Company locked in costly legal battle with former investor who says CEO fired employees over after threats were made
LiveXLive is not returning the nearly $2 million it received from the federal government through the Paycheck Protection Program.
The company’s chief financial officer Mike Zemetra announced yesterday (June 18) that the concert streaming company planned to file for 100% forgiveness for the federal loan program meant for small businesses during the second quarter of 2021.
LiveXLive was one of 400 publicly traded companies that accepted federal funds from the program administered by the Small Business Administration. While the company was able to avoid a Treasury Department investigation because the amount it accepted ($1,993,500) fell under the $2 million safe harbor amount, they are not totally out of the woods. The Securities and Exchange Commission is investigating public companies that accepted funding from the program, according to The Washington Post, which reports that “investigators may be focusing on companies whose dire condition qualified them for PPP funding but whose financial disclosures prior to the outbreak didn’t reflect such vulnerability.”
The microcap concert streaming company that bills itself as the next ESPN of live music is facing a growing number of civil lawsuits from former employees, past investors and unpaid lawyers and legal vendors. LiveXlive was sued last month by XACT Data Discovery over $480,000 in unpaid bills. XACT had been hired by LiveXLive’s attorneys at Latham Watkins who in May 2019 took over defense of a lawsuit brought by an investor after LiveXLive’s previous attorney stopped defending the company because of non-payment. By October, Latham Watkins also asked the judge to be relieved from the case, claiming LiveXLive had “failed to pay a single invoice” and had racked up more than $650,000 in unpaid bills.
The unpaid legal bills are tied to a multi-year lawsuit with former investor and employee Joe Schnaier, who Ellin called “dumby,” “jerkoff” and “a f***ing clown” during the 2017 negotiations for Schnaier’s company Wantickets. After LiveXLive bought Wanticktets in an all stock deal, Ellin allegedly convinced Schnaier to invest an additional $1.25 million in LiveXLive. But weeks after the deal closed, Ellin began sending threatening text messages to Schnaier claiming he was owed hundreds of thousands of dollars and would terminate Schnaier’s employees if he wasn’t paid.
“(Y)ou better wired the 50k today or i start firing people no more games,” Ellin wrote on May 25, claiming that Schnaier owned him $650,000 for newly discovered “liabilities” at Wantickets. Ellin wanted “600k Tuesday or all hell break loose.” The next day, Ellin wrote “first guy fired today” followed by taunts like “next firing coming shortly,” “more people going by Friday clown” and then a gleeful text on June 16 when Ellin learned that CFO Richard Blakely’s two sons worked at Wantickets. After firing the siblings, Ellin wrote “dope wire the money.”
Blakely was fired next, and with no one left, Ellin let Schnaier know that the $10 million worth of shares Schnaier received in exchange for Wantickets, as well as the $1.25 million in preferred stock Schnaier had purchased were being restricted so that Schnaier couldn’t trade or sell his shares. “My shareholders always win but you will not get your shares ever,” Ellin wrote as a parting shot to Schnaier.
Schnaier is suing LiveXLive for fraudulent inducement, breach of his employer agreement and a number of other charges tied to his time at the company. The case is currently being heard in New York Supreme Court.
