A shareholder has filed a lawsuit against the board members and executives of a real estate investment trust (REIT), accusing them of fiduciary breaches and securities law violations.
The lawsuit names Ivan Kaufman, Paul Elenio, Kenneth J. Bacon, Caryn Effron, Edward Farrell, William C. Green, Melvin F. Lazar, Joseph Martello, and Elliot Schwartz as defendants and centers on allegations that from May 7, 2021, to July 11, 2024, the defendants engaged in misconduct related to their management of Arbor Realty Trust’s business operations. Arbor Realty Trust invests in multi-family and commercial real estate properties through two main business segments: Agency Loan Origination and Servicing, and Structured Loan Origination and Investment. During this period, the company raised over $8 billion by securitizing bridge loans into Collateralized Loan Obligations (CLOs). The plaintiff claims these activities were conducted without maintaining adequate underwriting standards.
According to the complaint, despite public assurances of conservative loan practices and internal controls by Arbor’s senior management, the company engaged in risky lending practices primarily involving inexperienced syndicators during a strong real estate market. This allegedly resulted in an inflated loan book volume with high-risk bridge loans often granted to borrowers who would not typically qualify under normal conditions due to poor creditworthiness or low debt service coverage ratios.
The complaint further alleges that these actions led to material misrepresentations about Arbor’s financial health and risk exposure. The allegations came to light following reports from Viceroy Research Group in late 2023 and subsequent investigations by federal authorities into Arbor’s lending practices. These developments caused significant declines in Arbor’s stock price.
The plaintiff seeks judgment against the defendants for alleged breaches of fiduciary duty and securities law violations. The requested relief includes compensatory damages for losses as well as measures to improve corporate governance at Arbor Realty Trust.
The plaintiff is represented by attorneys from Robbins LLP. The case was filed in the United States District Court for the Eastern District of New York under Case ID 2:25-cv-04373.73.