SFX Entertainment, Inc. (SFXE) is being sued by three men who claim they were co-founders of the electronic music holdings company with Robert FX Sillerman (pictured) but were denied their shares, valued at $100 million.
Bloomberg reports that Deckstar president and co-founder Lawrence Vavra, “Disco Donnie” Estopinal’s manager Paolo Moreno, and his brother Gabriel filed a complaint today in the federal court of Los Angeles claiming that they were frozen out of SFX after offering key industry knowledge and contacts in the early stages, something they say Sillerman didn’t have and couldn’t have done without. The claim states that Sillerman breached contracts and engaged in fraud after agreeing to make the three “partners” and provide financial backing while they made connections and selected targets.
The complaint reads:
“Had they known that Sillerman’s true intentions were to use plaintiffs’ strategy, information, connections and access for his own gain, without granting plaintiffs any significant ownership interest in the venture, plaintiffs would not have entered into any agreement with Sillerman, and would not have undertaken to execute on the strategy for the benefit of SFX.”
The three men claim to have identified and helped acquire seven of the eight properties listed in SFX’ Securities and Exchange Commission filings for the IPO in October, including Estopinal’s Disco Donnie Presents event brand.
The Wall Street Journal reports that according to the suit, the men were offered “founder’s shares” that would yield a staggering ammount of money in addition to options, control, and more, but were offered no further details. For the next year, the three men were allegedly strung along with inferior offers, and the shares were never mentioned again.
SFX released a basic statement, saying the company “will vigorously defend this baseless lawsuit.”
Although this could get ugly with unsubstantiated claims and email investigation, this situation won’t likely end in anything irreparable for SFX–at least not anything worse than what’s already underway, as the company continues to dip toward its all-time low of $8.10 a share, sitting currently at $8.53. The company priced its shares at $13 for its IPO.