Brothers who headed Ditto Trade sue Wert, Tribune Media for defamation, demand $100M

By Scott Holland | Dec 9, 2016

Editor's note: This article has been updated to include additional comments from Joseph Fox and to clarify certain facts relevant to the lawsuits referenced in the article.

The brothers who headed troubled online brokerage firm Ditto Trade are taking aim at Tribune Media Company and Chicago media executive Larry Wert, demanding $100 million for allegedly participating in an alleged scheme to ruin his reputation and his business. 

Joseph Fox, 50, of Long Beach, Calif., was CEO of Ditto Trade, which specialized in allowing customers to more or less copy the trading activities of certain equities traders. Fox led the company from January 2009 until it closed in December 2015. His brother, Avi Fox, 52, of Beverly Hills, was executive chairman from inception through December 2012, when he went on medical leave. 

In the pro se complaint filed Dec. 1 in Cook County Circuit Court, the Fox brothers named as defendants Wert, president of broadcast media for Tribune Media; Tribune Media itself; and radio host Marc S. Mandel, of Boulder, Colo., who served as a Ditto consultant from August 2012 through December 2014 and became a shareholder in February 2013. 

The complaint accuses Wert of “colluding with former Ditto executive and bogus ‘whistle-blower’ Paul M. Simons” starting Sept. 11, 2013. Earlier this year, a Chicago federal judge, in a default judgment, ordered Ditto to pay $2.7 million to Simons, after Simons alleged Ditto fired him because he informed federal securities regulators of possible misconduct within upper management. In August, Joseph Fox was also ordered to pay $44,681 in Simons’ attorney fees. When he refused, U.S. District Judge Harry Leinenweber held Fox in contempt in an Oct. 5 order. 

In an emailed statement to The Cook County Record, Fox alleges the judicial orders were entered against him after Ditto was forced to close, and he lost the financial ability to contest Simons' legal actions. On Dec. 16, Fox filed a motion in that action, asking the court to sanction Simons' attorneys for "malicious" attacks and "lies" allegedly stated in court, which Fox said have contributed to his legal losses to date.

Fox also unsuccessfully attempted to countersue Simons in federal court. And in April, he sued Simons and others for intentional infliction of emotional distress, also demanding damages of $100 million. That case remains pending.  

In September 2015, the federal Securities and Exchange Commission imposed sanctions on Fox for allegedly violating the federal Securities Act, saying Ditto Trade did not provide investors with certain required documents and Ditto did not file required registration statements. The SEC ordered him to pay $125,210, plus $5,426 in interest and a $75,000 penalty. 

In his emailed statement, Fox said he intends to file suit in early 2017 to undo that settlement agreement, which he said was reached "under duress, in an ill-fated attempt to save Ditto."

The legal saga began in 2013, when, according to the Foxes, Simons was trying to forestall his termination Sept. 9, 2013, when he “began making knowingly false accusations” and directed his lawyer to contact the SEC. 

“Simons went as far as fabricating evidence, withholding exculpatory evidence and lying,” the Foxes alleged their latest complaint. 

Joseph Fox said the SEC concluded its investigation in September 2015 without finding any of Simons’ claims to be true. However, “Wert and Mandel began colluding almost immediately to personally attack” the Fox brothers and the company. 

“This was done by effectively turning Ditto’s shareholders against the company and its executives, primarily by recycling Simons’ now completely debunked allegations,” the Foxes wrote. 

The complaint further accused Wert and Mandel of a lengthy campaign to delegitimize the SEC investigation and, “in a textbook case of extortion, sent a 77-page document laced with an abundance of defamatory rhetoric to Ditto’s lawyer” threatening to send the document to shareholders unless the Fox brothers resigned. Wert purportedly sent the email from his Tribune Company account. 

Fox also detailed alleged intimidation attempts by a private investigator and others allegedly hired by Wert, which included an alleged visit to the home of Joseph Fox’s 83-year-old mother-in-law. The Foxes also accused Wert of influencing Crain’s Chicago Business “to write a knowingly false article” that “permanently destroyed” the Foxes’ reputation. 

The complaint cited heavily from purported email correspondence involving Wert and Mandel, in which the men allegedly threatened the Foxes. 

The complaint also referenced alleged communications between Tribune Media's general counsel and Joseph Fox's legal counsel at the time, regarding Wert’s use of his Tribune email address to discuss Ditto-related business, as well as to distribute allegedly defamatory statements and information with others about the Foxes. 

The complaint formally accused the defendants of tortious interference with business expectancies, intentional infliction of emotional distress, conspiracy to interfere with business expectancies and economic advantage, defamation and injury to reputation. The Foxes, who are representing themselves in the matter, have asked the court to award them compensatory and exemplary damages, as well as punitive damages of at least $100 million. They also want legal fees and interest on the damages. 

An attorney for Wert declined comment, saying his client had not yet been served. 

A spokesperson for Tribune Media did not respond to a request for comment.

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