Former Queen Mary operators charged with fraud after investors lose over $70M
The U.S. Securities and Exchange Commission is looking to bar Taylor Woods and Howard Wu from the securities market entirely.
The former operators of the historic Queen Mary were accused of defrauding investors of tens of millions of dollars through multiple schemes related to investments in and ownership of 13 hotels across the country, including the Long Beach landmark.
The U.S. Securities and Exchange Commission announced Wednesday that it filed securities fraud allegations against Urban Commons co-founders Taylor Woods and Howard Wu, alleging the pair used two schemes to defraud two sets of investors, resulting in over $70 million in losses.
Urban Commons operated the Queen Mary from 2016 to 2021.
Andrew Holmes, an attorney for Wu, denied the allegations, saying the case is based on the SEC’s “lack of understanding how these transactions were structured,” adding that Woods and Wu, are looking forward to “setting the record straight.”
Woods' attorney could not be immediately reached for comment.
In the first scheme, the SEC claims, Woods and Wu convinced investors to sell their equity interest in hotels to an entity the pair “secretly controlled,” promising big returns when the properties were sold. In reality, Woods and Wu listed the hotels, including the Queen Mary, on the Singapore Stock Exchange under the real estate investment trust Eagle Hospitality, which carried “significantly greater risk,” according to the SEC.
Woods and Wu “made numerous alleged misrepresentations, including that they had lined up a third-party buyer for all the hotels,” the SEC complaint reads.
The agency says Woods and Wu did not inform investors that their equity interests were reliant on the success of a public listing, which ultimately cost them millions.
After the trust filed for bankruptcy in 2021, the SEC alleges Woods and Wu falsely told another group of investors they had raised $350 million to purchase the same hotels out of bankruptcy. The pair raised $1.775 million through a new company, Sky Holdings, based on the lie, the SEC reported.
The SEC claims investors were told the funds would only be used to purchase the hotels and would be returned if the bid was unsuccessful. However, even before the bid was rejected, Woods and Wu “misappropriated virtually all investors' funds, using the bulk of the funds for personal and unrelated business expenses,” the SEC said.
The two failed to return at least $1.75 million, according to the complaint.
When the bid was rejected, Long Beach was forced to take sole control of the city-owned asset after decades of failed leases to operators.
Earlier this year, Woods was indicted in a related Sky Holdings scam in which he allegedly defrauded two investors out of $1.2 million in Nassau County, New York on Long Island. In February, Woods was arrested and arraigned on two counts of grand larceny and one count of scheme to defraud — all felonies — and is facing up to 15 years in prison, according to the Nassau County District Attorney’s Office.
The city of Long Beach is not part of the SEC’s latest filing related to the Queen Mary, leaving officials to wonder how the company used public funds during its tenure.
With Woods and Wu at the helm, Urban Commons took over the master lease for the Queen Mary in 2016, despite a lack of expertise or experience with deteriorating historic properties. Following a marine survey that showed hundreds of millions of dollars worth of repairs were required aboard the historic ship, the city issued $23 million in bonds, which the new leaseholder was to use for critical repairs.
But when the city took over the Queen Mary after Urban Commons’ collapse, it had to pour millions more into the ship to complete unfinished repairs and fix those that were done poorly.
In this latest case, the SEC is seeking the return profits and subsequent interest obtained through the schemes, civil penalties and permanent injunctions barring Woods and Wu from the securities market.
Reporter Fernando Haro contributed to this report.
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