Shvo, German Backers Accused Of RICO Conspiracy In Core Club Dispute

A partnership between a members-only club and Michael Shvo was intended to elevate the status of his buildings. Instead, it has been the source of a continuously escalating legal battle pitting the clubs against the developer and his investors — a battle that now includes allegations of racketeering.

The owners of Core Club claim that Shvo, backed by Germany’s largest pension fund, Bayerische Versorgungskammer, and fund manager Deutsche Finance America, participated in a fraud scheme in violation of the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO, according to a proposed amended complaint filed Tuesday.

The document was filed as part of a lawsuit first lodged in June 2024 — one that Core and Shvo had nearly settled before new revelations caused the club to drag Shvo back into the courtroom, according to records. 

It lays out new accusations that Shvo misappropriated funds for personal use and that, when former partner Serdar Bilgili questioned the spending, the venture pressured him to leave. In addition, the complaint accuses BVK of playing an active role in the group’s decision-making — something the fund has repeatedly denied — including by funding a $50M settlement between Shvo and Bilgili.

Core founders Jennie and Dangene Enterprise's initial lawsuit sought $600M from Shvo and accused his firm of shoddy workmanship at the club's Manhattan location at 711 Fifth Ave., which Shvo bought in 2019 for $937M with backing of Bilgili, DFA and BVK. 

“The very same judge already rejected their assertions of fraud and this is an illegitimate effort to put lipstick on a pig,” a Shvo spokesperson said in a statement. “Regarding Core’s newest strategy of rehashing false, unrelated claims about expenses — a third-party audit concluded long ago that those claims have zero merit.”

A spokesperson for BVK said that since a judge hasn’t yet accepted the proposed complaint, the pension fund hasn’t received it. 

“Should we receive such a complaint, we will examine it in detail,” the BVK spokesperson said.

Bisnow’s request for comment included a link to the new filing. The spokesperson declined to comment further on the case.

The 114-page complaint pulls together information from several other lawsuits against Shvo, both settled and ongoing, including a now-disposed 2020 lawsuit brought by Bilgili, the chairman of BLG Capital. He isn’t a party in the lawsuit, and his firm didn't respond to Bisnow’s request for comment.

In court records, Core’s attorney, Marc Kasowitz, promises to present “new documentary evidence” to support the RICO case.

“The Shvo-BVK organization constitutes an illegal enterprise in violation of the federal RICO statute, which we will prove in court,” Kasowitz said in a statement to Bisnow.

Following reporting by Munich-based tabloid Abendzeitung, the fund has been embroiled in investigations and scrutiny by the Bavarian State Parliament over its investments and relationship with Shvo. In September, a state secretary said reviews have revealed indications that the fund, which oversaw the retirement accounts for nearly 511,000 pensioners as of its 2024 annual report, breached internal compliance guidelines, according to the lawsuit.

The lawsuit claims that the scheme began in 2018, when Shvo, DFA and Bilgili formed a joint venture, referred to as the BSD Partnership. Between then and 2020, the group spent more than $1B to acquire six properties in New York City, Miami Beach and Beverly Hills.

In late 2019, Bilgili allegedly became suspicious of the expenses that Shvo was charging to BSD and its projects. That includes a $30K-per-month penthouse apartment and $600K in private jet travel.

Bilgili requested an audit of the Shvo-maintained books, which BVK and DFA declined, the complaint says. Instead, the group allegedly pushed Bilgili out of the partnership by reducing his fees and acquiring properties without properly consulting him. That includes the Transamerica Pyramid in San Francisco and 333 South Wabash, known as The Red, in Chicago.

Bilgili sued Shvo in 2020 over the dispute, which was later settled. Kasowitz wrote in the amended complaint that BVK, despite not being a party to the suit, paid Bilgili and his firm $50M to exit the venture and settle any claims.

The assertion that BVK paid the settlement goes against the pension fund’s prior statements that it “has no relationship with Michael Shvo” and only invests through DFA, alongside other funds, according to the complaint.

DFA didn’t respond to Bisnow's request for comment.

The filing also cites a Dec. 26, 2019, letter in which Shvo claimed that BVK committed $1B to the venture. A Bavarian State Parliament document obtained and reported by Bisnow in August states that the fund invested a total of €611M, roughly $712M, in Shvo real estate development and renovation projects.

Around the same time, in early 2020, Shvo connected with Core’s owners. The club entered into four long-term agreements with the BSD Partnership, which promised to contribute $100M in capital to provide the tenant with turnkey spaces in New York, San Francisco and Milan, according to the complaint.

In executing the lease, BVK allegedly paid Shvo a $27M promote fee, which Core said wasn't disclosed. 

The groups also reached an agreement in January 2022 that gave Shvo the option to take a 50% stake in Core Club in exchange for a $1M loan. The plaintiffs accused Shvo of sabotaging the clubs in a bid to take control of the company. 

As Core alleged in its original complaint, the developer never delivered on the promises made during negotiations. The club claims that it received spaces that were “in an unfinished and highly defective condition.”

At the Transamerica Pyramid, construction costs ballooned, making the club space “financially unviable,” according to the complaint. 

Core said BVK was aware of the lack of progress, with its head of real estate investment management, Rainer Komenda, visiting the project in July 2022. Komenda departed from his role earlier this year. The fund’s head of real estate capital investment has also since been ousted, according to AZ.

Additionally, the lawsuit says Core was instructed to provide complimentary memberships, which typically cost $100K each, to the partnership’s executives and host events, including private dinners for Shvo’s friends and family. His outstanding tab allegedly totaled $80K. 

In December, BSD and Core reached a settlement deal that, among other things, would have terminated Core’s San Francisco lease and modified its lease at 711 Fifth Ave., the lawsuit says.

All was well until August, when Shvo's German backers allegedly told the landlord, “We’re not going to make a deal with [Core]. Please terminate their lease,” Shvo attorney Morris Missry said at a court hearing.

Shvo then asserted that the club failed to pay rent and served it with eviction papers, claiming more than $3.3M of unpaid rent. 

When a judge temporarily halted the eviction process, Core received a notice removing its staff from the building’s lobby, according to the complaint. Within three hours of receiving the notice, the landlord allegedly tried to force the employees out of the building, seizing their laptops and calling the police.

Shvo has previously presented a different side of the story in court — and won. In response to Core’s original complaint, Shvo countersued, stating that the club defaulted on a $750K loan from him when the Fifth Avenue location opened. In August, a judge ruled that the club owed the developer nearly $1M.

“This is a desperate attempt to distract from the real story here: Core Club is failing, frantically trying to avoid paying more than $3.5 million in owed rent,” a Shvo spokesperson said in its statement.

In addition to the Bilgili and Core cases, the club’s attorney is seeking to add a couple who bought one of Shvo’s Mandarin Oriental-branded residences at 685 Fifth Ave. as plaintiffs.

John and Diane Goodman have waged an intense legal battle against the developer over what they say are broken promises at the luxury apartment building. The residents, who paid $6M for their apartment, have accused Shvo of selling them a faulty unit in an understaffed and poorly maintained building.

The Goodmans have also accused the building’s residential board of falsifying records, which they say indicates that the partnership is skimming funds from the project.

Meanwhile, Shvo's relationship with his German backers has been rattled as his projects have faced losses. In August, as officials investigated BVK, Shvo brought an arbitration case against BVK, claiming he is owed more than $85M in various fees. 

Last month, the developer sold the historic Raleigh hotel in Miami Beach to Nahla Capital for $270M. With funding from BVK, Shvo hoped to complete a $2B redevelopment of the historic site, but with debts mounting, it stalled and was abandoned. In September, Shvo handed the keys to a separate Miami property over to its lender.