Federal judge clears two investors to keep suing developer over loans

A federal judge on Monday ruled in favor of two investors who want to continue suing developer Steven Molasky over $29 million in loans that the lawsuit said were obtained through false information.

Failed hard-money lender OneCap Holding Corp. and related hard-money lending companies solicited money from investors and used the money to make short-term loans to developers. Investors were attracted by the ability to earn double-digit interest rates and to hold real estate as collateral for the loans.

After OneCap filed for bankruptcy, its attorneys filed a bankruptcy court lawsuit against Molasky in 2008 over three loans in default, seeking to recover money for creditors.

Molasky was discharged from his own bankruptcy case last year, but OneCap alleged that the three debts couldn’t be discharged by Molasky’s bankruptcy case.

In two cases, Molasky is accused of using the money for purposes other than the real estate developments.

In the third, a loan to Chateau Properties III, Molasky said an entity controlled by his father, Irwin Molasky, would buy the real estate and the sales proceeds would be paid to investors in the loan, according to court papers.

However, Steven Molasky’s statements were false or Molasky lacked sufficient information to make the statements, according to the lawsuit.

In addition to developing real estate, Steven Molasky was executive producer in a 2007 movie called “Sex and Breakfast” that starred Macaulay Culkin and he invested in another movie. He owned an interest in the Pure nightclub at Caesars Palace and held a controlling interest in a company that owned a private airport hangar at McCarran International Airport.

Those investments weren’t mentioned in the bankruptcy lawsuit that OneCap filed against Steven Molasky.

Chief Bankruptcy Judge Mike Nakagawa dismissed the lawsuit when OneCap dropped the case. But two investors, Leslie Sully Jr. as a representative of a profit-sharing plan and Augustine Bustos, want to continue suing Steven Molasky. Bustos is pursuing an $800,000 investment he made in loans to Steven Molasky; Sully seeks damages over a $100,000 investment.

Attorney David Rivers argued on Sully’s behalf and John Netzorg argued for Bustos in opposition to Steven Molasky’s attorney James Pisanelli.

U.S. District Judge James Mahan found in favor of Sully and Bustos, allowing them to pursue the lawsuit in bankruptcy court. Mahan complained about procedural problems in bankruptcy court’s handling of the lawsuit.

Attorneys for Steven Molasky didn’t respond to calls for comment.

Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.

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