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SFX co-founders lawsuit to proceed, as Sillerman’s ‘buy-back’ slows Beatport payments

By | Published on Wednesday 5 August 2015


A lawsuit against SFX supremo Robert Sillerman and the firm’s strategy man Sheldon Finkel, filed by three men who claim to be co-founders of the EDM powerhouse, has been allowed to move forward after a judge in California refused the entertainment industry veteran’s request for a summary judgement in his favour.

As previously reported, Paolo Moreno, Lawrence Vavra and Gabriel Moreno claim that Sillerman approached them in early 2012 to discuss his plans for a dance music-focussed company. He having no experience in that side of the business, they say Sillerman used the three men’s expertise to identify and purchase seven of the firm’s early acquisitions.

The three men also claim that they owned shares in Sillerman’s then fledgling new company, which should have been worth over $100 million when it subsequently floated in 2013, but that they were defrauded of these shares and left with nothing.

When the lawsuit was first filed last year SFX called the claims “baseless”. But last week a judge overseeing the case decided there was enough evidence for the dispute to proceed to court. Among that evidence is email communication between Paolo Moreno and Sillerman from early 2012, in which the former sets out suggested terms for the two men’s alliance, and the latter responded “we have a deal”.

The legal setback for Sillerman comes as he tries to raise enough money to take the EDM festival and Beatport operator back into private ownership. The SFX chief is offering the firm’s other shareholders $5.25 per share to regain control of the firm, though the company’s board have asked that he confirm within the next two weeks that he actually has the finance in place to go ahead with that arrangement.

And it’s not just SFX’s board that wants that deal to proceed as quickly as possible. A memo sent by the firm’s download store Beatport to labels yesterday – and published here by Resident Advisor – reveals that the company won’t be able to make all of its latest payments to record companies whose downloads it sold in the second quarter of this year, because the “going private process” has “trapped certain earned label payments”.

The memo says it hopes the whole process will be completed in a few weeks, after which outstanding payments can be made. Yeah, let’s hope so, for the sake of smaller EDM labels, for which Beatport is a key sales platform, and where cashflow will always be tight.

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