SFX Entertainment Sued by Allegedly Cheated Co-Founders

SFX Entertainment Inc. (SFXE), a producer of electronic dance music events, was sued by three men alleging they helped create the company and were defrauded of their share of it, worth more than $100 million.

Paolo Moreno, Lawrence Vavra, and Gabriel Moreno said in a complaint filed today in federal court in Los Angeles that they were “frozen out” by SFX Chief Executive Officer Robert Sillerman and didn’t get their promised founders’ shares after using their industry connections and resources to help SFX make key acquisitions.

“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,” according to the complaint.

New York-based SFX, which produces music festivals around the world, raised $260 million in its initial public offering last year. Sillerman in 2000 sold an earlier incarnation of SFX, which was the largest U.S. concert promoter, to Clear Channel Communications Inc. for $4.4 billion. SFX, split off as Live Nation in 2005, also has branched out in electronic-music festivals.

SFX Events

Its events include TomorrowWorld, Mysteryland and Electric Zoo.

The three men suing allege that Sillerman had no experience in the industry when they met with him in early 2012, and that he was to provide financing for the venture. They claim they identified and helped obtain seven of the eight “principal assets” SFX listed in its Securities and Exchange Commission filings in support of the IPO.

SFX said in an e-mailed statement that it will fight the suit, without commenting further.

The case is Moreno v. SFX Entertainment Inc., 14-0880, U.S. District Court, Central District of California (Los Angeles).

To contact the reporter on this story: Edvard Pettersson in Federal court in Los Angeles at

epettersson@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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