Notice of Completed Sale of Puerto Rican Villa Gabriela Properties

On January 13, 2023, the Receiver and his professionals finalized the closing of the “Villa Gabriela,” Properties specifically the properties listed below:

Condominium Villa Gabriela, Apartment PH1-A/PH 1-B located at 109 De la Cruz Street, San Juan, Puerto Rico 00901;
Condominium Villa Gabriella, Apartment 2-E located at 109 De la Cruz Street, San Juan, Puerto Rico 00901;
Parking Space #321 located at Cochera San Francisco, Luna Street #204, San Juan, Puerto Rico 00901; and
Parking Space #325 located at Cochera San Francisco, Luna Street #204, San Juan, Puerto Rico 00901.

The sale of Villa Gabriela closed on January 13, 2023. Prior to the Closing Date, the Receiver worked diligently with Puerto Rican legal counsel to facilitate all aspects of Closing, in addition to requesting court approval for the amended sale price of $1,690,000.00. Two months prior to the Closing, the Purchaser terminated the Purchase and Sale Contract due to the “passage of time” since the Purchase Agreement had been signed. After this issue arose, the Receiver took immediate steps to negotiate new terms that were approved by the court and favorable to the defrauded investor claimants. The proceeds from the sale brought in $1,606,053.00 to the Receivership Estate.

Due to the Receiver’s efforts, the Closing occurred as planned – bringing in necessary funds to the Receivership Estates. A great deal of legal work was expended during the Reporting Period to assist the Receiver’s real estate professionals in finalizing the Closing, preparing the Closing documents, working with the Receiver’s Puerto Rican legal counsel, handling Post-Closing issues, communicating regularly with the Purchaser on all aspects of the Properties, ceasing the continued HOA payments and management of the Properties, and communicating regularly with the Purchaser’s legal counsel.

Receiver Distributes $3.5M to Investor Claimants in Second Interim Distribution

The Receiver received Court approval for his Unopposed Motion to Approve Second Interim Distribution, in which the Receiver sought an Order approving a distribution of $3,500,000.02 to the Investor Claimants. (Doc. 304.) This distribution amount represents a recovery of $10.6% of the Total Allowed Amounts of Investor Claims. Through his CPA Professionals, the Receiver prepared individual checks to the investor claimants designating the distribution amount for each claimant. The Receiver prepared letters to accompany the distribution checks explaining the process and each individual claimant’s distribution amount. At present, all claimant investors have cashed their Second Distribution checks and the money has been distributed to the investors. Many investors have expressed gratitude to the Receiver for effectuating this Second Distribution. At present, the Receiver and his staff are preparing a motion for a Third Interim Distribution of $2.3M to the investors, which will leave approximately $2.3M in the Receivership Estates Servis Accounts.

To date, the Receiver has returned a total amount of $18,037,656.82 to the investor claimants in this Receivership.

Notice of Completed Sale of 152 Tetuan Street Building

On January 29, 2021, Mark A. Kornfeld, Esq., as Receiver (the “Receiver”), filed his Motion seeking Court approval of the sale of the property located at 152 Tetuan Street, Old San Juan, Puerto Rico, 00901 (the “Property”) and also the ability and associated procedures for interested parties to submit a statutory overbid for the Property pursuant to 28 U.S.C. § 2001(b) (Doc. 174) (the “Motion”). The Court entered an Order granting the Motion on March 24, 2021 (Doc. 206). On March 31, 2021, the Receiver published a notice of the proposed sale (the “Notice of Sale”) in El Nuevo Dia and the Sarasota Herald Tribune. See Doc. 209. The Notice of Sale indicated that any interested party had until April 10, 2021 to submit to the Receiver any bona fide offer to purchase the Property pursuant to 28 U.S.C. § 2001(b), which in relevant part required a minimum bid of at least $2.31 million (i.e., at least 10% higher than the proposed sale price of $2.1 million).

The Receiver received four (4) bona fide offers within ten days after the publication of the Notice of Sale. See Doc. 222. Pursuant to Paragraph 8 of the Order, the Receiver exercised his sole discretion and business judgment in evaluating the offers, and he ultimately determined to accept the highest offer of $4.15 million submitted by Propiedades Ceiba, LLC – nearly 100% higher than the highest offer received during the previous marketing period. On May 11, 2021, the Receiver officially closed on the sale of the Property. After payment of commissions and other statutory closing costs, the sale represents a net recovery of approximately $4.0 million for the Receivership Estate.

Introduction

Welcome to the website of Receiver, Mark A. Kornfeld. On March 6, 2020, Mr. Kornfeld was appointed as Receiver in a civil enforcement action, styled Securities and Exchange Commission v. Kinetic Investment Group, LLC et al., Case No. 8:20-cv-00394-WFJ-SPF in the United States District Court for the Middle District of Florida, Tampa Division.

This website has been created to provide convenient access to information about the Receivership, including important updates and select District Court documents. As the Receiver’s work progresses, additional information will be added to this website, including information regarding a plan of distribution to creditors of any assets that are recovered and all forms required by the District Court for participation as a claimant in the distribution process. If you require further information not contained in this website, you may contact us.

Brief Case Summary

On February 20, 2020, the Securities and Exchange Commission (SEC) filed a civil enforcement action in the United States District Court for the Middle District of Florida against defendants Kinetic Investment Group, LLC and Michael Scott Williams (collectively, defendants). In their Complaint, the SEC alleged that the defendants conducted a fraudulent and unregistered securities offering that raised approximately $39 million from several dozen investors located in Florida and Puerto Rico. As set forth further in the Complaint, the SEC also accused Williams of misappropriating at least $6.3 million through undisclosed loans to himself and entities he controlled. In addition to the defendants, the Complaint also names six relief defendants that received proceeds of the alleged fraud without any legitimate entitlement to the funds: Kinetic Funds I, LLC; KCL Services, LLC d/b/a Lendacy, Scipio, LLC; LF42, LLC; El Morro Financial Group, LLC; and KIH, Inc. f/k/a Kinetic International, LLC.

The SEC sought various forms of relief against the defendants including an asset freeze and the appointment of a receiver to assist in marshalling assets on behalf of creditors, including injured investors. Defendants opposed this relief.

On March 6, 2020, the Court held a hearing on the SEC’s motions and that same day entered an Order appointing Mark Kornfeld as Receiver over Kinetic Investment Group and all Relief Defendants. Mr. Kornfeld is an attorney with the Buchanan Ingersoll & Rooney PC law firm and his bio is available here. In the Order Appointing Receiver, the Court directed the Receiver to (i) administer and manage the business affairs, funds, assets, and any other property of the defendants and relief defendants; (ii) marshal and safeguard the assets of the defendants and relief defendants; (iii) investigate the manner in which the affairs of the defendants and relief defendants were conducted and institute such legal proceedings for the benefit of the defendants and relief defendants and their investors and creditors as the Receiver deems necessary; and (iv) take whatever actions are necessary for the protection of the investors. The Receiver intends to fulfill his duties and responsibilities as efficiently and effectively as possible. The District Court overseeing this Receivership has broad powers and wide discretion to determine the appropriate relief.

The Court subsequently approved the Receiver’s motions to retain various professionals to assist him in his duties. Lauren V. Humphries serves as Mr. Kornfeld’s lead counsel.

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