Investors Sue Fraudsters Over Ponzi Scheme Involving Bogus Movie Distribution Deals
The proposed class in a fraud class action challenging a Ponzi scheme involving bogus overseas licensing rights for HBO and Netflix films is owed $300 million for amounts loaned in 2018 and 2019, alleged AVR Group, Trident Asset Management and Illinois resident Michael Dziurgot in a fraud complaint Tuesday (docket 1:24-cv-20755) in U.S. District Court for Southern Florida in Miami.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The class action alleges Alebrije Entertainment; Craig Cole of Bend, Oregon; Matthew Cole of Ada County, Idaho; Gustavo Montaudon of Broward County, Florida; and John Does 1-10 propped up 1inMM Capital, a “billion dollar Ponzi Scheme” that resulted in a 2022 criminal indictment for Zachary Horwitz of Los Angeles, who was sentenced to 240 months in federal prison for the fraud. The scheme raised at least $650 million from investors, many who were personal friends of Horwitz, based on false claims that their money would be used to acquire film distribution rights that would be licensed to online platforms such as Netflix and HBO, said a 2022 news release from the U.S. Attorney’s Office for Central California.
“But the whole business was a lie,” said DOJ. Horwitz’s company “neither acquired film rights nor entered into any distribution agreements with HBO or Netflix,” and the purported copies of film licensing agreements “were fake,” it said. Instead of using the raised funds to acquire films and arrange distribution deals, Horwitz operated 1inMM Capital as a Ponzi scheme,“using victims’ money to repay earlier investors and to fund his own lavish lifestyle, including the purchase of his $6 million Beverlywood residence, luxury cars, and travel by private jet," said the release, citing DOJ’s sentencing memorandum.
Horwitz’s was the only criminal indictment “despite the fact that many individuals assisted in and profited from the scheme,” said the complaint. Though defendant Craig Cole didn’t own any part of 1inMM, he was billed as Horwitz's “right-hand man” and portrayed himself as the co-founder and owner of 1inMM Capital -- “until Horwitz’s arrest,” the complaint said. Cole forged banking records for 1inMM to “reel in more investors” and was accountable for over $85 million in the “criminal scheme,” it said.
Cole’s father, Matthew, was 1inMM’s first significant investor, plugging $100,000 into the company in 2013, the complaint said. Horwitz offered Craig Cole a percentage of investments he brought, which ultimately yielded the Coles “millions of dollars,” it said. Craig Cole’s most valuable potential investor was his friend, Ryan Spiegel, and Spiegel's father, Jeffrey, who formed SAC Advisory Group that raised $75.1 million for 1inMM “from innocent investors” including the plaintiffs, it said.
Craig Cole and Horwitz gave investors periodic “updates” regarding payouts for investors based on their investments into distribution agreements that weren't real, said the complaint. A Sept. 30 email from Cole gave information on “active deals,” but those, too, were “illusory as 1inMM had no investments,” it said.
Alebrije and Montaudon provided necessary material support to 1inMM and were identified on multiple distribution agreements with 1inMM that were provided to investors, the complaint said. The documents were “a reason that investors were willing to invest large sums of money into 1inMM,” it said.
To raise funds for 1inMM Capital’s purported business activities, Horwitz solicited investments from the investors by offering to sell them promissory notes issued by 1inMM Capital and signed by him, said the complaint. Promissory notes issued by 1inMM to aggregators and investors had maturities ranging from three to 24 months, with most coming due in either six months or 12 months, the complaint said. Each note provided for an amount to be paid at maturity, at a profit of 35%-45% over the life of the note, it said.
To persuade investors to buy the promissory notes, Horwitz and Craig made “materially false and misleading statements,” including that 1inMM had experience acquiring and licensing distribution rights in movies to HBO and Netflix, and that in the past they had used profits from those transactions “to repay investors in 1inMM’s promissory notes,” it said. They also claimed HBO, Netflix and other media companies were “strategic partners,” it said. By the time 1inMM “imploded,” Horwitz and 1inMM had raised over $690 million from investors through aggregators in multiple states, it said.
The plaintiffs’ claims include aiding and abetting fraud and unjust enrichment. They seek actual and compensatory damages, attorneys’ fees and costs, and pre- and post-judgment interest.