Scooter Braun's Ithaca Management Demands Full $14.5M Payment in Troy Carter Suit

Patrick T. Fallon/Bloomberg via Getty Images
Troy Carter, global head of creator services at Spotify Ltd., during the WSJDLive Global Technology Conference on Oct. 25, 2016 in Laguna Beach, Calif.

Scooter Braun's Ithaca Management Holdings submitted a new court filing Tuesday, seeking an injunction in the company's multimillion dollar lawsuit against Troy Carter, Carter's wife and his Atom Factory company. The original suit, filed Sept. 12, alleged fraud and breach of contract, claiming failure to repay a loan dating back to June 2016.

In the new filings, reviewed by Billboard, more details of the loan and Ithaca's attempts to recoup its worth are laid bare. According to the documents, "Throughout August and September, Ithaca followed up with Troy and Rebecca Carter (and through counsel) about the status of the payment ... [and] received repeated assurances that the payment would be received by the end of August."

No payment has been made and Ithaca is requesting full repayment in cash of all obligations, totaling slightly more than $14.5 million.

The requested injunction is seeking to stop Carter, the Atom Factory and other defendants from transferring assets between them or to other parties, effectively freezing them. A second filing is requesting an expedited hearing on the matter, originally scheduled for next May.

"This is yet another litigation tactic by Ithaca," said a rep for Carter. "These claims are not accurate, both legally and factually."

A rep from Ithaca told Billboard: "Not only are these statements factual but there is documentation to back up everything as fact. We have no interest in Troy Carter's history of games or slander. We as a company just want to recover the millions of dollars owed to us by Troy Carter which he has repeatedly promised to pay but never has. We defy Troy to identify a single factual inaccuracy in our court filings. Everything is backed up with documentation. Blanket statements to protect his image are absurd at this juncture. Simply pay what you owe and move on. We will continue to follow the legal steps for recovery in the meantime."

When Billboard first reported on the lawsuit in September, Carter sent a statement that read, in part, "Sadly, Scooter Braun, went back on his word. The fact is that I’ve never borrowed a dime from him, nor have I needed to. Ithaca has already received in excess of $12 million for my repurchase of the company. The equity they originally held became debt with collateral attached. Nothing out of the ordinary. He decided to file a lawsuit after we reached a stalemate on interpretations of the balance of debt." (The full statement can be read here.)

Braun, who manages Ariana Grande and Justin Bieber and co-manages Kanye West, is not mentioned in the suit. But sources tell Billboard that Ithaca is Braun’s $120 million investment fund and is a holding company for his Scooter Braun Projects, as well as ownership interest in a number of music management companies. Carter, who used to manage Lady Gaga, recently left his role as Spotify's global head of creator services. Braun, an early Spotify investor, helped Carter get that job in 2016, as Carter’s repayment to Ithaca was outstanding, sources tell Billboard.

According to the documents, Ithaca loaned Carter and AFACT (Carter's LLC) $26 million in June 2016, which was partially secured by collateral including Atom Factory's Culver City, California, property, but was ultimately under-secured. The following year, when AFACT could not make a $5.2 million payment on the loan, Ithaca agreed to accept stock in certain technology companies in lieu of cash, which the company notes as an example of Ithaca's willingness to work with Carter and AFACT on repayment methods.

(In a footnote, the filing reads, "It should also be noted that, upon signing the Note, Carter's non-compete and exclusivity provisions of his agreements with Ithaca were terminated, which allowed him to move to Spotify, a move purported by Ithaca in good faith to help his career.")

At the time of the loan, Carter and the Atom Factory were negotiating an arbitration settlement with an unnamed third party, which sources tell Billboard was between the Atom Factory and Gaga, who ended their management deal in 2013.

According to the terms of the loan, the arbitration settlement would require AFACT to pay any cash settlement to Ithaca in an amount that would settle the loan. In March 2018, AFACT settled the arbitration without Ithaca's consent.

According to the new filing, however, after the arbitration was settled, Atom Factory received a wire transfer for $10.8 million and, between March 19 and March 30, $250,000 was transferred to unknown accounts; $7 million was transferred to one single account; and $350,000 was transferred to various other accounts.

"As a result of these fraudulent transfers, AFACT and the other defendants had, and continue to have, insufficient funds" to pay back Ithaca, the documents say. 

Ithaca then says that it again tried to work with AFACT to work around any cash flow problems. "Ithaca spent several months trying to resolve defendants' outstanding debts, including indicating a willingness to accept a total payment of $10 million by July 31, 2018 ... [which] would result in total satisfaction of the note and eliminate further payment obligations," documents say.

By the end of August, however, no further payment was made, and Ithaca demanded full repayment of the outstanding loan, worth approximately $14.57 million. On Sept. 7, Ithaca requested an audit of AFACT, which was refused.

The documents also note that press reports in August -- including in a statement Carter made to Billboard last month -- said that Carter spent $730,000 on a painting, despite claiming an inability to repay the loan to Ithaca. Carter responded, according to Ithaca, that the painting was "a tax write-off for charity," and again promised to pay the amount owed.

Ithaca's attorneys are now seeking an injunction to "prevent debtors from placing property which legitimately should be available for the satisfaction of demands of creditors beyond their reach." Additionally, the company is seeking to expedite the case -- originally scheduled for a hearing in May -- though Carter's attorneys have said they would oppose any hearing date sooner than 60 days.

Additional reporting by Hannah Karp.