Ryan Kavanaugh Sued For Fraud By Relativity Investor

Relativity CEO Ryan Kavanaugh was sued today by one of his investors over monies that the plaintiff put into the struggling company, saying he was “fraudulently induced” into providing financial investment.

Carey Metz, a hedge fund investor, alleges in the complaint that “Kavanaugh desperately needed money to save Relativity from bankruptcy and to save his reputation and lifestyle, so [Kavanaugh] said whatever he thought would be persuasive, regardless of the truth, to entice Metz to lend Kavanaugh millions of dollars to put into Relativity.”

The 18-page filing in Los Angeles Superior Court (read it here) states that Metz already had invested $10 million in Relativity and an additional $2 million as a bridge loan in summer 2015. That loan was to be paid back within a year with 8% interest. Metz says in the lawsuit that he remains unpaid. Among the allegations in Metz’s suit are a number of “lies” that the Relativity topper told Metz to gain investment in the faltering company. Among those “lies” were that other investors were contributing additional funds; that the CEO already had raised $20 million himself; that billionaire Ron Burkle had invested $10 million to help the company avoid bankruptcy and wanted to increase his investment; that an IPO was on the horizon; and that the bridge loan provided on top of Metz’s $10 million investment would help stave off a Relativity bankruptcy.

The oral agreement between Kavanaugh and Metz for the bridge loan came about month before Relativity filed for Chapter 11 bankruptcy.

Metz alleges in the suit that Kavanaugh, “despite repeated demands,” has yet to repay the $2 million that was due in June 2016.

According to the suit, “This case arises out of the unscrupulous lengths to which Kavanaugh, a/k/a ‘the billion-dollar producer’, went to scrounge money to salvage his company — and with it his reputation. Defendant enjoyed lavish parties, luxury cars, private jets, and other perquisites that went along with being CEO of a global media company that includes one of the largest privately held Hollywood film and television studios.”

Metz’s suit alleges that Kavanaugh told him he had ongoing projects that would bring more income. But instead of taking the proceeds from the sales of the projects to repay him for the bridge loan, “Kavanaugh kept those proceeds for himself and used them for his own personal purposes (outside the business purposes). Notably, Kavanaugh purchased real estate valued at several million dollars for his personal use.”

Metz also claims that he, his partner Michael Fowler, and Kavanaugh met at the Santa Monica Airport. At that meeting, Metz says, the Relativity CEO asked him “to extend a short-term loan to Relativity through a Kavanaugh-controlled entity.” The lawsuit does not specify which entity was used.

Attorney David A. Bovino of Bovino Carminati in Aspen, Colorado is representing Metz in the suit, which alleges fraud, breach of contract and more; seeks undisclosed punitive and other damages; and demands a jury trial.