Economy

The Doomed Trump SoHo, A 46-Story History Of Hubris

With its 391 units spread among 46 floors, the glass tower has transformed south Manhattan's skyline. But it has been an utter business failure.

Donald and Ivanka Trump at the 2007 launch of the Trump SoHo
Donald and Ivanka Trump at the 2007 launch of the Trump SoHo
Tali Shamir

NEW YORK — When Trump SoHo was inaugurated in April 2010, it was hailed by real estate mogul Alex Sapir as a hotel unlike any the city had ever had, or would have. It was the tallest and most expensive building built in New York since the 2007 economic crisis, and it was branded as Manhattan's newest luxury hotel.

With its 391 units spread among 46 floors, the glass tower has transformed south Manhattan's skyline. From the corner of Spring and Varick streets, it fancifully overlooks the lower historical buildings around it, the few towers with no more than 15 floors, and the bohemian atmosphere of the streets of SoHo, Tribeca and the West Village.

Real estate giants Sapir Organization and Bayrock Group invested $450 million in the project that combined luxurious modern design with an oriental touch. The Trump family brought the name, the glamour and the design skills of Donald's daughter Ivenka, and was also in charge of running the business.

Sapir's prediction turned out to be true — but not for the reasons he had in mind. Trump SoHo's short history includes problems and crises, and the pretentious vision recently came to a bitter end with a foreclosure shortly before the death of Tamir Sapir, the Soviet-born, Israeli-raised owner of the real estate group. Four-and-a-half years after its inauguration, Trump SoHo now stands in south Manhattan as a symbol of hubris and its punishment.

Objections from the beginning

It was a bumpy road right from the start. Plans for the hotel were made public in June 2006, when Donald Trump announced that the winner in his reality show The Apprentice would become the building's manager. Objections came almost immediately, and the community zoning committee held a hearing in July, drawing 125 local residents. But opponents soon discovered there wasn't much they could do. The building's proposed height, much like its style, was unusual for the area — and certainly controversial — but completely legal.

But they didn't give up. They were concerned about the plans for residential use. It was originally proposed as a condo-hotel, where owners could live in the flats for 120 days. The rest of the time, the flats would be rented out as hotel rooms with profits shared between the project owners and the flat owners.

"How are you going to enforce how long somebody is living in a room?" one resident argued. "Trump is arrogantly thumbing his nose at the community, and he has to be taught a lesson. That's the goal."

The residents claimed that the area was not zoned for residential buildings, according to municipal regulations, but once again to no avail. The project was approved.

Excavation on the site began in November 2006 but was halted a month later after 190 body parts were discovered on the premises. The Greenwich Village Society for Historic Preservation claimed these were remnants of a Spring Street Presbyterian church graveyard, which had been burned down in the 19th century for its abolitionist work.

The society called on then-Mayor Michael Bloomberg to investigate whether the lot was part of the Underground Railroad, a network of routes smuggling slaves to freedom. Bloomberg was unimpressed. Objections continued, and so did construction.

In 2008, the project was halted once again. A formwork collapsed, killing one worker and injuring three others. An investigation followed, but work soon resumed. Two months later, a glass panel crashed into the ground, this time with no casualties.

"This project should never have been allowed in the first place, and if they cannot run their construction site safely, it should be shut down," the director of the Greenwich Village Society for Historic Preservation said at the time. But the project went on, and two years later the building was inaugurated.

Financing flaws

Six months after opening, it turned out that the project's financial foundations were just as shaky. In November 2010 The Wall Street Journal reported that 17 of the apartment buyers were suing the project owners for fraud. According to the lawsuit, management declared that 60% of the units had been sold, while the real number was less than 20%. The economic downturn killed had killed the condo-hotel model almost completely.

The project administrators proposed the plaintiffs withdraw their lawsuit and get up to half their money back. Some were convinced, but 10 of the plaintiffs, including French footballer Olivier Dacourt, went on. In November 2011, the parties reached an agreement, and the plaintiffs received 90% of their down payment and, of course, left the building.

But the company still had most of the units. Prices — which started at between $1.2 million for a studio flat and $50 million for a presidential suite — started falling, and falling further, and still less than third of the units had been sold.

Alex and Tamir Sapir's Sapir Organization found itself with a $290 million debt. Negotiations with real estate fund CIM Group concluded with the latter buying most of the debt for $120 million, with hopes that the project could rise again.

But this never happened. In September, CIM announced it would be taking over the building with a foreclosure, and then auctioning it. A week later, Tamir Sapir died of cardiac arrest at the age of 67.

Tamir Sapir in January 2014 — Photo: Wikimedia Commons

Days before his father's death, following CIM's announcement, Alex Sapir admitted to The World Street Journal that "the current structure does not make economic sense for ownership." Trump himself sounded less concerned. "This is a situation between the lender and the owner," he told the newspaper, arguing that the hotel is "very successful" and that his family will continue to run it. All parties clarified they intended to make the building a hotel.

If and when that happens, it would be a partial achievement for the opponents, but Manhattan's skyline will never be the same.

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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