A new class action lawsuit is demanding Hollywood movie financier Jason Cloth and an accused Chicago area intermediary pay more than $180 million to repay investors who accuse him of operating a Ponzi scheme that have allegedly allowed Cloth to grab film credits and continue a "lavish lifestyle," while leaving investors, including many from the Chicago area, holding the bag.
On March 5, attorneys Alexander Loftus and Ross Good, of the firm of Loftus & Eisenberg, of Chicago, filed suit in Cook County Circuit Court against Cloth and his accused local "middlemen" affiliated with a financial advisory firm, identified as Schmidt Advisory Services, which does business as Catalyst Wealth Management.
The lawsuit centers on the successful efforts by Cloth and his associates to raise tens of millions of dollars from 2019-2023 on behalf of several Cloth-affiliated ventures. According to the complaint, these included entities known as BRON Studios, Creative Wealth Media Finance Corp. and C2 Motion Picture Group.
According to the complaint, the various business entities were all part of an alleged Ponzi scheme by Cloth and his affiliates, allowing them allegedly to shift funds from one to the other.
According to the complaint, they follow a "business model" set by a Canadian entity known as Crystal Wealth, which was operated by a man identified as Clayton Smith and in which Cloth was allegedly involved.
According to the complaint, Crystal Wealth was shut down under an investigatory action launched by Canadian financial regulators, ultimately leaving Crystal Wealth's auditor to settle with investors for tens of millions of dollars.
In the meantime, the lawsuit asserts BRON Studios and Cloth's new company, Creative Wealth, had produced other U.S. films, notably including the successful supervillain origin story, "Joker."
However, in 2022, those ventures allegedly were beginning to default, and Cloth at that time launched a new venture, C2, which "picked up where Creative Wealth left off but apparently with new investors."
According to the complaint, over the next four years, Cloth's ventures collectively raised millions more for other film projects. According to the complaint, this was allegedly accomplished through two intermediaries, the Schmidt group in the Chicago area and another group in Texas, identified as Maraboyina Capital.
According to the complaint, Schmidt allegedly was paid through "carried interest" from investments placed in Creative Wealth through them.
According to the complaint, investors were allegedly promised payment through based on the success of the films in which they were investing, but were allegedly either never paid or paid based on the desires of Cloth to "keep an investor engaged."
According to the complaint, it allegedly did not matter if the film projects were actually successful or not.
The complaint noted the pattern could be seen in investor payments - and non-payments - in films co-produced by Cloth affiliated entities, including "Ghostbusters: Afterlife" and the Netflix movie, "Monkey Man."
Both films proved profitable, but according to the complaint, Cloth allegedly only repaid certain investors, and then at times only to allow them to reinvest in other film projects.
In the meantime, the complaint asserts Cloth would use Schmidt and Maraboyina to essentially string investors along, promising them payment that usually never materialized.
According to the complaint, Schmidt and Maraboyina never actually confirmed any of the messages they passed along to investors were accurate or factual.
"Cloth's scheme was a house of cards and an iota of due diligence by the middleman ... would have demonstrated this investment was not safe for anyone," the complaint said.
According to the complaint, both BRON Studios and CMWF have since entered bankruptcy.
According to the complaint, CMWF has claimed $80 million in total liabilities, including an estimated $34 million allegedly owed to investors in Illinois.
According to the complaint, Cloth and C2 invested more than $100 million in four Paramount movies released in 2022 and 2023, including "Mission: Impossible - Dead Reckoning;" "Transformers: Rise of the Beasts;" "Dungeons & Dragons: Honour Among Thieves;" and "Babylon."
The complaint was filed by named plaintiff Diane Fowler, of Oklahoma, who allegedly invested $1 million in CWMF, allegedly as part of a $20 million loan, under which Fowler allegedly was promised a return of 12% interest, paid monthly.
She allegedly never received payment.
The lawsuit seeks to expand the action to include a class of additional plaintiffs to include everyone who invested in Cloth's ventures from 2020-2023.
The lawsuit accuses Cloth of fraudulent misrepresentation and violations of Illinois state securities law, and accuses the Schmidt defendants of negligent misrepresentation. It accuses all defendants of unjust enrichment.
The plaintiffs are seeking actual damages of at least $80 million, plus punitive damages of at least $100 million, plus attorney fees.