Category Archives: Bankruptcy

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R. Kelly Evicted From 2 Atlanta Properties as Legal and Financial Troubles Pile Up

Singer, songwriter, and producer R. Kelly was recently evicted from two properties in the Atlanta suburbs for failing to pay more than $30,000 in back rent and fees.

The two properties, situated in the tree-lined Johns Creek neighborhood of Duluth, GA, have had a shadow cast on them by the scandals surrounding Kelly. There’s a large mansion and a smaller home, both of which Kelly had been renting. The homes have taken center stage in sex abuse allegations against the entertainer, in addition to dual burglaries committed in December.

The larger home on Old Homestead Trail was used as a primary residence by Kelly, according to BuzzFeed, which published a bombshell report in October accusing the popular R&B crooner of running a “sex cult” involving brainwashing, with a stable of young women kept in guesthouses near his Johns Creek home.

Kelly denies these allegations.

The singer rented the large mansion for $11,542.45 per month. Built in 2000, the 9,000-square-foot estate is situated on 2.5 acres and has its own batting cage and a tennis court that Kelly turned into a basketball court. Indoors, the home boasts luxe amenities, including a home theater and cigar bar.

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SEC warns celebs about legal dangers of bitcoin endorsements

Celebs endorsing ICOs must now disclose if their social media posts are paid promotions.

When celebrities endorse things on social media, a lot of people tend to take their word for it. Now that some of them have also begun endorsing a controversial means of crowdfunding called “initial coin offering” or ICO, which was recently banned in China and South Korea, the US Securities and Exchange Commission has had to step in with a warning. Since ICOs are an unregulated means to raise money using cryptocurrencies, people could use them to sell products that don’t exist or to entice investors to sink their money into projects that will never materialize. That’s why SEC has decided to be on the lookout for celebrity ICO endorsements to protect potential investors.

The agency’s warning says:

“Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws. Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.”

SEC’s warning comes after The New York Times published a piece on celebrities like Floyd Mayweather and Paris Hilton endorsing various ICOs. The famous boxer help a Miami-based ICO called Centra Tech raise $30 million. According to the publication, Centra Tech’s founders created a chief executive that doesn’t exist. In addition, despite promising a Visa or a Mastercard debit card to its backers that will supposedly allow them to spend their Centra coins anywhere, the company reportedly doesn’t have any kind of deal or partnership with either credit card company.

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Manhattan judge asked to determine if rent guidelines should be based on tenant affordability

For some tenants, the rent is still “too damn high” — but is that something the city’s Rent Guidelines Board can consider when it decides just how high rents can go for more than 1 million rent stabilized apartments?

That is what a Manhattan judge has been asked to determine by landlords who argued Tuesday that tenant affordability is not a factor that the board can weigh when it sets rent increases each year.

“Affordability is not the be all and end all of the rent stabilization law,” Jeffrey Turkel, the lawyer for the Rent Stabilization Association, a landlord group, told Manhattan Supreme Court Justice Debra James.

The RSA has asked the judge to rule that the board was “arbitrary and capricious” in 2015 and 2016 for even considering tenant affordability when it decided to freeze rents for stabilized tenants renewing their leases.

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50 Cent to Receive $14.5 Million in Legal Malpractice Suit

Rapper awarded payout after suing former legal team over botched headphones lawsuit; $14.5 million will go toward bankruptcy settlement


50 Cent was awarded $14.5 million stemming from a malpractice suit the rapper filed against a law firm that represented him in a headphones lawsuit.

However, it’s unlikely 50 Cent will see any of that award, as most of it will go toward satisfying the $23 million bankruptcy settlement he agreed to in July, pending approval, Forbes reports.

In a 2014 lawsuit, 50 Cent (real name Curtis Jackson) was ordered to pay headphone makers Sleek Audio $16 million after the rapper severed his deal with Sleek to produce his own brand of headphones that a court ruled was “basically the same designs” as his Sleek-branded pair.

Following that decision, 50 Cent filed a malpractice suit against Garvey Schubert Barer (GSB), the law firm who represented him against Sleek Audio, alleging that the firm “didn’t adequately represent his interests in licensing negotiations and arbitration disputes with Sleek Audio.”

“Among GSB’s numerous failures was its inexplicable decision not to call technical and damages experts to rebut expert testimony offered by Sleek — failures relied upon by the arbitrator in crediting Sleek’s experts and entering an eight-figure award in Sleek’s favor,” 50 Cent’s new legal representation alleged in their suit against GSB.

As part of 50 Cent’s Chapter 11 reorganization plan, agreed to in July after he filed for bankruptcy in July 2015, the rapper owed Sleek Audio $17 million, making them 50 Cent’s largest outstanding debt. 50 Cent also owes $7 million in damages after losing a privacy lawsuit over a leaked sex tape.

In a deleted Instagram post following the $14.5 million decision, the rapper wrote, “I just got 14.5 million back from one Law Firm For malpractice. They fucked up so bad, I don’t think they should be practicing Law.”

On Monday, 50 Cent replaced that post with a Photoshopped image of the rapper sitting on a stack of money and a caption that read, “I retract my earlier statements about the legal services provided to me by the law firm of Garvey Schubert Barer. The law firm and I have settled our dispute and I consider the issue closed.”

“With respect to Sleek Audio, the $14.5 million settlement represents significantly more than the $12.5 million payable to Sleek Audio under the Bankruptcy Plan and more than half of the total amount owed under Mr. Jackson’s reorganization plan,” Craig Weiner, one of 50 Cent’s lawyers in the malpractice said, said in a statement.

“We are informed that these proceeds, together with other funds contributed by Mr. Jackson should position the Estate to provide for the remaining obligations to be satisfied in connection with this successful Chapter 11 Reorganization Plan. This is a most significant achievement, especially considering that the Plan was approved less than six months ago and provided Mr. Jackson with up to five years to satisfy all debts. Mr. Jackson is eager to move forward in doing what is best for his estate and creditors, and this settlement brings us one step closer toward that end.”

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Largest lawsuit against an auditor goes to court for $5.5 billion

Colonial Bank in Miami Beach, on August 17, 2009, days after it failed. The bank’s fraud with Taylor, Bean & Whitaker is the subject of a lawsuit against its auditor, PricewaterhouseCooper, which failed to catch the fraud for seven years. John VanBeekum Miami Herald

The largest-ever lawsuit against an auditing firm is set to open Monday in a Miami-Dade County Circuit Court, pitting Big Four firm PwC against a trustee of the defunct Taylor, Bean & Whitaker Mortgage Corporation.

At stake: $5.5 billion.

The lawsuit was filed in 2013 by a trust formed following the bankruptcy of Ocala-based Taylor, Bean & Whitaker, which in the early 2000s was one of the nation’s largest mortgage companies. The firm was raided by federal agents in 2009 for its part in a seven-year, multibillion-dollar fraud scheme with Colonial BancGroup.

According to the lawsuit, the fraud went undetected by PwC, the independent public auditor in charge of auditing Colonial, as a result of “gross negligence.”

The $5.5 billion action is one of a wave of suits against major auditing firms, including PwC, in the aftermath of the 2009 banking crisis. Most have alleged faulty work, said Jonathan Perlman, equity partner at Miami-based firm Genovese Joblove & Battista, who has prosecuted several cases against auditing firms. A majority of the cases have settled, including a suit brought against PwC for the alleged negligent auditing of failed brokerage MF Global Holdings Ltd. PwC paid $65 million in a settlement.

Few of the suits have gone to trial, Perlman said.

Still, Steven Thomas, lead trial lawyer for the trust, said he is confident this suit will succeed.

Thomas, who has has obtained several multimillion-dollar settlements and verdicts in cases involving negligent audits, said PwC’s alleged negligence is the “worst” of any case he’s had.

As early as 2002, six top executives at Taylor, Bean & Whitaker, including chairman Lee Farkas, colluded with two executives at Colonial to sign off on mortgage sales that didn’t exist. Colonial financed Taylor, Bean & Whitaker’s mortgages, but in order to bypass the federal lending limit, Colonial started registering loans from the mortgage company as sales instead.

Circumventing the lending limits allowed the fraud to grow exponentially as executives at each company worked to falsify documents and computer entries and shift money between Colonial bank accounts. Both Colonial and Taylor, Bean & Whitaker were raided on Aug. 3, 2009, and later filed for bankruptcy, leading to the sixth-largest banking failure in U.S. history.

Farkas was sentenced to 30 years in federal prison. Catherine Kissick at Colonial, who worked most closely with Farkas, received eight years in prison as part of a plea deal.