Recently, the bankruptcy estate of collapsed futures broker Refco Inc. has filed a lawsuit against financial services firm CantorFitzgerald, L.P. The suit alleges that Cantor’s Nevada gaming businesses acquired technology and other assets from a subsidiary in which Refco held a 10 percent stake, without compensating the subsidiary.
Conveniently, this lawsuit comes ahead of Cantor’s pursuit of a potential public offering of its subsidiary in the mobile gaming space, Cantor Entertainment Technology, Inc. Financial litigation law firm Grant & Eisenhofer filed the suit on behalf of Refco bankruptcy estate representative Marc Kirschner to recover tens of millions of dollars owed to the estate. The suit contends that in 2002, Refco invested $8 million in a Cantor Fitzgerald subsidiary, Cantor Index Holdings (CIH), in exchange for a 10 percent partnership interest. Later, CIH actually developed gaming technology, such as devices for remote gambling and other betting techniques.
According to the estate, after CIH and its subsidiaries successfully developed and deployed these technologies, Cantor Gaming shut down CIH and took the rights of CIH’ assets and intellectual property for its own profit. So, the lawsuit alleges that this was done for the benefit of Cantor’s Nevada businesses without properly compensating the subsidiary.
The lawsuit concludes that having taken assets from CIH, Cantor used them to create valuable businesses in Nevada and beyond. Also, the complaint contends that Cantor has admitted to regulators and the press that the technology developed by CIH was extremely critical to the build-out of Cantor’s Nevada operations.
In this case, plaintiffs are seeking millions of dollars in compensatory damages. In fact, an IPO of Cantor Entertainment Technology could potentially value the company in the hundreds of millions of dollars. “Cantor drained CIH of its assets, and then co-opted the intellectual property for its gambling businesses,” said Grant & Eisenhofer Co-managing Director Jay Eisenhofer. “The brazenness of the Cantor scheme is illustrated in the sham transaction valued at barely a dollar, and the company’s public admissions that significant capital was put into developing remote gambling technology key to Cantor’s Nevada businesses.”
According to Eisenhofer, the company still owes its subsidiary, and indirectly Refco’s bankruptcy estate, for these technologies and other assets which Refco helped finance a decade ago.
He continued, “Cantor Entertainment Technology’s success in the mobile gaming industry and its potential IPO rely heavily on these technologies, and we seek recovery for the bankruptcy estate the fair value of Refco’s investment.”
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