Judge Spares Ex-CEO Of Bankrupt KIT Digital From Additional Jail Time
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Federal district court judge Paul Gardephe recently spared
Keleil Isaza Tuzman from additional jail time, despite Tuzman’s
December 2017 convictions for securities and mail fraud, the latest
twist in the long, strange saga of KIT Digital. Tuzman was the
founder and former CEO of KIT Digital Inc., a publicly traded
software startup that offered video management products, but which
ended up bankrupt and is now called Piksel Inc. The US Attorney
sought a prison term of 17.5-22 years for Tuzman.
Tuzman, and co-defendant Omar Amanat, who was sentenced to five
years in jail and fined $175,000, were convicted on multiple counts
of manipulating the stock price for KIT Digital and for defrauding
investors in a hedge fund known as Maiden Capital.
The KIT Digital conspiracy had three parts. First, from 2009 to
2012, Omar Amanat and his brother, Ifran, helped Maiden Capital
conceal losses on its investment in Enable, an asset management
firm run Irfan Amanat. In 2008, Maiden Capital invested $1 million
in Enable and provided a $2 million loan. Enable used that money to
cover KIT Digital’s redemption of its own investment in Enable.
In March 2009, the Amanat brothers told Maiden that they lost his
entire $3 million investment. Ifran Amanat and Maiden generated
fictitious client account statements that failed to disclose the
millions of dollars in Enable-related losses. When Maiden’s
investors wanted their non-existent money back, KIT Digital helped
cover the redemption requests through 2011.
For their second scheme, from December 2008 to September 2011,
Amanat, Tuzman, and Maiden manipulated the price of KIT Digital
stock by having Maiden trade up the value to benefit Tuzman’s
In the third scheme, Tuzman and members of KIT Digital’s
management inflated revenue to make KIT Digital look more
attractive for a potential sale. A sale to private equity investors
never materialized, however, dooming Tuzman. In 2012, KIT
Digital’s board requested Tuzman’s resignation after the
company’s auditors dug into KIT Digital’s relationship with
Enable. For a more detailed discussion of the facts of the scheme,
see the Court’s recitation in United States v.
Tuzman, No. 15 CR. 536 (PGG), 2021 WL 1738530 (S.D.N.Y. May 3,
2021), reconsideration denied, No. 15 CR. 536
(PGG), 2021 WL 3167708 (S.D.N.Y. July 27, 2021).
Tuzman, a Harvard alumnus and former Goldman Sachs banker, built
KIT Digital into an important player in the multiscreen video
management and delivery market. Amanat was an investor in media,
finance and technology companies, including the studio behind the
“Twilight” movie franchise.
After the schemes unraveled, Tuzman was arrested in September
2015 in Colombia where he spent 10 months in gruesome conditions
before being extradited to the United States. At Tuzman’s
sentencing earlier this month, Judge Gardephe explained he did not
want to order additional jail time because “the risk
associated with sending Mr. Tuzman back to prison, the risk to his
mental health, is just too great.” According to Mr. Tuzman, he
endured horrific conditions including five months in solitary
confinement and was raped at knifepoint. He was extradited to the
United States in 2017. See Andrew Ross
Sorkin, Entrepreneur, Charged in U.S., Recounts Abuse in
Colombia Prison (NYT Sept. 25, 2017).
The case is United States v. Tuzman & Amanat,
No. 15 CR. 536 (PGG), 2021 WL 1738530 (S.D.N.Y. May 3,
2021), reconsideration denied, No. 15 CR.
536 (PGG), 2021 WL 3167708 (S.D.N.Y. July 27, 2021).
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