Investor accuses Lasater Capital of hiding $100M in fund defaults

A Texas investor alleges a Southlake private equity firm sold him on promises it could not keep.

The investor filed a complaint on October 22 in the US District Court for the Northern District of Texas against Lasater Capital, LLC - formerly known as KeyCity Capital - three KCAP-branded investment funds, and three of the firm’s principals.

According to the complaint, the investor put $450,000 into two funds in late 2022 and early 2023. The firm’s marketing materials at the time promised an “impeccable financial record with no capital losses, no missed preferred dividends, and consistently exceeds targeted returns,” the filing states. Pitch decks also advertised “Zero Principal Losses” and returns that would “Always Exceed Targeted Returns,” according to the complaint.

Nearly four years on, the investor alleges he has received just $31,335.34 in cash. None of his principal has been returned, the complaint states. Another $210,950.01 in credited earnings was never paid to him. The filing alleges those earnings were rolled into his capital accounts as though he had agreed to reinvest them - despite his election to receive cash distributions.

The complaint leans heavily on a June 9, 2026 emergency cease-and-desist order from the Texas State Securities Board, identified as Order No. ENF-26-CDO-1898. According to the filing, the TSSB found that since approximately 2024, affiliated entities had “defaulted on loans exceeding $100 million,” lost properties through foreclosure, filed Chapter 11 bankruptcies, and been placed in receivership - all while the firm’s website continued to claim it had “protected the entirety of the investor principal” and “never missed a distribution.” The complaint states the TSSB also found the fund interests were securities sold without a permit through “materially misleading statements” while “material information was intentionally withheld.”

The filing paints a picture of a Sunbelt multifamily real estate operation that was stretched too thin and falling apart. In September 2025, the complaint says, a lender foreclosed on a six-property, 1,240-unit apartment portfolio in Memphis held in a separate KCAP fund - a portfolio the firm’s website had valued at $106 million just one year earlier, according to the filing. Further foreclosures on properties in Bryan and Joshua, Texas followed in August 2025, the complaint alleges.

The lawsuit also describes structural changes the filing says worked against existing investors. About four months after the investor put his money in, according to the complaint, the firm amended one fund’s partnership agreement on its own to allow loans to its own affiliated entities. The amendment itself acknowledged those loans “involve conflicts of interest on the part of the General Partner,” the filing states. The complaint alleges the change was pushed through via a passive-consent email that buried the provision in attached redlined documents.

When the investor’s two-year investment term in one of the funds ended around late November 2024, his capital was not returned, the complaint says. A written redemption request submitted months earlier went unanswered, according to the filing.

The promotional operation kept running in the background, the complaint alleges. Instagram ads for a newer fund claimed that “in 20+ years managing over $500 million in assets, we’ve never lost investor capital,” according to the filing. The complaint says the firm’s CEO styled himself “The World’s #1 Capital Closers Coach” and used speaking fees, syndicated radio, social media, and celebrity endorsements to promote alleged projected returns of 20% or more.

The complaint references other litigation against the firm and its principals, including a November 2025 lawsuit in the Southern District of Iowa alleging “fraud” in connection with a separate KCAP fund, and a case in the Southern District of California in which the filing states a 72-year-old investor alleges the loss of approximately $1 million in retirement savings. A July 2025 default judgment of $525,000 plus $143,722.36 in interest against the firm and two of its principals in a separate matter is now on appeal, according to the complaint.

The complaint brings 11 counts. The headline claims are federal securities fraud and Texas Securities Act violations. The filing also alleges common-law fraud, breach of contract, and breach of the duty of loyalty the firm owed its investors. Two counts are brought on behalf of the funds themselves, alleging the firm’s principals wasted fund assets by funneling money to distressed affiliates and collecting fees while distributions were frozen.

The investor seeks damages including his $450,000 in unreturned principal and $210,950.01 in withheld earnings, along with attorneys’ fees and other relief.

The allegations in the complaint have not been tested, and no court has ruled on any of the claims.