Joseph Blinick was recently featured in an article in theGlobe and Mailabout the default on payments by Sunrise Homes (Sunrise) linked to the collapse of Fortress Real Developments Inc. (Fortress).
Joseph is part of the team at Bennett Jones LLP that represents KSV Restructuring Inc. (KSV), the court-appointed Receiver, to which Sunrise and its related parties—including Sunrise CEO Sajjan Hussain, COO Muzammil Kodwavi—were ordered to repay $10.5 million pursuant to a court-approved settlement.
Since 2019, FAAN Advisors Group Inc. (FAAN) has served as the trustee for the syndicated mortgage investors who lost money after the 2018 collapse of Fortress.
Sunrise had borrowed $8 million (which later became $9.8 million) in 2015 to fund a townhouse project named Unionvillas. In March 2021, Sunrise informed FAAN it would not be able to repay the full amounts, though it did not provide a plausible explanation for the sudden and marked decrease in the expected recovery.
Throughout 2022, KSV attempted to determine where the borrowed funds went and found evidence that millions of dollars were misappropriated.
When cross-examining Mr. Kodwavi on an affidavit filed in the proceeding, Joseph asked Mr. Kodwavi to explain why millions of dollars was transferred from the Unionvillas project to other Sunrise-owned development companies. Mr. Kodwavi answered that from time to time funds get transferred back and forth between projects and are returned to the original project when needed. However in this case, those funds never came back to the Unionvillas project.
In cross-examining Mr. Kodwavi on another section of his affidavit, Joseph asked Mr. Kodwavi to explain what looked like "cooked books". Joseph said KSV identified ledger records that indicate $1.4 million was paid to Mr. Kodwavi while bank statements indicate $4.9 million was in fact paid to him. Mr. Kodwavi failed to answer Joseph's questions about why ledger entries to multiple contractors were recorded for amounts that were in fact paid to Mr. Kodwavi personally.
With the debtors having defaulted on their obligations to repay $10.5 million to KSV pursuant to the court-approved settlement, KSV is now enforcing a Court order it obtained requiring repayment of a larger sum of over $14 million.
As the representative of FAAN notes in the Globe and Mail article, this is not a simple financial dispute; the syndicated mortgage lenders FAAN is working for often invested their life savings into the Fortress/Sorrenti loans. The investors need to be repaid.
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