New civil disputes and financial judgments have joined the multistate court docket involving Joseph Blake Smith and his failed SQRL convenience store venture.
Meanwhile, federal authorities apparently have launched a criminal investigation into allegations of fraud and forgery associated with SQRL-related real estate transactions. Several parties associated with the lawsuits surrounding Smith’s business dealings confirm visits with the FBI. The FBI, on the other hand, will neither confirm nor deny an ongoing Smith-SQRL investigation.
“We encourage anyone who has information about a potential federal crime to contact us,” said Connor Hagan, spokesman for the FBI.
Broken leases and loan defaults tied to SQRL projects are adding to the count of personal judgments against Smith that total more than $4 million.
On Sept. 10, LMR Capital Properties LLC of Los Angeles landed a nearly $2.5 million default judgment in Florida’s Duval County Circuit Court against Smith on a lease agreement he personally guaranteed. The lease, dated Aug. 26, 2022, is tied to a convenience store at 818 Dunn Ave. in Jacksonville, Florida.
On Oct. 23, Pulaski County Circuit Judge Herbert Wright handed down a $1.3 million default judgment for fraud and punitive damages against Smith, some of his SQRL entities and a former partner, Adam Lusthaus.
The judgment for Filmore Evan Smith and his namesake living trust includes an award of $53,000 for unpaid rent on the VP Racing Fuels convenience store at 6828 Col. Glenn Road in Little Rock.
These follow an unpaid arbitration award of $7 million in May 2019 against Smith for fraud and breach of fiduciary duty in connection with Oklahoma oil and gas leases.
New Fraud Allegations
Now in the legal mix are two Texas investment groups pursuing fraud claims against Smith in connection with SQRL.
Sanaullah Abbasi of Katy, Bijaya Karki of Coppell and Samir Juma of Colleyville allege they invested $2 million earlier this year with Smith as part of a deal to buy a 50% stake in SQRL Service Stations LLC.
Their complaint indicates this is the same entity, which held scores of leased C-store locations, that Smith sold to Jamal Abdul Hizam’s Gas Hub LLC in a controversial $17.4 million transaction on April 5.
The trio, referred to as the Abbasi group, also allege that Smith crafted an $18.7 million promissory note with Riverside Capital in Florida, a debt they say included Abbasi’s forged signature.
According to the complaint, Abbasi first learned of the promissory note after Smith defaulted on the loan and Riverside Capital contacted him regarding its intention to pursue collections against him.
Adding to the muddled narrative of the nine-page complaint is the absence of any supporting exhibits. The Abbasi group is seeking to recover their $2 million investment from Smith, the only named defendant.
The lawsuit was filed in Dallas County District Court on May 10, but Smith wasn’t served with the complaint until Sept. 12 at his home in west Little Rock.
Earlier this month, SQRL Syndicate Fund I LLC of Dallas staked belated ownership claims on two SQRL projects in central Arkansas already embroiled in controversy.
The Texas venture is attempting to intervene in two foreclosure cases involving a dormant 1.5-acre development in the Saline County community of Paron and a 4-acre development near the Garland County community of Lonsdale.
The Paron property is already scheduled for a Dec. 10 court-ordered foreclosure sale after Today’s Bank of Huntsville landed its $658,000 default judgment against Smith, SQRL Holdings LLC and Lusthaus, a minority partner in SQRL Holdings.
Two days after that Nov. 2 ruling, SQRL Syndicate entered the case trying to halt the action, claiming it is the rightful owner of the project after a $600,000 deal with Smith’s Standard Development Co. on Jan. 31, 2023.
According to real estate records, Standard Development didn’t even own the Paron property in January 2023.
Standard transferred ownership to Bryant businessman Mark Carter in December 2022, the first in a series of transfers where no money changed hands.
In July 2023, Carter transferred it to SQRL Holdings, which transferred the property to the Joseph Blake Smith Irrevocable Trust a month later.
Today’s Bank didn’t bother suing the trust because SQRL Holdings couldn’t legally transfer ownership of the encumbered property. On paper, the meaningless SQRL Holdings transfer to the trust did trigger a default on the July 2023 loan.
According to SQRL Syndicate’s complaint, the Paron property was part of a five C-store deal with Standard Development valued at more than $4.8 million. SQRL Syndicate is associated with Steve Parks, managing director of Skystone Securities & Petro Capital Securities in Dallas.
An attorney for SQRL Syndicate likens his client’s situation to that of Files Development LLC. The Little Rock venture is defending its ownership of convenience stores in Bryant and England against competing claims linked with controversial transactions that include allegations of forged signatures and fraudulent deeds.
“Turns out our client is a victim to the same fraud,” said Locke Adair of the Dallas law firm of Farmer & Coker. “They’re still in the process of investigating, still trying to uncover what happened, why it is happening and why it’s such a mess.”
Unlike Files Development, however, SQRL Syndicate’s position in the ownership chain of its properties is much more precarious. The deeds for Paron and Lonsdale weren’t recorded with the circuit clerks in Saline and Garland counties until August of this year.
That’s 17 months after the deeds were signed. In the race to the courthouse to record its deeds and establish legal priority of ownership, SQRL Syndicate never really got off the starting line.
During that time gap, two ownership changes were filed of public record for the Lonsdale property: a moneyless transfer from Standard Development to the Joseph Blake Smith Irrevocable Trust in August 2023 and a $5.6 million sale on Feb. 29 from the trust to SQRL Cameron-Lonsdale LLC recorded on April 22.
In its court filing, SQRL Syndicate describes both transactions as fraudulent conveyances. The limited liability company is attempting to intervene in Stone Bank’s $2.8 million foreclosure action on a November 2022 mortgage.
That foreclosure suit was filed Sept. 16 against the Smith trust and his Standard Development, not SQRL Cameron-Lonsdale.
To perfect its ownership claim, the Charlotte, North Carolina, venture will have to deal with the Stone Bank mortgage that was mysteriously bypassed. (Normally, underlying mortgages are paid off or assumed when a change or ownership occurs. This didn’t happen with the Bryant or England convenience stores.)
Under SQRL ownership, the Paron and Lonsdale properties existed on opposite ends of the operational spectrum.
The partially remodeled 2,400-SF convenience store at 22160 Hwy. 9 in Paron never opened after Smith’s Standard Development Co. LLC acquired the shuttered convenience store property from John and Nancy Shipe for $86,000 in October 2022.
The shiny, built-new 3,510-SF SQRL C-store at 7209 E. Grand Ave. near Lonsdale operated for nearly two years before closing. A Smith-related entity, Aria Oil LLC, acquired the location for $450,000 in January 2021 from the Frost Family Trust, led by Jeremy and Angela Frost.
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