Investors Sue Chicago Investor Shangxuan Tan for $34M

The amounts of money owed by Shangxuan Tan — a multifamily investor once based in Chicago until he allegedly fled to Singapore — are growing with each new lawsuit against him.

The main financial backer that allowed Tan to run real estate dealmaking for a Chicago-based student housing firm called OC Ventures has filed a federal lawsuit against him and his holding company. The suit seeks to recover $34 million and accuses Tan of running a “Ponzi-like” scheme, a lawsuit shows.

Yanglong Song, a Chinese citizen who controls OC Ventures, claims to have funded the firm and gave Tan his blessing to buy large apartment properties near college campuses throughout the U.S., with Tan holding the title of CEO. OC Ventures invested in buildings in Chicago’s Greektown neighborhood, near the University of Illinois-Chicago; and in New York, Alabama and North Carolina, among other locales. Tan used his own holding company, Ivy Fund, to buy the assets on behalf of OC, according to lawsuits.

The deals haven’t gone well.

“It is apparent that the current catastrophic mismanagement of Ivy Fund has caused the business to crumble and Ivy Fund Collateral to dissipate,” Song’s lawsuit against Tan and Ivy said. “Without immediate legal intervention, Plaintiffs and other creditors and stakeholders will be left with no recourse.”

Tan and Ivy have been struggling to sell several of the firm’s assets for more than a year, triggering previous lawsuits for defaulting on loans after failing to close deals, including in an ongoing dispute over the 482-bed Letterman Apartments in Chicago’s Greektown, according to litigation.

Song and OC are now suing Tan and Ivy for mishandling the properties and siphoning funds into Tan’s own hands despite owing investors and lenders tens millions of dollars, according to Song’s lawsuit, filed in the Southern District of New York last month. It seeks to claw back $34 million that Tan was given in various increments, as both investments for deals and as loans.

“There is also a continuing risk that Tan may improperly attempt to divert any remaining value in the Ivy Fund Properties for his own benefit,” Song’s lawsuit said, calling Ivy and Tan’s assets “severely distressed.”

Aaron P. Davis, an attorney for Tan, declined to comment beyond a letter submitted to the court on Friday, which argued that Song’s dispute lacks jurisdiction in New York’s Southern District, citing both Tan’s and Song’s lack of U.S. citizenship, among other factors. It also claims that the court has no right to oblige a request by Song and OC Ventures to appoint a third-party receiver to take over and manage Ivy Fund’s properties as the lawsuit advances. Song and OC want Chicago-based Steven Edelson of Mercantile Companies to be appointed as a receiver.

“Plaintiffs are relying on unexecuted loan documents and are seeking relief against collateral for which they do not possess any security interest,” Davis wrote to the court on behalf of Tan. The letter confirmed Tan is living in Singapore. The court has so far held off on making a final decision on whether to appoint a receiver until it can consider formal legal filings from Tan and Ivy’s lawyers.

Tan’s building management firm Varsity Campus — which has allegedly taken big chunks of revenue out of OC Ventures investment properties, some of it without proper authorization, according to lawsuits — is based in Charlotte, North Carolina, and Tan also has a residential address in Boston.

Attorneys for Song and OC didn’t return requests for comment. Edelson, the receiver they’ve pushed to be appointed, also didn’t return requests to comment.

Song and OC’s lawsuit cites eight previous lawsuits filed by others against Tan and his affiliates that own real estate, including several that have resulted in judgements against Tan or his affiliates, stating that they owe anywhere between $836,000 to over $8 million to various creditors or investors.

Song and OC claim the suits revealed Tan’s statements that he was knowingly shifting money between accounts to cover expenses of various properties within Ivy’s portfolio, including by using funds to repair damage at a separate property from the one to which the funds were loaned, even though those funds were loaned to and secured by specific properties.

“Equally alarming is [Tan and Ivy’s] continuing pattern of attempting to evade creditors and ignore lawsuits, all while circumventing their contractual obligations by selling various assets in which other parties have interests without such parties’ consent,” Song’s suit said.

The more than $8 million judgment is tied to The Letterman property in Chicago, which several investors have been interested in buying for upwards of $50 million, according to litigation, but so far such deals have fallen apart or so far not closed.

The previous suits also reveal that another of Ivy’s properties, in Greensboro, North Carolina, is already in receivership, after Ivy attempted to sell it without the knowledge of a creditor that had obtained a judgment against the landlord.

Furthermore, Tan’s former partner, Shaofan “Steven” Zhang, has sued Tan and Ivy, also pushing for the appointment of a receiver to protect investors in OC Ventures deals. Tan responded with a lawsuit claiming Zhang was improperly sharing firm secrets with “creditors, competitors and adversaries” in an attempt to undermine Tan. Their disputes are playing out in Cook County court.