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2 Tech Entrepreneurs Found Guilty of Manipulating Shares in Startup

December 28, 2017, 1:36 PM UTC
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Two technology entrepreneurs who rose to prominence in the years before the financial crisis were found guilty of manipulating shares in a digital-video software startup at the center of a complex fraud that spanned from China to Dubai.

Former KIT Digital Inc. Chief Executive Officer Kaleil Isaza Tuzman, a Harvard graduate who spent more than four years at Goldman Sachs Group Inc., and Omar Amanat, a tech-industry socialite who helped produce some of the “Twilight” films, were found guilty Tuesday of all the charges against them by a federal jury in Manhattan.

After the verdict, U.S. District Judge Paul Gardephe ordered Amanat jailed until he’s sentenced, ruling he’s a risk to flee. Gardephe allowed Tuzman, who wept openly during part of the proceeding, to remain free on bond. They’re scheduled to be sentenced in April.

The verdict, following a six-week trial, caps a remarkable change of fortunes for the pair. The onetime globetrotters avoided eye contact during the trial and blamed each other for the wrongdoing that sunk KIT. Neither man took the stand to testify in his own defense.

Instead, three government witnesses who pleaded guilty, including two former KIT executives and a disgraced hedge-fund founder, told jurors of related frauds being directed by Tuzman and Amanat in an effort to hide their disastrous investment losses.

The 12 jurors were also shown hundreds of pages of government evidence, including emails, text messages and corporate documents that illuminated the alleged scam and two related frauds from every angle.

The men’s colorful histories gave a Hollywood sheen to the trial, which took place in a massive ceremonial courtroom despite sparse public attendance. Amanat’s lawyer, Randall Jackson, is a former prosecutor who won convictions against five of Bernard Madoff’s staffers.

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In 1998, while working in emerging markets arbitrage at Goldman Sachs, Tuzman co-founded, a website that promised to link people to local municipalities. He can be seen in the 2001 documentary “” chatting with former President Bill Clinton at a summit about the internet.

Amanat, who boasted on his glossy personal website that he was deemed one of the world’s most influential Muslims by an academic center, is a playboy who sold a trading platform he developed — Tradescape — for $100 million.

By the time Amanat turned 30, the former University of Pennsylvania student was rich. Often photographed in his trademark scarf, the mystic-quoting philanthropist threw himself into human-rights causes and bragged of his donations to museums. By 2007, he’d embraced a hobby: Hollywood production.

Complex Fraud

The details of the frauds were complex, even by the standards of Wall Street litigation. Federal prosecutors alleged Tuzman used sham software licenses to inflate KIT’s revenue by convincing real customers to agree to fake deals that they never had to pay for. In fact, KIT allegedly paid for the licenses, essentially “round tripping” millions of dollars around to world to obscure the purpose of the transactions.

Amanat was accused of hiding trading losses at Enable Invest Ltd., a fund run by his brother, during the financial crisis. He did it by seeking investments from Tuzman, who funneled millions of dollars from KIT’s coffers to Enable.

Prosecutors also claimed Amanat defrauded investors in a hedge fund, Maiden Capital LLC, that invested in KIT and Enable. The goal, to prop up Enable, didn’t work out. The Dubai-based fund collapsed, as did Maiden Capital. KIT filed for bankruptcy in 2013.

Stephen Maiden, who founded the hedge fund, pleaded guilty and testified as the government’s star witness. He told jurors he was dazzled by Amanat’s business skills and Hollywood ties when he agreed in 2008 to a doomed investment in KIT.

Star Power

In an introductory phone call that summer, Amanat bragged about partying with Hollywood stars Angelina Jolie and Brad Pitt and having lunch with former movie producer Harvey Weinstein, Maiden said.

To keep KIT afloat — and by extension keep Enable and Maiden Capital from going under — Maiden testified that he struck a deal with Amanat and Tuzman to buy thousands of KIT shares on a regular basis for months. Maiden said he sometimes paid more for the shares than he needed to, just to create the illusion of demand. The agreement was only intended to last for 90 days, until KIT could be acquired by another company, according to Maiden.

“The point was for me to prop up the stock,” Maiden said in his testimony. “There was aggressive selling of KIT Digital day after day and I was just sitting there sucking it up” and “trying to fool people into believing there was demand.”

The case is U.S. v. Amanat, 15-cr-536, U.S. District Court, Southern District of New York (Manhattan).