Trouble is mounting for American Ventures, as a group of investors accuse the Austin-based developer of misusing funds and misleading backers — allegations that arrive alongside ongoing federal scrutiny of the firm’s business practices.
Six investors filed suit in Travis County District Court this week against American Ventures, CEO Shravan Parsi and related entities, alleging fraud, breach of fiduciary duty and unjust enrichment tied to multiple Central Texas developments. The Austin Business Journal reported that the complaint claims investor funds were diverted to personal expenses and undisclosed fees, while promised returns failed to materialize.
The lawsuit seeks at least $1 million in damages and calls for the appointment of a receiver to take control of company-managed entities.
At the center of the dispute are three projects, including a planned $500 million mixed-use development in San Marcos and a retail-heavy project in Elgin, east of Austin. Plaintiffs allege they collectively invested millions — including $2.3 million in the Elgin deal alone — under expectations of returns as high as 75 percent within two years, according to the publication. Instead, they claim, little progress has been made.
The lawsuit zeroes in on so-called “double closings,” a real estate practice where properties are quickly transferred between entities. While not inherently problematic, plaintiffs allege Parsi used affiliated entities to extract undisclosed assignment fees — including one instance cited at roughly $5 million — without investor knowledge, according to the publication.
They also allege investor funds were used for personal expenses, including payments tied to home improvements and medical services, and describe company accounts as functioning like a “personal piggy bank.” The complaint further alleges inconsistencies between disclosed and actual fees, including acquisition and development charges that exceeded agreed terms.
American Ventures pushed back in a statement, calling the lawsuit speculative and pledging to “vigorously defend” its business. The firm attributed project delays to broader market headwinds and pointed to support from other investors, noting it has raised more than $36 million from over 250 backers across multiple funds.
The legal fight lands as the company faces a separate, ongoing inquiry from the Securities and Exchange Commission. While no charges have been filed, investigators have been examining how the firm marketed investments, disclosed fees and deployed investor capital, according to the publication. The company has acknowledged cooperating with what it describes as a fact-finding inquiry.
The controversy already complicated public-sector dealings, as incentives for the San Marcos project were shelved after news of the probe surfaced, while Elgin approved a deal that included clawback provisions tied to the investigation.
— Eric Weilbacher
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