×

Ryan Kavanaugh Accused by Ex-Partner of Running a Ponzi Scheme

Updated below: 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.

Update: Kavanaugh and Spar appear to have mended fences. Kavanaugh’s rep sent a statement Friday afternoon saying they have “satisfactorily resolved all of their issues.” The statement also accused Variety and the Hollywood Reporter of having “attempted to smear both Kavanaugh and Spar” by quoting from their lawsuits against each other, which they now say they submitted to the court by accident.

“Unfortunately, what was, in reality an employment dispute was blown way out of proportion by the press reports this morning. The fact that the private documents went public was a mistake. Neither was intended to be legally filed. Kavanaugh and Spar are on good terms.”

In a separate comment, Kavanaugh sought to take back some of the allegations from his lawsuit — which his rep emailed to Variety on Friday morning. The complaint, which is posted below, contends that Spar disparaged Howard Lutnick, the CEO of Cantor Fitzgerald, and tried to persuade Kavanaugh to exclude him from the stock exchange venture, saying that Lutnick would only try to “screw” them.

“I do need to add that reported statements from ESX’s complaint relating to Cantor Fitzgerald and Howard Lutnick are not accurate,” Kavanaugh said. “To my knowledge, Elon never spoke badly about them and did not try to shift business from them. The terms just could not be agreed.”

Spar apparently has some regrets as well, saying that Kavanaugh is not really running a Ponzi scheme, as he alleged in his suit, which is also posted below.

“Ryan has been funding the ESX operation himself,” Spar said. “To my knowledge based on information provided to me, Ryan has and is investing heavily in this business and any reference to ESX or any related business as a ‘Ponzi Scheme’ is not accurate. He is a visionary thinker and I wish him the best of luck in his future endeavors. He and I have no remaining disputes.”

Kavanaugh also faulted the press for not fact-checking the allegations that he and his former business partner leveled at each other over the last 24 hours, when he says the truth is that they have nothing but the highest regard for each other.

“We were figuring out how we were parting ways as our business interests diverged, and it’s unfortunate that the press spun this the way it did. We only want the best for each other,” Kavanaugh said. “Elon is a great banker, we just have different business interests. As usual the press spun a mountain out of a molehill. I wish him and his family nothing but the best and know he will be successful. This just shows the unfortunate state of the news as an industry today: they take things out of context, do little to no fact checking, and create headlines that fill their objective.”


More Biz

  • The dark Manhatten skyline, seen from

    StubHub Refunds $500,000 to Customers Shut Out by New York Blackout

    Saturday’s blackout in New York had an outsized effect on the city’s nightlife, with Madison Square Garden and the entire Broadway district seeing multiple shows cancelled due to the the power outage. As a result, StubHub has refunded more than $500,000 worth of tickets for cancelled events. According to a statement from the company, the StubHub [...]

  • Weapons Cache

    D.A. Files 64 Charges in Bel-Air Weapons Stockpile Case

    The L.A. County District Attorney’s office has filed 64 counts against Girard Saenz, the man who allegedly kept a stockpile of more than 1,000 weapons at a Bel-Air home linked to the Getty family. Saenz is accused of illegal possession of assault weapons, transferring handguns without a dealer license, possession of short-barreled shotguns, and possession [...]

  • 9-1-1: Angela Bassett in the series

    Fox Sees Primetime, Sports Ad Gains As TV Upfront Wraps

    Fox Corporation is the latest to benefit from stronger-than-expected trends in TV ad spending, as the company notched strong gains in advertising commitments for its next cycle of programming – its first since selling off a large chunk of its media assets to Walt Disney. Ad demand was stronger than many executives anticipated, according to [...]

  • BMI Promotes David Levin to Senior

    BMI Promotes David Levin to Senior VP of Digital Licensing

    BMI today announced that David Levin has been promoted to Senior Vice President of Licensing, effective immediately. In his newly expanded role, Levin is responsible for all of BMI’s domestic licensing and revenue generation, encompassing radio, television, digital media, cable, satellite and general licensing.  Levin, who will oversee teams in New York and Nashville, reports [...]

  • Warner Music Group Logo

    Warner Music Acquires Musical Theater Indie First Night Records

    Warner Music Group has acquired First Night Record, an independent record label for West End and Broadway musical theatre cast recordings. The company will be overseen by WMG’s Arts Music Division, led by President Kevin Gore. First Night co-founder John Craig will join the Arts Music team under a multi-year consulting agreement to identify and record musical theatre productions in [...]

  • Woodstock 50 to Hold Open House

    Woodstock 50 to Hold Open House for Local Residents Before Permit Review Tuesday

    If nothing else, the producers of Woodstock 50 are persistent. After two permit applications to hold the troubled festival at the Vernon Downs racetrack in Upstate New York were rejected by the town of Vernon codes office, the producers and venue owner Jeffrey Gural today invited the local community “to embrace the Festival’s spirit of [...]

  • ILM Star Wars The Force Awakens

    ILM to Open Latest Effects Facility in Sydney, Australia

    Sydney, Australia, is to be home to Industrial Light & Magic’s fifth production hub. The Disney-owned special effects company currently has facilities in San Francisco, Vancouver, London and Singapore. The decision to open the Sydney outpost was announced Monday local time by executive creative director and head of ILM Rob Bredow, ILM executive Luke Hetherington, [...]

More From Our Brands

Access exclusive content