AAMC Files Lawsuit Against Former Board Member Nathaniel Redleaf for Improperly Disclosing Confidential Information for Financial Gain

Rhea-AI Summary

Altisource Asset Management Corporation (AAMC) filed a complaint against former board member Nathaniel Redleaf for disclosing confidential information to Luxor Capital Group, benefiting both parties at AAMC's expense. The lawsuit reveals a scheme involving Luxor's $150 million investment in AAMC preferred stock, which was used to buyback AAMC's common stock, inflating Luxor's stake value. AAMC aims to recover gains made by Redleaf and Luxor through this improper disclosure, which harmed the company and its shareholders.

Positive

• AAMC is pursuing litigation to recover gains from Luxor and Redleaf, which may benefit shareholders.

Negative

• Redleaf's actions led to a breach of fiduciary duty, potentially harming AAMC's reputation.
• The situation indicates a failure in internal compliance protocols, raising concerns for investors.

CHRISTIANSTED, U.S. Virgin Islands, Oct. 31, 2022 (GLOBE NEWSWIRE) -- Altisource Asset Management Corporation (“AAMC” or the “Company”) (NYSE American: AAMC) today filed a complaint in the Superior Court of the U.S. Virgin Islands, Division of St. Croix, against former AAMC board member Nathaniel Redleaf, who improperly disclosed confidential information of the firm to financially benefit himself and his current employer, New York-based hedge fund Luxor Capital Group (Luxor).

As outlined in the complaint, Redleaf engaged in a secret scheme to illegally use AAMC’s confidential information to benefit Luxor, a $12 billion hedge fund founded by Christian Leone, a former Goldman Sachs analyst. Luxor acquired 19.7 percent of AAMC and then had its partner, Redleaf, join the AAMC board as part of a plan to funnel confidential information back to Leone and Luxor.

One aspect of the scheme involved Luxor’s $150 million investment into AAMC preferred stock. The proceeds of that investment were used to buyback AAMC’s common stock, thereby increasing the value of Luxor’s stake in AAMC’s common stock, which at the time was valued at more than $350 million. The nonpublic information that Redleaf was privy to as an AAMC board member was illegally used by himself and Leone to make investment and trading decisions.

Instead of adhering to the well-established compliance practice of setting up an ethical wall to ensure that material nonpublic information is not disclosed to a hedge fund that employs a director of a public company, Redleaf improperly disclosed the information to Luxor as noted in the complaint. Luxor anticipated making hundreds of millions of dollars on the position it built.

Redleaf’s actions harmed AAMC and its shareholders. AAMC is seeking to recoup any of Luxor and Redleaf’s ill-gotten gains through this litigation.

About AAMC

AAMC is an alternative lending company that provides liquidity and capital to under-served markets. We also continue to assess opportunities that could potentially be of long-term benefit to shareholders such as Crypto-ATMs.

Additional information is available at www.altisourceamc.com.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections, anticipations, and assumptions with respect to, among other things, the Company’s financial results, margins, employee costs, future operations, business plans, including its ability to sell loans and obtain funding, and investment strategies as well as industry and market conditions. These statements may be identified by words such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “target,” “seek,” “believe,” and other expressions or words of similar meaning. We caution that forward-looking statements are qualified by the existence of certain risks and uncertainties that could cause actual results and events to differ materially from what is contemplated by the forward-looking statements. Factors that could cause our actual results to differ materially from these forward-looking statements may include, without limitation: our ability to develop our businesses and to make them successful or sustain the performance of any such businesses; our ability to purchase, originate, and sell loans; our ability to obtain funding, market and industry conditions, particularly with respect to industry margins for loan products we may purchase, originate, or sell; our ability to hire employees and the cost of hiring such employees; and other risks and uncertainties detailed in the “Risk Factors” and other sections described from time to time in the Company’s current and future filings with the Securities and Exchange Commission. The foregoing list of factors should not be construed as exhaustive.

The statements made in this press release are current as of the date of this press release only. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, whether as a result of new information, future events, or otherwise.

 

FAQ

What lawsuit did AAMC file on October 31, 2022?

AAMC filed a lawsuit against former board member Nathaniel Redleaf for disclosing confidential information to Luxor Capital Group.

What was the financial impact of Redleaf's actions on AAMC?

Redleaf's actions potentially inflated Luxor's investment position at AAMC's expense, harming shareholder interests.

What is AAMC seeking in its lawsuit against Redleaf and Luxor?

AAMC is seeking to recover any ill-gotten gains made through the improper disclosure of confidential information.

How did Luxor Capital Group benefit from AAMC's confidential information?

Luxor benefited from investment decisions based on confidential information shared by Redleaf while serving on AAMC's board.