A federal bankruptcy court judge on Friday froze $2.4 million in assets of Urban Commons founders Taylor Woods and Howard Wu that could be used to repay COVID relief loans for the Queen Mary that they allegedly used for “wrongful purposes.”

In a strongly worded letter, U.S. Bankruptcy Court Judge Christopher Sontchi in Delaware said Woods “misrepresented or lied” to the U.S. government to obtain $2.4 million in federal Paycheck Protection Program loans.

Sontchi granted a preliminary injunction freezing the assets to assure repayment of the allegedly ill-gotten money. “Woods and Wu have a history of wrongful acts and have proven that they are capable of shuffling assets,” the judge said.

In late May, the judge said he was considering referring the matter of the PPP loans to the U.S. Attorney’s office. “These defendants’ behavior is beyond the pale,” he said at the time. “It was reprehensible. It was a betrayal of public trust.”

The order freezing the assets was sought by attorneys for a company, Urban Commons Queensway, LLC, who contend that Woods and Wu improperly applied for the PPP loan without the company’s consent.

Woods told the Long Beach Post in May that the loan application was made by mistake and they were working to fix the issue. “There was never any intention to do anything inappropriate by any party involved,” Woods and Wu said in a statement.

But in the letter released Friday, Sontchi said “Woods knowingly or recklessly made false statements” to obtain the PPP loan from the Small Business Administration. After “wrongfully obtaining the funds,” the judge wrote, Woods and Wu transferred the money to another company they owned and “then caused the funds to disappear.”

“These facts show Defendants’ willingness to flaunt the law, use entities and transfers to avoid paying money wrongfully obtained, and a lack of remorse for so doing,” Sontchi said.

The judge also noted that attorneys for Urban Commons Queensway have submitted to the bankruptcy court evidence of multiple lawsuits and judgments against Woods and Wu for “fraud, breach of repayment obligations, and other loan defaults.”

In November 2016, the Long Beach City Council awarded Urban Commons a 66-year lease on the city-owned Queen Mary. To get the lease, Woods and Wu made bold promises about developing a $250 million entertainment and hotel complex called Queen Mary Island on waterfront land next to the ship. Those plans were never realized.

The same day, the majority of the City Council ignored warnings from City Auditor Laura Doud and approved $23 million in bonds to jumpstart repairs on the deteriorating ship. Doud has been conducting an audit to determine if Urban Commons spent the money appropriately.

Urban Commons then packaged the Queen Mary lease and a host of U.S. hotel properties and sold them to Eagle Hospitality Trust. In May 2019, Eagle went public on the Singapore Stock Exchange. Beset by financial problems, the company collapsed into bankruptcy in January of this year. Sontchi is overseeing the bankruptcy case.

All of the other hotel properties were sold at a bankruptcy court auction, but not the lease on the Queen Mary. There were no bidders. The Queen Mary is now back in the hands of the city. The ship is closed because of the pandemic and the need to make urgent repairs to the vessel.

‘A betrayal you can’t even put into words’