Wed, 18/06/2014 - 10:00
A federal judge has upheld all of the key claims in a lawsuit filed against financial services firm Cantor Fitzgerald and its owner and chief executive Howard Lutnick by the bankruptcy estate of former futures broker Refco Inc.
The suit, filed in 2013, alleges that Cantor's Nevada gaming businesses acquired proprietary technology and other assets from a subsidiary in which Refco held a 10 per cent stake, without ever compensating the subsidiary and depriving Refco of its interest in the assets.
In an 80-page ruling on Cantor’s motion to dismiss delivered 10 June, US District Judge Ronnie Abrams allowed the Refco bankruptcy estate’s conversion, waste, breach of fiduciary duty, aiding and abetting claims and other claims to survive against Cantor Fitzgerald and several of its subsidiaries and executives. The named individual defendants are Cantor Fitzgerald chairman and CEO Howard Lutnick, Cantor gaming president Lee Amaitis and Cantor general counsel and Cantor Index Holdings director Stephen Merkel.
Financial litigation law firm Grant & Eisenhofer is counsel for Refco’s bankruptcy estate and its administrator Marc Kirschner. The firm filed suit seeks to recover compensation owed to the Refco estate under Chapter 11 of the bankruptcy code.
The lawsuit contends that in 2002, Refco invested USD8 million in Cantor Fitzgerald subsidiary, Cantor Index Holdings (CIH), in exchange for a 10 per cent partnership interest. Over the next several years, CIH developed successful gaming technology, such as devices for remote gambling and other betting techniques. The bankruptcy estate alleges that Cantor Gaming ultimately shut down CIH and took the rights of its core assets and intellectual property for its own profit, developing valuable businesses in Nevada and elsewhere – while failing to provide any compensation to the bankruptcy estate to reflect its 10 per cent stake in CIH.
The complaint notes that Cantor defendants have repeatedly represented to regulators, analysts and the press that the technology developed by CIH and its subsidiaries in the UK was critical to the successful build-out of Cantor's Nevada operations. The bankruptcy estate’s suit seeks tens of millions of dollars in compensatory and punitive damages.
Following the ruling, the parties in the litigation will be required to jointly submit to the court a proposed case management plan and scheduling order, and the court has set a conference on 24 June 2014.
Grant & Eisenhofer co-managing director Jay Eisenhofer says: “We’re pleased that the Southern District Court has upheld all of the key claims against the main parties in this action. We are prepared to move forward with our litigation, to prove that Cantor still owes Refco’s bankruptcy estate for the value of assets which Refco helped finance more than a decade ago. Cantor’s success in the mobile gaming sector has depended heavily on the technologies that Refco helped bankroll and we will continue to press for recovery for the fair value of that investment.
“If the case goes to trial, we will demonstrate that the Cantor defendants used CIH’s core technology and related assets in which Refco had original ownership stake to build its subsidiary gaming business. This case is about honouring the terms of that original agreement.”
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