The Animatress Pipeline

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Approaching Closure

The end is near. My former employer who dissolved his company owing the entire crew two months pay has been brought to justice by the Security and Exchanges Commission. There is no telling whether all who he has wrong will be compensated, but at least it’s comforting to know that haphazard business practices is monitored by a formidable authority.

The Securities and Exchanges Commission is a federal agency that assured investors are paid. Fear of their wrath is the reason why Hollywood isn’t taking any chances with new properties right now, only funding remakes. Investors must be repaid. Investors aren’t donors. You just an’t take their money and not pay dividends. Apparently some of them complained and my former employer must pay the Piper. 

That said, that this blog entry is not intended as a gloat. Gloating would be bad karma, but rather a cautionary tale against flawed business practices. That, and the Leo in me refuses to be wholly disloyal to an animation employer who kept me on longer than any studio. 

Articles have a nasty habit of disappearing after a few years, so I’ve pasted the following three articles here. The first is how my employer gambled away a considerable portion of investor funding, including employee wages:

Las Vegas-based Online Sweepstake Operator Charged With $9 Million Fraud

FEBRUARY 08, 2019 BY PHILIP CONNELLER

The owner of a Las Vegas-based online gaming company has been arrested and charged with fraud after it is alleged he used investors money as his “own personal piggy bank.”

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Robert Alexander hanging out with the model Maria Kang at a star-studded promotional event hosted by Kizzang and Sports Illustrated. The magazine later sued him for £1 million. (Image: Getty)

Robert Alexander is accused by the Securities and Exchange Commission (SEC) of fraudulently raising $9 million from more than 50 individuals for his company Kizzang, which until its December 2017 insolvency offered sweepstakes-based online gaming through slots tournaments, fantasy sports, and scratch cards.

But according to a filing in the US District Court for the Southern District of New York, Alexander stole “at least” $1.3 million from investors, more than $450,000 of which he used to fuel his gambling habit. The rest was funneled into a business that had no actual viable revenue stream.

“As alleged in our complaint, Alexander promoted Kizzang as an opportunity for investors to profit from the early success of a technology start-up,” said Carolyn Welshhans, Associate Director in the SEC’s Division of Enforcement. “In reality, Alexander brazenly converted investor proceeds for his personal use, sometimes within days of receiving investor funds.”

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Former Take-Two Interactive Exec

Alexander is a former video games industry executive who once sat on the board of Take-Two Interactive, the parent company of Rockstar Games, which created the Grand Theft Auto and Red Dead series.

Despite his credible back story, the SEC accuses Alexander of making wild claims to investors, such as that they would make a tenfold return on their investments. He also led some to believe he had personally invested millions into the business and that he had been involved in the creation of an unnamed hit video game, which he had not.

In order to cultivate an image of personal wealth he told one that he had made a charitable donation of $50 million to a prominent Los Angeles hospital. In reality, he was almost broke and blowing through investor funds.

“On May 28, 2015, Alexander emailed a Kizzang investor to request additional funds, writing ‘Monday is payroll and I need 55k.’” reads the complaint.

The following day, the investor wired $10,000 to the Kizzang bank account. Alexander failed, however, to disclose to the investor that in the days and weeks prior to his May 28 email, between May 1 and May 26, 2015, he had spent more than $20,000 of investor funds on a gambling spree at four different casinos in Las Vegas and Indiana.”

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Lawsuits Pile Up

In 2017, Kizzang was sued by the NCCA for copyright infringement over its “Final 3” and “April Madness” promotions, which riffed on the league’s Final Four and March Madness trademarks. Since Alexander failed to turn up in court, the NCAA was awarded a default judgment.

Around the same time, he was also sued by Sports Illustrated, which had agreed a $1 million marketing partnership with Kizzang but had received no payments from Alexander. Again, he was a no-show in court and Sports Illustrated was awarded a default judgment of $1,025,384.62.

Kizzang’s business model was to monetize consumer traffic through advertising and sponsorship, but, in reality, from its incorporation in 2014 to its 2017 insolvency, its “never had any meaningful source of revenue,” the SEC alleges.

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The second article is the reason why it is so scary to be a producer and yet why I want to be one. The pressure of making a profit with investor funding is considerable, yet as a producer, one is privy to where the money comes from and the politics behind. I am learning more and more as I grow older that the ruling class are not gods and must take risks with their financial stability just like poor folks—they stakes are just higher. No one goes hungry in the end, but they do land in jail and ruin countless lives and livelihood for their mistakes. As it turns out, two of Kizzang’s investors ran a Ponzi scheme on Broadway tickets and they were hoping investing in Kizzang would fund the dividends, but the company never pulled a profit. Kizzang failed. We all failed. Art-wise, I don’t understand why. Our games looked like everyone else’s. I blame the framework we used. Flash is so 2001. The language is clunky and buggy. Also there were other cheats that restricted the animation department from using 3D and After Effects in the final product. When a framework and JSON generator is free, that should be a red flag not to use it for professional purposes. Never lag behind in technology, for the audience always bee-lines for the latest and greatest trend. I was ready, the whole crew was ready. I can rock Maya and After Effects just as efficiently as Flash. Why didn’t the budget allow for 3D games?

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U.S. brings charges over Ponzi scheme, ‘Hamilton’ tickets fraud

Jonathan StempelNate Raymond

3 MIN READ

NEW YORK (Reuters) – U.S. authorities on Friday unveiled criminal charges against two men accused of helping operate a hedge fund as a Ponzi scheme and of swindling investors in a ticket-reselling business for popular events, including the smash Broadway musical “Hamilton.”

Joseph Meli and his wife, Jessica Meli, exit U.S. Federal Court in Manhattan, New York, U.S., January 27, 2017, after Meli and Steven Simmons were charged with running a criminal Ponzi scheme that swindled investors in a purported ticket-reselling business for popular events, such as Adele concerts and the smash Broadway musical “Hamilton”. REUTERS/Nate Raymond

Joseph Meli, who ran the ticket business, and Steven Simmons, the head of an alternative investments at Sideris Capital Partners, were arrested on Friday on securities fraud and wire fraud charges brought by Manhattan federal prosecutors.

Meli, 42, and Matthew Harriton, 52, were separately accused by U.S. Securities and Exchange Commission of orchestrating an $81 million Ponzi scheme by raising money from investors to buy and resell tickets for popular shows.

Those included “Hamilton,” which won 11 Tony Awards last year, and concerts featuring Adele, the SEC said.

In court, Assistant U.S. Attorney Josh Naftalis said prosecutors rushed to bring charges after the fund’s co-founder turned cooperating witness and recorded Meli saying he was draining his bank accounts and had gotten his passport.

Naftalis also said that after Simmons, 48, was arrested at his Connecticut home, he told Federal Bureau of Investigation agents that he “hoped that Mr. Meli would put two slugs in the back of the cooperator’s head.”

But defense lawyers swayed U.S. Magistrate Judge James Francis to release each man on $1 million bonds after providing explanations.

Michael Bowen, Meli’s lawyer, said anticipating the probe, Meli recently put down a large retainer with his law firm and gave his lawyers his passport. Florian Miedel, Simmons’ attorney, said Simmons was simply stressed upon arrest.

Bowen in a statement said Meli would “vigorously defend against the criminal charges.” Miedel declined to comment. Harriton did not respond to requests for comment.

According to a criminal complaint, the unnamed Connecticut hedge fund had raised funds from, among others, an investment fund that sank $4.2 million into it, only to misappropriate most of the money.

After that investor demanded repayment, the cooperating witness turned to Simmons, who raised $850,000 from an investor, and Meli, who provided $3.75 million from an account for Advance Entertainment LLC, court papers said.

The SEC said Meli and Harriton through Advance Entertainment and other ticket resale business entities were meanwhile involved in a separate Ponzi scheme.

Of the $81 million they raised from 125 investors, $48 million was used to repay earlier investors, while funds were spent on jewelry, private school tuition, gambling, and other expenses, the SEC said.

Our Standards:The Thomson Reuters Trust Principles

The final article is the account from the Security and Exchanges Commission. Apparently, they are more powerful than the IRS, for I tried to go after my employer like the tax accountant after Al Capone after the withholdings from my wages were not properly reported to Uncle Sam for the tax year of 2017. But my efforts were to no avail. Neither were my efforts to retrieve my wages via the Nevada Labor Department. The crew’s lost wages were a hot potato to all local lawyers who simply told us to file our complaints with the labor department. According to other accounts of other Nevada based industries, dissolving a company with money owed to workers is common practice in Southern Nevada. Therefore, companies set up here not just for the low taxes, but for the inadequate legislation for workers rights which are lightly enforced. I’ll never work for a company that isn’t based in California or New York again! Taxes may be high, but they pay for protections!

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SEC Charges Founder of Online Gaming Company Defrauding Investors

Litigation Release No. 24392 / February 7, 2019

Securities and Exchange Commission v. Robert Alexander and Kizzang LLC, No. 19-cv-01161 (S.D.N.Y. filed Feb. 7, 2019)

The Securities and Exchange Commission today charged Robert Alexander with fraudulently raising approximately $9 million from more than 50 individuals by selling investments in Kizzang LLC, a purported online gaming business.

According to the SEC’s complaint, among other misrepresentations, Alexander told investors that they would make a minimum of ten times their investment, Alexander had personally invested millions of dollars in Kizzang, Alexander had made a $50 million charitable donation, and that he had led the creation of a prominent video game. Rather than using investor funds for Kizzang’s business, Alexander stole at least $1.3 million, including spending more than $450,000 on gambling sprees. Alexander also used investor funds to finance his daily living and other personal expenses, including credit card bills, shopping and entertainment, and expenses for his daughter, including culinary school tuition and luxury car payments.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Alexander and Kizzang with violating Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 and seeks permanent injunctions, civil monetary penalties, and disgorgement of ill-gotten monetary gains plus interest.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Alexander.

The SEC’s investigation was conducted by Cecilia B. Connor and Andrew Elliott, and supervised by Ms. Welshhans and Amy L. Friedman, with assistance from Janet Yang. The SEC’s litigation will be handled by Martin Healey. The SEC appreciates the assistance of the Federal Bureau of Investigation and the U.S. Attorney’s Office for the Southern District of New York.

kittyKaboom

There are lot of lessons learned here. Despite everything, I am grateful that I had a safe place for me and my cat to stay. My mother lived nearby. I may not have save face, but I saved what is important; those who depend upon me and my ability to regroup and stand on my feet. I think all working people, especially artists and other types of business owners. There is a darkest hour before a new stimulus that comes in the form of ruin as a result of a business deal gone sour, an employer who ran off with your intellectual property or some other fiscal tragedy. The Tower. Thankfully, there is recover after the great loss; there is time to rebuild a fortune before one retires and new life experience to use as a tactical asset for executive position that is now possible to take on, because there is one less big thing to scare you now. You’ve survived a second right of passage. Rejoice!

Madeliene the MINI

Madeleine. My beloved repossessed MINI. A casualty of the six month non-compete clause.

Metaphysics aside. The shame that I walked about with for a year is giving way to hope. With these articles, I have proof that my current situation is not failure, but circumstance. I’ve suffered layoffs before. I’ve endured the embarrassment of being fired by an email. This fuck-over was the third and final humiliation I insist on enduring in my artistic life. I am not washed up. I’ve been offered art director positions (although on spec), hired for illustration, completed commissions for long lost professional friends and sought out again by my beloved Sesame Workshop. I may have lost my car, but I still have my dignity. Now the next step is returning to Los Angeles. I belong there. All animators do. My closing advice is to never work in a region where there isn’t a union or guild. Southern Nevada has a six month non-compete clause in all of its entertainment and entertainment services contracts. Even when you don’t sign one, all of the casino game studios honor it. Much like non-union studios honor the standard wage set by the Animation Guild in LA. I was poised to land on my feet after the Kizzang dissolution. Konami was interested in me, but could hire me due the six-month non-compete that wasn’t even in my Kizzang contract. By the time I created samples to convince them otherwise, the job was gone. Stay in LA. Stay close to those studios. For the disparate industry that exists between the coastlines are run by people who haven’t even graduated high school and have no idea what they are doing.

Thank you, Secret Tarot 

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