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<\/p>\nAttorneys in the branch of the Department of Justice that monitors bankruptcy cases\u00a0are seeking to appoint an independent trustee to take over LuxUrban Hotels,\u00a0claiming\u00a0the way it operated before and since it filed for Chapter 11 bankruptcy amounts to \u201cgross negligence.\u201d<\/p>\n
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\n Bisnow\/Ciara Long\n <\/p>\n
\n LuxUrban Hotels operated The Tuscany hotel in Midtown Manhattan before abruptly ceasing operations and filing for bankruptcy.\n <\/p>\n
LuxUrban filed for bankruptcy\u00a0on Sept. 14<\/a>, claiming it had less than $10M in assets and between $10M and $50M in liabilities. It said it operated four New York City hotels and needed to use the Chapter 11 restructuring process to keep the business going.<\/p>\n But that week, guests who\u00a0paid for rooms at two of LuxUrban’s hotels showed up to find the hotels had shuttered, The New York Times reported<\/a>. Even after that report, rooms were\u00a0still available to book online<\/a>,\u00a0Bisnow reported.\u00a0<\/p>\n In a motion filed Thursday night to the U.S. Bankruptcy Court for the Southern District of New York,\u00a0an attorney under U.S. Trustee William Harrington described the bankruptcy as a \u201cfree fall\u201d and said an independent fiduciary is necessary to prevent more \u201cchaos\u201d for LuxUrban’s customers and creditors.<\/p>\n \u201cAlthough it is understandable that a debtor may have financial difficulties for which bankruptcy protection is sought, a hotel operator \u2014 such as here \u2014 that leaves customers stranded, places people in rooms where no services are available, and where union workers appear to have been unpaid, is untenable, and dangerous,\u201d U.S. Trustee trial attorney Andrea Schwartz wrote.<\/p>\n Two unions representing employees at\u00a0the 125-room Tuscany hotel at 120 E. 39th St. and 79-room Hotel 46 at 129 W. 46th St. say the workers at the hotels hadn’t been paid for five weeks leading up to the Chapter 11 filing and that $57K has been illegally withheld from their 401(k)s.\u00a0<\/p>\n No fewer than 85 lawsuits are pending against LuxUrban in state and federal courts, Schwartz wrote.<\/p>\n The company’s\u00a0bankruptcy attorney, Leo Jacobs, didn’t respond to a request for comment.<\/p>\n Schwartz\u00a0wrote that\u00a0LuxUrban has additional creditors and debts that it didn’t outline in its initial filing, including $118M in unpaid state sales taxes owed to New York going back to 2020, when it operated as a short-term rental company named CorpHousing Group<\/a>.\u00a0<\/p>\n The company was fined $1.2M by New York City for illegally operating dozens of apartments as short-term rentals. The city sued\u00a0in April<\/a>\u00a0for nonpayment after LuxUrban allegedly bounced a check and then stopped responding to collection attempts.<\/p>\n Under founder and former CEO Brian Ferdinand<\/a>, it\u00a0pivoted its business in 2022<\/a> to master leasing troubled hotels that had closed during the pandemic. It had a licensing deal with Wyndham Hotel Group<\/a> and, at one point,\u00a0claimed to operate more than 2,000 rooms<\/a>.<\/p>\n