This interesting, but atypical case, involves one of the many possible issues that can arise from the use of unlicensed finders to raise securities.

Five years ago, Daniel Azouri met Marvin Lipschultz at the Cannes Film Festival.  Mr. Azouri suggested that Mr. Lipschultz invest in a movie venture.  Mr. Lipschultz invested a total of $220,000 in the expectation of a return of $1.15 million.  When that didn’t happen, Mr. Lipschultz sued alleging that Mr. Azouri had failed to disclose that he was to receive a finder’s fee equal to the anticipated return, contingent upon the project’s success.

In an order issued earlier this week, U.S. District Court Judge Kent J. Dawson ruled that Mr. Lipschultz had failed to state a claim under Rule 10b-5.  Golden Palm Invs. v. Azouri, 2015 U.S. Dist. LEXIS 75095 (D. Nev. 2015).  I found particularly interesting Judge Dawson’s analysis loss causation. The plaintiffs alleged that had they known of Mr. Azouri’s commission arrangement, they would not have invested.  Judge Dawson, however, found that what Azouri stood to gain had no effect on the execution of future course of the investment agreement.  This case is atypical because Mr. Azouri’s commission was contingent upon the the project’s success, not simply the investment.