A hedge fund investor is suing Relativity boss Ryan Kavnaugh for fraud, accusing him of misrepresenting the state of Relativity’s finances and of lying about a billionaire investor in order to secure a loan to keep the embattled company afloat.
Casey Metz, who had previously invested $10 million in Relativity, filed the suit Thursday in Los Angeles Superior Court, claiming that he lent the company $2 million under false pretenses one month before the company filed for bankruptcy.
“Kavanaugh desperately needed money to save Relativity from bankruptcy and to save his reputation and lifestyle, so Defendant 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 complaint says. “Kavanaugh lied about Relativity’s financial condition, he lied about the existence of other investors, and he lied about the size of other investments to induce Metz to make a bridge loan to Relativity.”
Taking Kavanaugh at his word, Metz proceeded to lend Relativity $2 million at an 8 percent interest rate with Kavanaugh personally guaranteeing the funds, the complaint alleges. Metz’s complaint says also that he agreed to a handshake deal with Kavanaugh in June 2015 that was never formalized in writing. Among the representations Metz’s suit claims turned out not to be true include that the company would be having an “imminent IPO” and that billionaire Ron Burkle had invested $10 million in the studio. Relativity filed for chapter 11 bankruptcy in July of that year, and Metz alleges that Kavanaugh refused to honor the deal and has not repaid his $2 million.
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Metz is suing Kavanaugh for fraudulent inducement by intentional misrepresentation and breach of oral contract, in addition to other claims. The suit adds to the legal drama Kavanaugh has been involved with relating to Relativity’s implosion. The studio is currently suing Netflix for breach of contract and is also being sued for fraud by RKA Film Financing.