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Bankrupt developer James Myers must appear before a Minnesota judge to determine whether he participated in a scheme to defraud investors in a condominium project, a judge in his bankruptcy case ruled last week.

Myers and other partners are targets of a 2008 lawsuit in which 38 investors in a downtown Minneapolis condominium complex claim they lost $684,000 after being told they would receive their initial investment plus a 100 percent return.

The lawsuit accuses Myers, who headed a limited partnership that held a 45 percent interest in Sexton Lofts condominiums, of securities fraud and failing to register the investments as securities, as required by Minnesota state law. A bench trial is scheduled for Nov. 30 to determine whether the investments were in fact securities.

By filing for bankruptcy, Myers could have been shielded from the Minnesota lawsuit as well as efforts to collect nearly $184 million in business debts and court judgments he cited in the filing.

However, lawyers for the condominium investors argued that because he defended himself in the lawsuit prior to filing for bankruptcy, Myers should not be allowed to avoid the trial. Those lawyers also claimed that bankruptcy does not offer protection from creditors if a debtor has violated state or federal securities laws.

The Sexton Lofts project has been troublesome for Myers, who was a leader of Regency companies when they closed in April 2007, roughly the same time the Sexton Lofts project was collapsing.

He has been ordered to pay $1.8 million in connection with a $26 million loan for the project. Another Minnesota judge observed that Myers neglected his duties as a principal in Sexton Lofts by failing to keep himself informed of efforts by the project’s majority owner to market condominium units.

In that case, the judge ruled that investments in the projects were securities under Minnesota law and that Myers was responsible for repaying $90,000 by virtue of his role as a principal in Sexton Lofts.

The judge also noted that there was no evidence that Myers participated in or was aware of the marketing scheme that prompted the lawsuit and led to the judgment.