The S2 Capital lawsuit most commonly referenced is Everett v. Kostecki, a federal defamation case founder Scott Everett filed in August 2024 against the person he identified as being behind the “LPWhisperer” account on X. A Dallas federal judge entered a default judgment of $2,000 in Everett’s favor in July 2025.1PACER Monitor. Everett v. Kostecki That case is separate from the financial unraveling at S2 Capital itself, where a private REIT is winding down, a Garland apartment complex faced foreclosure, and roughly $558 million in loans across twelve properties have moved to special servicing.
The Defamation Lawsuit Against LPWhisperer
Everett sued Jakub Kostecki in the Northern District of Texas, alleging Kostecki operated the LPWhisperer account that had accused Everett of defrauding investors and funding a luxury lifestyle with their money. The LPWhisperer account publicly denied any connection to Kostecki.2Texas Lawyer. Real Estate Investor Sues Person Allegedly Behind Notorious LPWhisperer X Account
The complaint focused on two August 2024 posts. One said Everett had “screwed over so many investors, tenants, employees and vendors” and was spending “THEIR money, not his, on luxury.” The second reposted allegations that Everett had “scammed” people and withheld books from “defrauded investors,” with added commentary that Everett and others “funded lavish lifestyles and stupid initiatives.” Everett also alleged Kostecki tried to extort him by suggesting Everett “make an offer” to buy the LPWhisperer account in exchange for silencing the criticism.3GovInfo. Everett v. Kostecki, Findings and Recommendation
Kostecki was served at his residence in August 2024 but never responded. The clerk entered a default, and in May 2025 a magistrate judge recommended granting default judgment, finding the two posts constituted defamation per se because they accused Everett of criminal conduct and injured his professional reputation.3GovInfo. Everett v. Kostecki, Findings and Recommendation
Everett had sought $82,500 in compensatory damages, an amount tied to payments made to a crisis public relations firm. The court denied the request, noting the payment came from S2 Capital rather than from Everett personally and that the evidence was insufficient to justify the sum. The magistrate instead recommended nominal damages of $1,000 per defamatory statement, for a total of $2,000. On July 14, 2025, Judge Ed Kinkeade adopted the recommendation and entered final judgment for that amount.3GovInfo. Everett v. Kostecki, Findings and Recommendation No appeal or motion to set aside the default appears on the docket.1PACER Monitor. Everett v. Kostecki
Why S2 Capital Is in Financial Distress
The lawsuit sits against a backdrop of much larger trouble at the firm. Everett founded S2 Capital in Dallas in 2012 as a value-add multifamily investor, buying underperforming apartments and renovating them to raise rents. The firm grew rapidly during the Sun Belt boom on floating-rate debt. Everett once said on a podcast that “fixed-rate is for suckers.”4The Real Deal. Scott’s Solution
When the Federal Reserve pushed rates above five percent, that debt strategy inverted. By 2024, S2 was the 44th-largest apartment landlord in the country, with roughly 28,000 units across about 130 Sun Belt properties.5The Real Deal. Scott Everett’s S2 Capital Issues Capital Call In April 2024, Everett rolled roughly 10,000 units across 26 properties, valued at $1.6 billion, into a private REIT carrying $1.4 billion in senior debt split about evenly between fixed-rate agency loans and floating-rate debt at 8.25 percent. S2 refinanced roughly $500 million of the floating portion into a five-year Fannie Mae credit facility and sold nearly $75 million in founder’s shares to limited partners to fund renovations.4The Real Deal. Scott’s Solution
The REIT Wind-Down and Investor Losses
By the end of 2025, common equity in the REIT had lost 90 percent of its per-share value.6The Real Deal. Feeder Fund for S2 Capital’s REIT Predicts Loss Everett notified limited partners of potential losses in November 2025. In January 2026, S2 issued a capital call seeking $70 million in preferred equity, warning that without the full amount investors faced a 60 to 75 percent equity loss. The firm raised $30 million of the target.5The Real Deal. Scott Everett’s S2 Capital Issues Capital Call
Trinity Investors, the feeder fund that helped form the REIT in 2024, told its investors: “Equity investors should expect a full loss of capital.” Trinity said the $30 million raised would provide only “a short runway to complete an orderly wind down of the REIT,” and that S2 was shifting focus to “maximizing value for mezzanine investors” rather than equity holders. The REIT holds over 9,000 units in North Texas, Houston, and Phoenix.6The Real Deal. Feeder Fund for S2 Capital’s REIT Predicts Loss
Everett attributed the losses to market conditions rather than strategy, citing a 32 percent drop in rents since October 2022, a 26 percent rise in operating expenses, and interest rates that have remained “stubbornly high.”6The Real Deal. Feeder Fund for S2 Capital’s REIT Predicts Loss
Foreclosure and $558 Million in Special Servicing
In May 2026, S2 Capital defaulted on a $78.6 million loan from Benefit Street Partners tied to The Republic Apartments, a 1,033-unit complex in Garland, Texas. A foreclosure auction was set for around May 27, 2026, though Everett said the property was under contract to sell within 30 days.7The Real Deal. Scott Everett’s S2 Capital Faces $79M Foreclosure
Around the same time, more than $250 million in Freddie Mac floating-rate CMBS loans across three S2 properties moved to special servicing after the properties failed to hit the net cash flow projected at underwriting. Morningstar Credit identified them as:
- The Kace in Grand Prairie, Texas: 720 units, $92.2 million loan. The property had never met underwritten cash flow.
- The Weston Medical Center Apartments in Houston: 793 units, $84 million loan. Net cash flow dropped from $5.4 million to $4 million by the end of 2025.
- The Jerome in Glendale, Arizona: 408 units. Net cash flow fell from an underwritten $5.1 million to $2.9 million in 2025.
Those three were part of a larger group. Multifamily Dive reported that twelve S2 Capital properties had moved to special servicing by May 2026, carrying a combined outstanding debt balance of nearly $558 million across Texas, Arizona, Florida, and North Carolina.8Multifamily Dive. S2 Capital Apartment Distress Special Servicing In early June 2026, Everett said he was personally investing “a lot of cash,” an undisclosed sum he called “not an insignificant” amount, to bring the twelve properties out of special servicing within 30 to 60 days.9CoStar. S2 Capital Founder Opens His Own Wallet To Reclaim 12 Apartment Properties
Investor Litigation Against S2 Capital
As of the available reporting, no class action lawsuits or formal legal actions by limited partners against S2 Capital have been publicly reported, despite Trinity Investors telling its clients to expect a total loss. The only active litigation tied to Everett’s name in the public record is the defamation case he brought and won by default. Everett has said the firm is “working with our lenders on solutions to maximize recovery.”6The Real Deal. Feeder Fund for S2 Capital’s REIT Predicts Loss