Report: Zayat Sued for $23 Million, Sold Shares in American Pharoah

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Mylute
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Wed Feb 12, 2020 9:49 pm

Loan Company Seeks to Recover Assets Sold by Zayat
https://www.bloodhorse.com/horse-racing ... d-by-zayat

Call me naive but I somewhat tend to doubt LNJ, McMahon, etc. were aware what they were buying from Zayat wasn't legally his at the time.

Also, how does the company *recover* a breeding right from the buyer (like LNJ) or a stallion like Solomini (McMahon fully bought all of Solomini IIRC).
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Flanders
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Thu Feb 13, 2020 7:35 am

Mylute wrote:
Wed Feb 12, 2020 9:49 pm
Loan Company Seeks to Recover Assets Sold by Zayat
https://www.bloodhorse.com/horse-racing ... d-by-zayat

Call me naive but I somewhat tend to doubt LNJ, McMahon, etc. were aware what they were buying from Zayat wasn't legally his at the time.

Also, how does the company *recover* a breeding right from the buyer (like LNJ) or a stallion like Solomini (McMahon fully bought all of Solomini IIRC).
It doesn't matter if they knew or not. Zayat knew and sold everything so he was committing fraud and screwing the buyers. The instance you sign your name on a loan that has items specifically listed as collateral they are owned by the creditor until the loan is paid off. Its like going and stealing someone else's property and then selling it as your own.

MGG will either have to try to work with the buyers or they go through the court and sue everyone who bought something that had a lien on it. If the judge decides in MGG favors, then they get the horse, breeding right, % ownership, etc. back. Then I'm assuming all those buyers will have to sue Zayat to try and get their money back. Its honestly a legal mess that is going to take a long time to go through the courts. If there is evidence that the buyers KNEW that the property(horses, etc) had liens on it, they may not even be able to sue Zayat for their money, the judge might throw their cases out.

This is just me guessing, but say MGG sues LNJ for the return of the breeding rights and MGG wins. MGG gets ownership of the breeding shares and then would probably have to pay the stud fee for the year(s) they were used. Then LNJ has to sue Zayat to recover the money they paid. Its the same situation with Solomini. MGG would take McMahon to court and if MGG won, whatever percentage Zayat owned would change ownership to MGG. MGG would get the stud fees from that % and McMahon will have to sue Zayat.
Horsebagger
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Thu Feb 13, 2020 10:12 am

Lots of naughty words being used in the court documents. Malfeasance, fraud, scheme. All of which are quite apparent and will be hard to contest when the defendants file their papers in response. I predict the comedy level in those papers will be high.

I told you at the beginning this would turn into a $hit show, especially if he contested any part of the Lender's actions. And, here we are. The reporting of the email from AZ to MGG where he said he was ready to hand them the keys and walk away is pretty telling, especially when you consider him contesting subsequently when they appointed the Receiver. Why the change...….because he was hoping all the malfeasance would be kept non public. The first threat from MGG that it would is probably what precipitated that email. Now all his laundry is getting hung out to dry publicly. Lender realized they were being defrauded and said f-that. As many well know, lots of deals are done without the full belts and suspenders protections for either side, when both sides operate in good faith. When one side takes advantage (I'm talking about you, Zayats), the other side has to react in their own self interest. I think that's what happened here and all of the fall-out lies at the feet of Ahmed and Justin. The secondary legal action naming the buyers of the collateral assets are a whole separate minefield of actions and reactions, and while I've read some online comments that Coolmore has a battery of lawyers lined up and will crush MGG, i'll tell you right now, I don't think so. A single email suggesting anyone on their side was aware of the Zayat debts and the possibility that could reasonably be drawn that they SHOULD have known of the potential of assets serving as collateral to 3rd party lenders, and it's ballgame over for them.

This has all the trappings of a 'Trumpian' move by Ahmed. Over inflate asset values to defraud lenders. Declare bankruptcy to wipe the slate clean and move forward without shame or sacrifice. Unfortunately, I don't see Zayat becoming President anytime soon to shield himself from prosecution when this gets investigated as a federal crime. Nor does Fredo Zayat look clean here given his 'title'. Are International plane tickets and passports handy, fellas?
Horsebagger
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Thu Feb 13, 2020 11:09 am

Horsebagger wrote:
Thu Feb 13, 2020 10:12 am
The secondary legal action naming the buyers of the collateral assets are a whole separate minefield of actions and reactions, and while I've read some online comments that Coolmore has a battery of lawyers lined up and will crush MGG, i'll tell you right now, I don't think so. A single email suggesting anyone on their side was aware of the Zayat debts and the possibility that could reasonably be drawn that they SHOULD have known of the potential of assets serving as collateral to 3rd party lenders, and it's ballgame over for them.
MGG filed UCC-1 forms recording their interest in the collateral. Sorry Coolmore. You lose.
Horsebagger
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Thu Feb 13, 2020 11:20 am

I've got work to do, but I can't stop reading these papers.

Here's where every defense they may think they have, falls apart...…….

They sold Lemoona privately, then instead of removing her from the collateral list for the lender, they INCREASED HER APPRAISED VALUE on the list. That's criminal bank fraud under every state jurisdiction, and jail, right there alone. How many times did they do that? Because each is an additional count. Was she transported over state lines? Federal crime. Was the money wired? Another federal count.

Bye Bye.
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starrydreamer
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Thu Feb 13, 2020 12:33 pm

Horsebagger wrote:
Thu Feb 13, 2020 11:09 am
Horsebagger wrote:
Thu Feb 13, 2020 10:12 am
The secondary legal action naming the buyers of the collateral assets are a whole separate minefield of actions and reactions, and while I've read some online comments that Coolmore has a battery of lawyers lined up and will crush MGG, i'll tell you right now, I don't think so. A single email suggesting anyone on their side was aware of the Zayat debts and the possibility that could reasonably be drawn that they SHOULD have known of the potential of assets serving as collateral to 3rd party lenders, and it's ballgame over for them.
MGG filed UCC-1 forms recording their interest in the collateral. Sorry Coolmore. You lose.
Aaaand this is why you should do your due diligence. None of the buyers are likely going to be successful in any action over MGG - they're going to have to go after Zayat.
stark
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Thu Feb 13, 2020 2:38 pm

Are these trainers working for free this year?

SA 01/26/2020 6 Starter Allowance $33,000 Challah Richie Baltas
OP 01/24/2020 6 Maiden Special Weight $85,000 Lido Legacy DW Lukas
AQ 01/18/2020 3 Maiden Special Weight $68,000 The Kohen Steve Asmussen
TP 01/18/2020 5 Allowance Optional Claiming $14,000 Noble Egyptian Rob Diodoro
GP 01/15/2020 2 Maiden Special Weight $50,000 Perlman Jorge Navarro
GP 01/15/2020 2 Maiden Special Weight $50,000 Paynted Jorge Navarro
GP 01/11/2020 10 Tropical Turf Stakes (Gr. 3) $100,000 Gidu (IRE) Todd Pletcher
GP 01/05/2020 1 Maiden Claiming $22,000 Colman Joseph (IRE) Jorge Navarro
SA 01/05/2020 8 Claiming $25,000 Factorial Doug O'Neill
SA 01/04/2020 8 San Gabriel Stakes (Gr. 2) $200,000 Desert Stone (IRE) Richie Baltas
I've found it easier to tear up tickets at 8/1 instead of 8/5.
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Flanders
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Thu Feb 13, 2020 3:10 pm

stark wrote:
Thu Feb 13, 2020 2:38 pm
Are these trainers working for free this year?
I'm sure they have been for awhile.
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DawnStorm
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Thu Feb 13, 2020 3:34 pm

Whoo! :shock:
Zayat better start getting measured for stripes. Do Club Fed prisoners even wear stripes?

Oh what a tangled web we weave when first we practice to deceive (Sir Walter Scott)
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KatieK101
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Fri Feb 14, 2020 2:52 am

A lot of the real smart, technical talk is going over my head, so I need it plain and simple: is Coolmore going to be forced to surrender/sell AP?
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Flanders
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Fri Feb 14, 2020 3:18 am

KatieK101 wrote:
Fri Feb 14, 2020 2:52 am
A lot of the real smart, technical talk is going over my head, so I need it plain and simple: is Coolmore going to be forced to surrender/sell AP?
No, he is owned by Coolmore, they owned him before the loan was ever made.

The legal issue is that Coolmore knew the Zayats breeding rights were used as collateral on a loan. Coolmore bought 7 of the breeding rights, with the other 2 being sold to LNJ Foxwoods. So they'll have to give the breeding rights back to MGG(the lender) or make some kind of deal to buy them from MGG.
Green Desert
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Fri Feb 14, 2020 4:27 am

What makes me angriest is that with all of this talk about the power players in the industry taking a hit due to his actions, there isn't a lot of talk about the little guys such as feed suppliers, vets, trainers etc. For some of these guys, this could spell disaster. Many of them have already been taking care of the horses on their own dimes assuming that they would be recompensed.
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Kurenai
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Fri Feb 14, 2020 6:38 am

stark wrote:
Thu Feb 13, 2020 2:38 pm
Are these trainers working for free this year?
At this point might as well race the horse and try to get some bucks with winning to recoup losses. Wondering if they can withhold the payout of the purse money in such a case to the owner.

@Green Dessert: as everywhere else, unfortunately it's the little guys that get screwed over the most.
Horsebagger
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Fri Feb 14, 2020 10:08 am

Kurenai wrote:
Fri Feb 14, 2020 6:38 am
stark wrote:
Thu Feb 13, 2020 2:38 pm
Are these trainers working for free this year?
At this point might as well race the horse and try to get some bucks with winning to recoup losses. Wondering if they can withhold the payout of the purse money in such a case to the owner.

@Green Dessert: as everywhere else, unfortunately it's the little guys that get screwed over the most.
Any purse money won would flow into the Zayat Horseman's account which is controlled now by the Receiver. More than at any time in recent past, the Horsemen and vendors are most likely to get paid for current services. The Receiver's mandate has got to be the orderly liquidation of the company in order to pay it's creditors. Having racing assets race is a path to creating cash to pay vendors in the interim. Those vendors carrying debts which originated prior to the appointment of the Receiver are the ones most at risk of never seeing any payment, and certainly unlikely to get paid in full, regardless.
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Flanders
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Fri Feb 14, 2020 11:16 am

So one thing that was never mentioned that I am very curious about is Pioneerof The Nile. Had Zayat sold his interest in the stallion prior to his death? He supposedly kept 75% interest in him when he went to stud.
stark
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Fri Feb 14, 2020 11:41 am

Sunday race 9 at Oaklawn.
3YO Lido Legacy should/could/might be on or near the lead throughout for Lukas/Zayat.

$150,000 purchase dropping to $50,000 maiden claimers after 4 failed attempts, with $11,000 in the bank.

First out was on the grass at Saratoga, dismal performance going 1 1-16th.
Next two on fast dirt resulted in 4th place finishes.
Last out was in the mud, 4th beaten 9 lengths.
Shortens up to a mile on Sunday, pretty good work over the track on Feb 3rd.

If you're a bettor, do you take the short price on him, bet against, or just pass the race?
If you're looking to make a claim, might this Speightstown look at all appealing?
I've found it easier to tear up tickets at 8/1 instead of 8/5.
Horsebagger
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Fri Feb 14, 2020 11:46 am

stark wrote:
Fri Feb 14, 2020 11:41 am
Sunday race 9 at Oaklawn.
3YO Lido Legacy should/could/might be on or near the lead throughout for Lukas/Zayat.

$150,000 purchase dropping to $50,000 maiden claimers after 4 failed attempts, with $11,000 in the bank.

First out was on the grass at Saratoga, dismal performance going 1 1-16th.
Next two on fast dirt resulted in 4th place finishes.
Last out was in the mud, 4th beaten 9 lengths.
Shortens up to a mile on Sunday, pretty good work over the track on Feb 3rd.

If you're a bettor, do you take the short price on him, bet against, or just pass the race?
If you're looking to make a claim, might this Speightstown look at all appealing?
Perhaps injecting speed figures into the discussion should be the first step in providing answers to the two questions above? But i don't disagree that evaluating all Zayat entries dropping into claiming races is potentially a strategy in obtaining them below levels where they otherwise might sell privately or in an auction.
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bare it all
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Fri Feb 14, 2020 1:21 pm

Take horses out. What Zayat basically did was buy a home with a loan. Then he took out another loan using the unpaid house as collateral and bought cars. Then sold some portion of the land his home is on and then sold a few rooms. Then he sold the cars off. Then he stopped paying his mortgage and the loan he took out against the house. Now the mortgage and equity loan is due and they’re coming to take the home and cars back regardless of who he sold them to because legally Zayat never owned the house. The cars (horses) were all bought with the house, technically, and can be re-sold to collect as much cash back as they can.

The worst part here is there’s no real house to fall back on. All of these loans were based on “hopes and dreams” basically.
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Diver52
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Fri Feb 14, 2020 8:06 pm

I will amplify is that recording a UCC-1 form is analogous to recording a mortgage or deed of trust in the local (usually county) repository. Once it is recorded, it constitutes "constructive notice" to the world about the lender's security interest in the listed property. Hence, no one can be an innocent "bona fide purchaser" even if they don't have actual knowledge of the security interest;; if you sell your house, the buyer still has to pay the mortgage or the lender forecloses on the house and throws the buyer out.
When you buy a house, you get title insurance, and the title insurer does a check of the records relating to the property to see if there are any other unpaid mortgages, or things like easements. Anyone buying the stallion shares should have done the same on the UCC-1 database, although I'm not sure how this works (it's been a LONG time since my class in "Commercial Transactions.") So, as others have said, the buyers of the shares are screwed.
I ran marathons. I saw the Taj Mahal by Moonlight. I drove Highway 1 in a convertible. I petted Zenyatta.
middleground
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Fri Feb 14, 2020 10:27 pm

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Last edited by middleground on Fri Feb 14, 2020 10:41 pm, edited 2 times in total.
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