Real Estate

Judge Upholds $50M Arbitration Ruling Against Malin and Troon Pacific for Fraud

Judge Upholds $50M Arbitration Award Against Developer Gregory Malin and Troon Pacific for Fraud and Embezzlement

By Doug Elli

7/10, 13:33 EDT

Key Takeaway

  • Judge upheld a $50M arbitration ruling against Gregory Malin and Troon Pacific for fraud, self-dealing, and embezzlement.
  • Malin and Troon must pay $48.1M in damages plus $2.25M in legal fees to investors of four failed luxury home projects.
  • Investors accused Malin of double billing, commingling funds, and breaching fiduciary duties; Malin blamed economic conditions and lengthy permitting processes.

Judge Upholds $50 Million Arbitration Award

In a significant legal development, Superior Court Judge Harold Kahn has upheld an arbitration award requiring San Francisco developer Gregory Malin and his firm, Troon Pacific, to pay over $50 million in damages and legal fees to investors. This decision follows a ruling by former San Francisco Superior Court Judge David Garcia, who found Malin and Troon Pacific guilty of self-dealing, fraud, and embezzlement. The arbitration award includes $48.1 million in damages and an additional $2.25 million for attorney’s fees. Malin's attempt to vacate the decision was denied, solidifying the financial repercussions for the developer and his firm.

The Allegations and Defense

The core of the dispute revolves around Malin's promise to build five spec mansions marketed as homes for healthy living. Investors accused Malin of squandering $35 million through fraudulent activities, including self-dealing and embezzlement. Malin and Troon Pacific denied these allegations, attributing the financial losses to external factors such as the COVID-19 pandemic, changing economic conditions, and San Francisco’s notoriously lengthy permitting process. Despite these defenses, the arbitrator sided with the investors, highlighting a breach of fiduciary obligations by Malin and his firm.

Broader Implications in Real Estate Fraud

This case is not an isolated incident in the real estate sector. Similar allegations of fraud and financial misconduct have surfaced in other high-profile cases. For instance, Sonoma developers Ken Mattson and Timothy LeFever are currently embroiled in lawsuits accusing them of defrauding investors, including elderly clients, out of millions of dollars. These cases underscore a troubling trend of financial mismanagement and fraudulent activities within the real estate development industry, raising questions about regulatory oversight and investor protection.

Market Dynamics and Developer Challenges

The challenges faced by Malin and Troon Pacific are reflective of broader market dynamics affecting high-end real estate development. The steep land and construction costs in San Francisco, coupled with lengthy permitting processes, have deterred many developers. Malin's properties, often priced unrealistically high, struggled to find buyers willing to meet the asking prices. This market reality, combined with the financial misconduct allegations, paints a complex picture of the risks and challenges inherent in luxury real estate development.

Management Quotes

  • Kyle Withers, Attorney for investors in four Troon projects:

    "Malin of clinging to a 'false narrative' that was rejected by the arbitrator."

  • Gregory Malin, Founder of Troon Pacific:

    "The fees they received were authorized and that they acted in good faith. Rather, they said losses stemmed from COVID, changing economic conditions and San Francisco’s lengthy permitting and approval process."