×

Relativity Media Investor Claims $12.5 Million Fraud

A hedge fund investor is doubling down on his claim that Ryan Kavanaugh defrauded him into investing into Relativity Media, the twice-bankrupt mini-studio.

Carey Metz filed an amended lawsuit in Los Angeles Superior Court on Thursday, accusing Kavanaugh, the founder and CEO, of conning him into making a $10 million investment in the company in 2013. Metz had earlier alleged that Kavanaugh duped him into making a $2.5 million investment in the company as it verged on bankruptcy in 2015.

The amended complaint comes two weeks after a New York bankruptcy judge dismissed portions of Metz’s original complaint alleging breach of oral contract, unjust enrichment, and other torts. Judge Michael Wiles held that Metz’s claims were barred by a release that accompanied Relativity’s initial plan of reorganization in 2016.

Relativity first recently declared bankruptcy for a second time, having failed to raise $100 million in new equity since first emerging from bankruptcy two years ago. The company is now seeking a bankruptcy sale to UltraV Holdings.

Wiles’ ruling did not bar Metz from pursuing allegations of fraud. In the amended complaint, he alleges that Kavanaugh lied in order to get Metz to invest the original $10 million.

“He did so by misrepresenting that Relativity based its investing decisions on a proprietary algorithm and computer model based on a rigorous set of inputs and assumptions that enabled it to predict a film’s potential success with greater reliability than even the most experienced studio executives,” the suit states.

Only after making the second investment did Metz discovered the alleged fraud, the complaint states.

“Metz discovered, for the first time, that Relativity’s vaunted model for predicting the potential financial success of a movie lacked mathematical rigor and was of limited, if any, value as a predictive tool,” the suit alleges. “He also discovered that, contrary to Kavanaugh’s representations at the time he originally invested in 2013, Relativity had not consistently followed its own computer model when making decisions about what films to finance.”

Kavanaugh’s representative did not immediately respond to a request for comment.

Update, 10:42 a.m. Friday: Kavanaugh’s spokesman issued the following statement:

“Carey Metz signed a full and complete release; he was on the board of Relativity and had equal or better access to information than Kavanaugh; and the statute of limitations has long passed for his claim. It is suspicious coming on the heels of Metz’s recent loss in US Bankruptcy Court.”

More Biz

  • Andy Signore Screen Junkies

    'Honest Trailers' Creator Andy Signore Settles Defy Media Suit

    Andy Signore, the creator of Screen Junkies’ “Honest Trailers,” has settled a lawsuit against Defy Media challenging his firing for alleged sexual misconduct. Signore was one of the first figures to lose his job in the aftermath of the Harvey Weinstein harassment revelations in October 2017. Defy Media, which then owned Screen Junkies, terminated him [...]

  • Singer-rapper Psy performs during the 70th

    YG Agency Boss Quits as K-Pop Scandals Expand

    Yang Hyun-suk last week resigned from his remaining positions at YG Entertainment. The talent agency he co-founded is deeply mired in a series of inter-linked scandals that stretch from drugs to prostitution. Problems started with the band Bigbang and its star Seungri, but now also encompass other YG artists. Hwang Bo-kyung was appointed as the [...]

  • NEW YORK, NY – JUNE, 24:

    LGBTQ Stars Honored at Variety’s Power of Pride Celebration

    New York City felt the full Power of Pride on Monday, as Variety celebrated its inaugural issue devoted to the annual recognition of LGBTQ people worldwide. At an intimate gathering at Mr. Purple, the rooftop bar at Hotel Indigo Lower East Side in Manhattan, Variety’s cover stars and luminaries gathered for cocktails and the unveiling [...]

  • Motown Seeks to Block 'O-Town' Trademark

    Motown Seeks to Block 'O-Town' Trademark

    UPDATED: The boy band O-Town briefly rose to fame in 2000, with a star turn on MTV’s reality series “Making the Band.” But the reformed group has just one obstacle to its efforts to trademark its name: Motown Recordings. The label’s parent company, Universal Music Group, is trying to block the band from registering “O-Town” [...]

  • Alyssa Milano

    Alyssa Milano Settles $10 Million Suit With Former Accountant

    Actress Alyssa Milano has settled a legal battle with her former accountant as the case was on the verge of going to trial. Milano and her husband, agent David Bugliari, filed suit in 2017, alleging that accountant Kenneth Hellie had forged her signature on checks, failed to pay overdue bills and taxes and allowed costs [...]

  • J Balvin ‘Amicably’ Parts Ways With

    J Balvin ‘Amicably’ Parts Ways With Longtime Manager Rebeca Leon

    J Balvin and his longtime manager Rebeca León have “amicably” parted ways, reps for the singer and León confirmed to Variety. The news was first reported by Billboard. León — who also oversees the careers of fast-rising Spanish singer Rosalia as well as Colombian superstar Juanes, with whom she founded Lionfish Entertainment — began managing Balvin early in his career [...]

More From Our Brands

Access exclusive content