Litigation Releases (Taylor Woods and Howard Wu)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26068 / August 7, 2024

Securities and Exchange Commission v. Taylor Woods, Howard Wu, Civil Action No. 2:24-cv-06633 (C.D. Cal. filed Aug. 6, 2024)

SEC Charges Founder-Owners of Urban Commons LLC with Orchestrating Two Securities Fraud Schemes

The Securities and Exchange Commission charged Taylor Woods and Howard Wu, the co-founders and co-owners of Urban Commons, LLC, with securities fraud involving two schemes to defraud two sets of investors related to investments in and ownership of thirteen hotels in the United States, including the historic Queen Mary. The two schemes resulted in over $70 million in investor losses.

According to the SEC's complaint, in the first scheme, Woods and Wu fraudulently induced investors to sell their equity interests in the hotels to an entity Woods and Wu secretly controlled and would later use as part of a transaction, which Woods and Wu concealed from the investors, to publicly list the hotels in an overseas real estate investment trust (REIT). The Defendants made numerous alleged misrepresentations, including that they had lined up a third-party buyer for all the hotels and that investors would retain a security interest in the properties if that purported purchaser failed to make the purportedly required payments. The complaint further alleges the Defendants concealed from investors that payment for their equity interests was reliant on the success of a public listing. For a year, while working to launch the REIT that they had concealed from investors, Woods and Wu also lulled investors to prevent them from discovering the fraud or canceling the sale of their equity interests in the hotels as alleged in the complaint.

In a second scheme, perpetrated in 2021 after the REIT had filed for bankruptcy, the complaint alleges that Woods and Wu raised at least $1.775 million from a second set of investors to purchase the same hotels out of bankruptcy. The Defendants allegedly told investors that their funds would be held in escrow, used only to fund the hotels' purchase, and returned to investors if the bid was unsuccessful. According to the complaint, even before their bid to buy the hotels was rejected, the Defendants misappropriated virtually all investors' funds, using the bulk of the funds for personal and unrelated business expenses. Ultimately, Defendants failed to return at least $1.75 million to investors according to the complaint.

The SEC's complaint, filed in the United States District Court for the Central District of California, charges the Defendants with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, civil penalties, and disgorgement with prejudgment interest.

The SEC's investigation was conducted by Edward B. Gerard and Matthew B. Reisig, with assistance from Derek Bentsen, who will lead the SEC's litigation. The case was supervised by J. Lee Buck, David Nasse, and Melissa Hodgman.