Yet another lawsuit: Wizard World suing Shamus Brothers and friends over possible takeover – UPDATED

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UPDATE: I’m told this lawsuit was also settled at the same time as the main one. So, all water under the bridge now.

The other day we reported on the end of Wizard World’s lawsuit against former CMO Stephen Shamus for breach of contract. However, as a tipster mentioned in the comments, there is still an ongoing lawsuit, filed in December in New Jersey, that alleges that the Shamus Brother (Gareb, Stephen and Kenneth) and several associates failed to disclose their stock holdings in Wizard World as part of an attempt at a hostile takeover of the company.

The original complaint assembles a rogues gallery of what the suit calls “bad actors” and their shell companies: Gareb Shamus, former CEO and owner of defendants Pivot Media LLC and 4 Brothers LLC; Shephen Shamus, former CMO and an owner and manager of defendant It’s all Normal LLC; Kenenth Shamus, former board member; and associates  Eric Weisblum, a “longstanding friend of the Shamus Brothers”, WIZD stock holder and controller of a company called  Gem Funding LLC; Robb Knie, another Shamus friend and stockholder; and Vincent Labarbara, a shareholder via his company Network 1 Financial Securities, Inc.

Labarbara and Knie have since been removed from the lawsuit.

The rest of the suit alleges that various stockholders failed to file forms to show what stocks they owed through their shell companies. For instance, Gareb Shamus failed to file a Schedule 13D with the SEC, a form required when an individual owns more than 5% of a company’s stock, although he owned more than 18.65% through Pivot Media, IAN and 4 Brothers. Although Shamus reported his ownership he failed to report the stock transfer to the companies, according to the suit.

This was all part of a plot to take over the company, the suit alleges, as revealed in Stephen Shamus’s court filings which mentioned an attempt to replace the current board. Weisblum and Labarbara are said to have held several meetings with WizardWorld CEO John Maata, all asking that more press releases be sent out to increase stock price. Later in the year, as Stephen Shamus grew disenchanted in his role after being “passed over” for CEO, a plan emerged among the defendants:

Having been rebuffed by Wizard World management, defendants Weisblum and Labarbara decided to join forces with the Shamus Brothers to pursue a change in the Board and to install Stephen Shamus as the new CEO. As Stephen Shamus’s own statements confirm, these two defendants, along with defendant Robb Knie, planned to team up with the Shamus Brothers to take control of Wizard World. The Company regularly held its annual meetings in the fourth quarter of the year. A board member of Wizard World who was employed by Weisblum began to push for a shareholder meeting. Defendants thus anticipated that a shareholder meeting would occur shortly and agreed to work together to determine its outcome. Their plan has not borne fruit only because Wizard World has yet to schedule its 2016 annual meeting.

The suit also sheds some light on the rather mysterious announcement by Jerrick Media Holdings last fall that they were going to attempt to take over the company. According to the filing, this was all part of the scheme:

On December 1, 2016, another public company, Jerrick Media Holdings, Inc. (“Jerrick Media”) issued a press release announcing its intent to acquire Wizard World. Jerrick Media is financed by Mr. Labarbara’s company, Network 1, and the press release was intended to encourage shareholders to purchase shares of Wizard World in order to then support the anticipated proxy contest by the Shamus Brothers and the other defendants. The press release was hopelessly misleading, as Wizard World had no intention of being acquired by Jerrick Media and the suggestion that a deal was either imminent or in the works was without the slightest factual basis. Indeed, Jerrick Media had no contacts at all with Wizard World before or after the release. Apparently and incredibly, when Defendants could not strong-arm the Company’s management to issue press releases not supported by any business justification, they themselves took the brazen and reckless step of generating their own press release in furtherance of their plan and own personal pecuniary motives.

Given that Labarbara was subsequently removed from the suit, this might be taken with a grain of salt.

There is a lot of salt around all of this. However what it does show is boardroom turmoil at the company and that the current board really doesn’t like the Shamus family. A response to the complaint has yet to be filed.