160 Royal Palm sought injunctive relief, and redress for trespass and theft of trade secrets. The allegations against Black include using bolt cutters to enter the property and removing records;
- Black v. Matthews – Mr. Black, in his personal capacity, sued the brother of one of the defendants named here. According to the SEC’s complaint, Gerry Matthews served as a nominee for defendant Robert Matthews, who controlled Palm House, LLC, the sole member of 160 Royal Palm (which owns the real estate);
- Black v. Matthews – Mr. Black also brought a shareholder’s derivative action against an assortment of defendants with varying links to this suit.
- KK-PB Financial v. 160 Royal Palm and Palm House Hotel – KK-PB Financial sought foreclosure of the hotel property at issue here. This suit is related to the SEC’s allegation that the defendants misrepresented Robert Matthews’ background;
- Titova v. Palm House – In 2016 an investor sued seeking an order granting her access to inspect corporate records;
- Palm House Hotel v. Matthews et. al – Palm House Hotel is the entity that received investors’ capital contributions. It then loaned funds to a limited liability company to acquire, develop, and operate the hotel. Palm House Hotel holds a mortgage as security for its loan and alleged that payments had not been made as scheduled in the loan agreement;
- Palm House Hotel, LLLP v. Palm House, LLC – a separate action arising from the same facts as the case above, seeking recovery of a loan secured by a note
- US Regional Economic Development Authority (USREDA) v. Matthews – USREDA, a relief defendant here, sued Gerry Matthews to recover funds that it wired for improvements to a house that he owned. USREDA is owned by defendant Joseph Walsh.
Unregistered broker-dealer activity is lurking behind the scenes of this action. At least one law firm has agreed to accept a “finder fee” from the defendants or their affiliates. This firm also represented at least one EB-5 investor and did not disclose the finder fee to its client. Similar facts have given rise to SEC complaints against attorneys for violating the broker-dealer provisions of the Exchange Act.