By Nate Raymond
(Reuters) – The former head of Kit Digital Inc and a business associate were convicted on Tuesday on charges related to what prosecutors said were wide-ranging fraud schemes involving the bankrupt video technology company.
Kaleil Isaza Tuzman, a former Goldman Sachs analyst who achieved brief fame as an internet entrepreneur before becoming Kit Digital’s chief executive, was found guilty by a federal jury in Manhattan of charges including that he conspired to commit securities fraud, prosecutors said.
Omar Amanat, an investor in media, finance and technology companies including at one time the studio behind the “Twilight” movie franchise, was convicted of charges that included conspiring to commit wire fraud and securities fraud.
Tuzman’s lawyer did not respond to a request for comment. Amanat’s lawyer declined to comment.
Tuzman was arrested in 2015 in Colombia and extradited last year after spending time in jail conditions his lawyers said led him to fear for his life.
The rise and fall of Govworks.com, the company he started with a friend, was the subject of the 2001 documentary “Startup.com.”
Prosecutors accused Tuzman, 45, and others at Kit Digital of engaging in a scheme to deceive investors and regulators about the company’s financial health by among other things booking revenue on sham software license agreements.
Prosecutors said that Tuzman, Amanat and a hedge fund manager, Stephen Maiden, also conspired to manipulate the market in Kit Digital shares from 2008 to 2011. The video technology company filed for bankruptcy in 2013.
Amanat, 44, also engaged in a scheme to defraud investors in Maiden Capital, Maiden’s hedge fund, prosecutors said. Maiden became a cooperating witness for the prosecution while serving a seven-year prison sentence for running a Ponzi scheme.
Prosecutors said that in 2008, Tuzman at Amanat’s request arranged for Kit Digital to invest $6.5 million in a fund affiliated with Amanat, Enable Invest Ltd.
To encourage the investment, Amanat told Tuzman he would raise money for a Tuzman-controlled investment vehicle, leading to him arranging for Maiden’s Maiden Capital Opportunity Fund to invest $1 million into it, the indictment said.
The indictment said Tuzman without permission redirected funds from Maiden Capital’s $1 million investment and used the money as part of Kit Digital’s $6.5 million investment in Enable.
Prosecutors said that when Enable suffered losses later in 2008, Amanat helped Maiden conceal them from Maiden Capital’s investors, including by providing loans to repay investors, prosecutors said.
The case is U.S. v. Amanat, U.S. District Court, District of New York, No. 15-cr-536.
(Reporting by Nate Raymond in Boston; Editing by Andrew Hay)