Ryan Kavanaugh Accused by Ex-Partner of Running a Ponzi Scheme
Ryan Kavanaugh is again embroiled in a legal battle, as the former CEO of an “entertainment stock exchange” has sued him for fraud and accused him of running a Ponzi scheme.
Elon Spar filed suit in Los Angeles Superior Court on Thursday, alleging that Kavanaugh persuaded him to go into business together under false pretenses. While working at Cantor Fitzgerald, Spar had developed an idea for a stock exchange in which buyers could take equity in film projects. In 2018, Kavanaugh — fresh from the second bankruptcy of Relativity Media — told Spar that he had a $6 million commitment to invest in the project.
According to the suit, Kavanaugh also claimed to have hundreds of millions of dollars in commitments to finance a slate of films under his new company, Proxima Media. Spar came to discover that that was not true, the suit alleges.
“It had virtually no capital,” the suit alleges. “It had no viable financial commitments — certainly nothing approaching the magnitude of what was represented… Over time, as Kavanaugh withdrew and replaced one funding proposal after another and each of his lies was exposed, it became apparent to Spar that Kavanaugh was operating Proxima and its related entities as essentially a Ponzi scheme, using meager new investment capital to satisfy old debts, diverting corporate funds for personal use (instead of paying his employees and contractors), and manipulating the corporate books and records to conceal his misrepresentations.”
Spar and Kavanaugh parted ways in May, and Spar alleges that Kavanaugh has tried to prevent him from pursuing the exchange concept independently.
Kavanaugh filed his own lawsuit against Spar on Friday, accusing him of breaching his contract. Kavanaugh claims that Proxima invested $2 million in the project, but that Spar wanted a bigger commitment of perhaps another $10 million. That conflict led to a falling out, and Spar became hard to find and rarely came to the office. Ultimately, Kavanaugh says Spar sent an “aggressive email” saying he no longer wanted to work with Kavanaugh on the project. Since then, Kavanaugh alleges that Spar has been trying to poach employees.
“We expect to be fully supported and look forward to our day in court,” Kavanaugh said in a statement.
Kavanaugh recently resurfaced with a plan to develop a studio, theme park and film slate in China. In that deal, Kavanaugh has partnered with National Arts Entertainment and Culture Group Ltd. in an effort to raise $100 million over the next nine months.
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