Photo credit: Electric Zoo’s Jordan Loyd
The company that organizes festivals like Electric Zoo, TomorrowWorld and Mysteryland has been sued for stock fraud, which could cost it nearly $100 million.
Paolo Moreno, Lawrence Vavra and Gabriel Moreno filed a complaint in a Los Angeles federal court on Feb. 5th against SFX Entertainment, Inc., according to Bloomberg.com.
In the complaint, the three men allege that they were “frozen out” by SFX Chief Executive Officer Robert Sillerman, and didn’t get their promised founders’ shares of the company’s publicly traded stock. They said they helped to create the company by using their industry connections to help SFX position itself to become the massive EDM company it is today.
Bloomberg.com said SFX could owe the men more than $100 million.
“Had they known that Sillerman’s true intentions were to use (three men’s) strategy, information, connections and access for his own gain, without granting (the three men) any significant ownership interest in the venture, (the three men) would not have entered into any agreement with Sillerman, and would not have undertaken to execute on the strategy for the benefit of SFX,” according to the complaint.
In English: if the three men knew Sillerman was going to use their insider knowledge – but not pay them their fair share for helping to create SFX – they would have never agreed to work with Sillerman in the first place.
This is all horrible news for SFX, which saw its stock drop from 9.15 to 8.40 today.
We don’t actually know what that means, but the graph of Bloomberg.com made it look like a dismal start to 2014.
SFX has exploded in just the past few years, buying out companies such as ID&T (of Tomorrowland and Sensation fame), Made Events (of Electric Zoo fame) and Totem OneLove ( which puts on Australia’s Stereosonic).
The company raised $260 million in its initial public offering (i.e. when its stocks went up for sale on the stock market), which was just last year, according to Bloomberg.com.
Although it’s unclear what this will mean for CEO Sillerman or SFX, we really really hope it won’t screw up our future festival season plans.
Oh yeah, and that it all gets worked out in civil court for everyone involved.
That, too.
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