Fraud-Riddled Ontario Real Estate Developer Defaults On Payments To Fortress Victims
Ontario-based real estate developer Sunrise Homes finds itself in a precarious situation, having defaulted on a court-ordered settlement to repay the substantial debt it owes to lenders entangled in the collapse of Fortress Real Developments Inc., once Canada’s largest syndicated mortgage company.
On May 8, 2023, Justice Peter J. Osborne sanctioned a settlement agreement. This agreement entailed various entities associated with Sunrise, including the CEO Sajjan Hussain, COO Muzammil Kodwavi, and their spouses, repaying $10.5 million to the court-appointed receiver, KSV Advisory. The court mandated that these payments occur in increments of no less than $2 million every 60 days until the debt was fully settled. The consequences of default were severe, involving the enforcement of a larger sum of $14,510,545.24, as per an earlier court order.
Naveed Manzoor, the Managing Director at FAAN Advisors Group Inc., lamented, “Pursuant to this order, we did receive a partial payment against the first installment, but since then, they’ve been in default of the agreement. We at FAAN are working very closely with the receiver to determine our next steps. … We are actively working on a strategy to ensure compliance with this order.”
Since 2019, FAAN has served as the trustee for syndicated mortgage investors who are still owed money over five years after the collapse of Fortress, which had raised nearly a billion dollars from thousands of individual investors back in 2018. In 2022, the company’s co-founders, Jawad Rathore and Vincent Petrozza, faced charges of fraud related to the investment scheme following an extensive investigation by the RCMP.
FAAN’s mission involves recovering funds tied to various Fortress-related investments, including ten mortgages valued at around $95 million, which were borrowed from 2,900 individuals and managed by Derek Sorrenti and the Sorrenti Law Professional Corp.
Sunrise initially borrowed $8 million from Sorrenti in 2015, later increased to $9.8 million in 2016, to fund the development of a 52-unit townhouse project known as Unionvillas under the corporate entity Sunrise Acquisitions Hwy 7. However, in March 2021, Sunrise informed FAAN that it would not be able to fulfill the full repayment, offering no plausible explanation for this unexpected shortfall.
Throughout 2022, receiver KSV Advisory diligently sought information from auditors and Sunrise’s leadership regarding the whereabouts of the funds. Public filings indicate evidence of the misappropriation of millions of dollars.
In a revealing affidavit from November 2022, Bennet Jones lawyer Joseph Blinick, acting for KSV Advisory, pressed Kodwavi to explain the movement of millions of dollars from the Unionvillas project to other Sunrise-owned development companies. Kodwavi’s explanation of routine industry practices did not account for over $5 million that never returned to the Unionvillas project.
Forensic accountant Jeffrey Feldman of SLF Financial Services Inc. underscored that while intercompany transfers occur in real estate, they should be documented as secured loans with proper agreements. In the case of Sunrise, these safeguards were conspicuously absent.
In another part of the affidavit, Blinick raised concerns about ledger entries that appeared to be masking payments to Kodwavi, suggesting potential financial irregularities. The inconsistency between ledger records and bank statements was troubling. Kodwavi chose not to address why ledger entries differed from actual payments to contractors, an unusual practice, according to Feldman.
On August 31, Hussain received an appointment to serve on Ontario’s species at risk program advisory committee through an order in council.
However, when inquired about Hussain’s qualifications and financial background to Environment Minister Andrea Khanjin, the ministry indicated a change of heart: “Given the seriousness of these allegations, we will be revoking Mr. Hussein’s appointment,” stated ministry spokesperson Gary S. Wheeler.
Information for this briefing was found via The Globe and Mail and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
