Prodigy Network sued by investors for assembly
A 12-story coworking space on Park Avenue, marketed as a way to foster a “shift in collective consciousness,” is now at the center of a lawsuit in which 50 investors accuse fraud.
The group is trying to recoup its $ 12.7 million investment from crowdfunding company Prodigy Network for the project at 331 Park Avenue South, known as “The Assemblage.”
For Prodigy, the lawsuit is the latest in a growing number of financial and legal issues. The company was sued by investors earlier this month over similar allegations over its property in 84 Guillaume Street.
The latest complaint was filed Wednesday in the New York State Supreme Court.
He alleges that Prodigy made a series of misrepresentations to investors, claiming they would earn a preferred 8% annual return – paid twice a year – and that the building had an appraised value of at least $ 120 million.
Instead, investors claim the money was used to fund the personal expenses of Rodrigo Niño, the founder of Prodigy. Niño died in may at 50 years after a battle with cancer.
Prodigy also took a 16% commission from each of the investors which was never disclosed, according to the lawsuit.
The Assembly is a coworking and event space that emphasizes well-being and community. Prodigy recently sold one of its locations at 114 East 25th Street for $ 41.3 million, $ 10 million less than he paid.
At the 331 Park Avenue project, investors said they learned in early 2019 that Prodigy was experiencing cash flow difficulties and liquidity constraints. The crowdfunding company suspended payments to investors that summer, saying it was struggling due to competition from coworking companies such as WeWork, NeueHouse and The Wing.
But the struggles were actually due to Niño’s mismanagement, according to the lawsuit. By mid-2019, the fund’s cash balance had fallen below the amount needed to complete Park Avenue development. As of this month, Prodigy has been “imminently or currently insolvent,” according to the lawsuit.
The Park Avenue building was recently transferred by deed in lieu of the lender, according to the lawsuit. This avoids a foreclosure, but also any possibility of returning capital to the investors of the project.
Prodigy bought the building for about $ 50 million and invested an additional $ 70 million in development. The property was only valued at $ 51 million in 2019, according to the complaint.
“It is simply inconceivable that the project could implode under such circumstances,” reads the complaint.
Mark J. Astarita of Sallah Astarita & Cox, the attorney representing Prodigy, declined to comment.
Prodigy’s CFO Carey Fieldcamp did not respond to a request for comment. Adam Philip Moskowitz and George Eric Mastoris of Winston & Strawn, who have represented Prodigy on prior legal issues, also did not return a request for comment.
Niño, a former real estate broker, started Prodigy as a crowdfunding company in 2013 with the goal of making real estate investing accessible to everyone. He finished raise some $ 690 million investors from around the world to finance developments in New York, Chicago and his native Colombia. The company’s ambitious vision never materialized and it stopped making distributions to most investors at the end of 2018.