In his ruling on Monday, U.S. Bankruptcy Court Judge Christopher Sontchi in Delaware found Urban Commons principals Howard Wu and Taylor Woods in contempt for failing to freeze assets and properly account for how they spent millions of dollars in federal Paycheck Protection Program (PPP) loans.

The pair is ordered to return to court for a hearing at 11 a.m. on Friday, where the judge will decide what sanctions to impose. The judge said Woods and Wu could be taken into custody, though they would first face an evidentiary hearing.

“Messrs. Woods and Wu are fraudsters,” Sontchi wrote. “They fraudulently obtained a PPP loan on behalf of the Debtor without authority and absconded with the proceeds, leaving either the Debtor or the United States to pay back the lender.”

The judge said arresting Woods and Wu would be a “drastic action,” but it might be more effective than monetary sanctions.

“The Court does not take this step lightly, but the actions of Defendants in derogation of a Court order entered after notice and a hearing leave no alternative,” Sontchi wrote.

The judge in a previous court hearing said he was considering referring the matter to the U.S. Attorney’s office.

Urban Commons, a Los Angeles-based real estate and investment firm, has faced a mountain of debt and legal problems since it took over as the Queen Mary’s leaseholder in 2016. The company earlier this year declared bankruptcy and gave up its lease, returning control of the Queen…

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