rage 1 of 23) 2 e te ORIGINAL PATRICIA L. GLASER ~ State Bar No. 55668 palaser@slaserweil.com GLASER WEIL FINK HOWARD ‘AVCHEN & SHAPIRO LLP 10250 Constellation Boulevard, 19" Floor Los Angeles, California 90067 Telephone: (310) 553-3000 Facsimile: (310) $56-2920 Attorneys for Plaintiff SHLOMO Y. RECHNITZ SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES SHLOMO Y. RECHNITZ, an Individual Plaintiff, JASON LYONS, an Individual, MOSHE HOGEG, an Individual, MOBLI MEDIA, INC., [and DOES | THROUGH 100, Defendants. ED stor Court oF calternis SeBgiehy of cos Angles ak -7 2018 tor, Exepuje OffcenCiork ener Cater © sc 8 SEE: ancy Ae Case No. BC697173 COMPLAINT FO! 1, BREACH OF FLORIDA SECURITIES REGISTRATION STATUTE ‘SECURITIES FRAUD 3. CONTROL PERSON LIABILITY 4. COMMON LAW FRAUD 5S. BREACH OF CALIFORNIA BROKER-DEALER REGISTRATION STATUTE 6, NEGLIGENT. MISREPRESENTATION 7. UNJUST ENRICHMENT/RESTITUTION DEMAND FOR JURY TRIAL ‘COMPLAINT ‘oot 4 aged 1 - Doo 1D = 1730701276 - Dee Type = omage 3 of 2) 10 u 12 13 4 15 16 7 18 19) 20 a 23 24 25 2 28 Plait ‘SHLOMO Y. RECHNITZ (“Plaintiff or “Rechnitz”), by his attomeys, hereby [complains and alleges for his complaint against defendants JASON LYONS (“Lyons”), MOSHE /HOGEG (“Hogeg”), MOBLI MEDIA, INC. (“Mobli”). Collectively, Hogeg, Lyons, Mobli and defendants DOES 1-100 are referred to as “Defendants” ‘SUMMARY OF THE ACTION 1. By this Complaint, Plaintiff seeks the recovery of sof dollars of unrealized losses which he suffered as a result of Defendants conduct. Specifically, Defendants orchestrated a scheme orchestrated a fraudulent scheme comprised of significant misrepresentations regarding financial investments in, and pledged advisory support for, Mobli, as well as Lyons’ compensation related to the sale of Mobli securities. As a result ofthis scheme and mistepresentations, and in reliance thereon Plaintiff was induced to and did make secondary purchases of Mobli-issued securities (ie. purchases from third party investors). 2. Defendants’ scheme created the false appearance that Mobli was a well-capit business with investor support from renowned investors and celebrities. Defendants did so in order to utilize Mobli to enrich themselves, and to allow Hogeg, Mobli’s founder and CEO, to [unload significant amounts of Mobli securities all to Plaintiff's detriment. 3. To these ends, Lyons, Hogeg and Mobi falsely portrayed Mobli as having attracted significant investments from Leonardo DiCaprio (“DiCaprio”), a famed actor, and an affiliate of billionaire Carlos Slim (“Slim”), a telecommunications investor widely considered one of the ‘wealthiest men in the world, 4, However, the truc sum invested by DiCaprio was less than $10.00, and the sum invested by Slim’s affiliate was only a small of fraction of what was publicly represented, Thus, the true commitments by Slim and DiCaprio to Mobli, and its true capitalization, were far less than publicly portrayed. 5. Defendant Lyons also represented to Rechnitz that he was not earning money on Rechnitz’s purchases of Mobli securities fom other selling investors. This representation was false, ‘Though Lyons lacked the appropriate licenses to broker these transactions and/or to receive COMPLAINT. 1 boot 1 fagot 3 ~ bee 1D = 2730701176 oc Type = OTHERage 4 of 28) 1 }[commissions on such brokering activity, and despite his representations to Rechnitz to the 2 contrary, Lyons eared hundreds of thousands of dollars in commissions as a result of Rechnitz's 3} purchases of Mobli securities from third parties. ‘THE PARTIES 6. Rechnitz is, and at all relevant times was, a resident of Los Angeles, California. 7. Lyons, om information and belief, is, and was a resident of the State of Florida at times relevant hereto. Lyons is a former stock broker, and, at the time of the events in question, served as a Managing Director of Mobli. Between 1993 and 2010 he was registered with various securities broker-dealers, but, following that time, he let his securities licenses lapse. On 10] information and belief, he has not held any securities licenses since 2010, Lyons also founded of 11 fand continues to run the Wall Street Conference, a conference designed to attract investment in 12|] startup and small public companies. 13 8. Lyons has purposefully availed himself of this forum's benefits by maintaining 14] significant contacts with the State of California and County of Los Angeles. Lyons organized and 15 |} hosted the 2016 Wall Street Conference, which was held in early March 2016 at the Beverly 16] Wilshire Hotel in Beverly Hills. On information and belief, he has maintained substantial contacts 17] directed to the State of California and County of Los Angeles in connection with the planning of 18} this conference, including with: the Beverly Wilshire Hotel; other conference vendors; and, 19}] conference sponsors, such as Culver City based eWellness Healtheare Corporation. 20 9. Hlogeg, on information and belief, is and was a resident of the State of New York, 21 | and at al times relevant hereto served as a founder and Chief Executive Officer of Mobi. 2 10. Hogeg has purposefully availed himself of this forum’s benefits by maintaining g 23 || significant contacts with the State of California and County of Los Angeles. Among other things, 3 24||Hogeg represented Mobli at investor conferences in the State of California. Moreover, he was . 25] instrumental in its multimillion dollar acquisition of California-based “Pheed,” and following this e 26}] acquisition, launching a major Mobli location in Venice, California, refered to as the “Beach a 28 COMPLAINT 2 ood 1 Paget & - Doo 1D = 1730702176 ~ Dee type = onma,rage 5 of 20) 1 House.” New articles quoting Hogeg describe this Venice location as a means of increasing 2|| Mobis retevance by creating content for dissemination on Mobi. 3 11, Hogeg’s Mobli misconduct is the latest in a history of sctf-dealing, as he has 4|{ consistently enriched himself and his family atthe expense of shareholders. For example, in early 5||2014, while serving as 2 director of publicly traded micro-cap company Infinity Augmented 6|/Reality, he caused his cousin Ortal Zanzuri to be appointed as its CFO. See 7|| tps: www. sec-gov/Archives/edgat/data/1421538/000117891314000070/2k1414190.htm 8 12. Mobli is headquartered in New York, with its parent corporation in Tel Aviv, 9 Israel. Mobti has purposefully availed itself of this forum’s benefits by maintaining significant 10|}contacts with the State of California and County of Los Angeles. In 2014, Mobli acquired 11|| Catifornia-based “Pheed.” From 2014-2015 Mobli also operated out of a location in Venice, 12|| California called the “Beach House.” B 13. The true names and capacities, whether corporate, associate individual or 14} otherwise, of defendants Does I through 100, inclusive, are unknown to Plaintiff at this time, who 15 | therefore sues said defendants pursuant to Code of Civil Procedure §474. Each ficttiously named 16|| defendant participated in, contributed to or is legally responsible forthe actions and events alleged 17] herein, caused Plaintiff's damages as alleged herein, and are therefore liable to him thereon. 18|| Plaintiff is informed and believes, and on that basis alleges, that the defendants, collectively, and 19|] cach of them individually, were at all times material hereto, principals, officers, directors, agents, 20/employces, representatives, alter egos, partners, joint venturers and/or co-conspirators of each. 21 ]fother defendant, and in such capacities participated in the actions and events alleged herein and 22] incurred liability to Plainti therefor within the course and scope of such agency and employment © 23]fin doing the things herein alleged. Whenever reference is made herein to any defendant in 2 24]| performing or failing to perform any act, such reference shall be construed to mean that the 'S28}forcer, directors, principal, contol person, supervisors, manager, employees, and agents of 6 Ulsaia defendants) performed, failed to perform, authorize, ratified, or pemnited such acts or Py | 28 COMPLAINT 3 Doct 1 Paget § - Doe ID = 1730703176 - boc Type = OTHER1 } failures to act alleged herein while engaged in the furtherance of the business or operations of said defendant(s) and while acting within the course and scope of their authority and employment. JURISDICTION AND VENUE 14. The Court has subject matter jurisdiction over these claims pursuant to Code of Civil Procedure §§85, 86 and 88. The Complaint seeks damages in excess of the Court's jurisdictional limits and equitable relief. 15. Venue is proper in this judicial district under Code of Civil Procedure Sections 395(a) and 395.5 because substantial portions of the events in question occurred in the County of 9||Los Angles, California and the claims implicate Plaintiff's un-waivable statutory rights under the 10 | California Corporations Code, which strongly favors a California venue forthe present action. u ALLEGATIONS COMMON TO ALL CAUSES OF ACTION 2 16. Mobli is a company that formerly hosted @ social media platform similar to 13]}tnstagram, a leading online mobile platform for the sharing of photo and video content, either 14] directly or through other popular online platforms sitch.as Facebook and Twitter, and Instagram. 15|] Like Instagram, through the Mobli platform, Mobli users could share photos and videos with their 16]| friends and others by posting them to the Mobli platform. Facebook acquired Instagram in 2012 17] for cash and stock valued at $1 billion. 18 17, According to public reports, Mobli raised $86 million in investment capital 19} between 2011 and 2013. As detailed below, figure materially overstates the amount Mobli 20|} truly raised by tens of millions of dollars. In reality, lacked vast portions of the capital it had 21 represented to Plaintiff and the investing public that it had raised, and, as a result was, in fact, 22 || chronically undercapitalized. 2 2B 18. Defendant Hogeg founded Mobli with several partners in and about 2010 and has 2 24} served as its CEO and a member of its Board of Directors since its inception. Hogeg has, 13 28feonisemty (and missing) portyed Mobi as atraing significant investors wing to o 26 || devote ample time and money toward its growth. a7 2% ‘COMPLAINT ooh 1 Bagel 6 - Doe 19 = 1730702176 - Doe Bype = OTMER(rage 7 of 20) 10 W 12 3 4 1s 16 7 18 9 a 2 2B 4 25 26 27 2B 19, In October 2011, Defendants Hogeg and Mobli touted DiCaprio as a significant investor in and advisor to Mobli. : 20. Through Mobli’s then- public relations firm, Blonde 2.0, Defendants issued the following release featuring Mobli’s logo and DiCaprio’s likeness on or about October 25, 2011: Leonardo DiCaprio Invests and Takes Advisory Position in NYC Based Social Media Platform Mobli NEW YORK, October XX, 2011 - Mobli, the popular Visual-social media platform, announced today that actor Leonardo DiCaprio has invested in the company and has taken an active role jn shaping the incredible growth and success of the platform. DiCaprio was part of a group of other high profile investors who “invested a total of $3 million in Mobli several months ago. He has taken on a position consulting the company in shaping its content ‘and social strategy. “'m very excited to be a part of Mobli, a company that is ‘groundbreaking - that is taking an active role in revolutionizing the way people interact with visual information, whether they are creating or consuming it. Mobli allows people from all over the world to share moments,” DiCaprio sai. Mobli recently unveiled the latest version of its mobile application for iPhone, Android, and Blackberry devices and has seen incredible adoption. This amazing growth recently propelled Mobli to the #1 spot on the App Store list of free Social Networking, apps, topping such applications as Facebook, Skype and Twitter. Currently, Mobli is acquiring 10,000 new users a day. “We are incredibly proud of our partnership with Leo and ‘we value his input and unique insight into creating a trily social COMPLAINT 5 oct 1 Pagel 7 - Doc 1D = 1730701176 - Doe Typo(@age 8 of 28) 10 u 2 b “ 1s 6 18 19 20 2 2 2B m4 25 26 27 28 visual experience for our users,” said Moshiko Hogeg, Mobli's CEO. “The passion and support our vibrant community provides is a testament to the fact that we are on the right path.” 21. The above press release was calculated to and did cause significant coverage by the business, technology and entertainment media. For example, on October 25, 2011, Venture Beat, 2 web based publication focused on startup investments published a story on October 25, 2011 entitled: “Mobli adds Leonardo aprio as advisor and investor, looks for help with branding,” In the article, defendant Hogeg is quoted extolling DiCaprio’s advisory role with Mobli: “[DiCaprio} has zero tech background,” he explained in an interview with VentureBeat. “I's about him knowing and snderstanding branding and marketing.” Overall, Hogeg is excited about the future with DiCaprio. “These people are business people 100,” he explained, “They invest inreal estate and the stock market and no one says anything.” 22. Each of the italicized statements in paragraphs 20-21 above was materially false, ‘misleading and incomplete when made, in that they state or convey the misleading impression that DiCaprio invested significant sums in Mobli and/or served as its advisor. 23, Intrath, according to a Bloomberg News asticle published on December 5, 2016 by Gabrielle Coppola entitled: “Israel's Startup Hype Master Faces His Toughest Test Yet” (which Hogeg himself re-tweeted): In 2011, the Oscar-winning [DiCaprio] made an investment of just $9.54 in exchange for almost a million shares, according to a securities document seen by Bloomberg. (Emphasis supplied). 24, Following Defendants’ initial announcement of DiCaprio’s investment, similar stories followed in domestic and intemational publications, such as entertainment news site COMPLAINT 6 oot 1 Rage § ~ Doe 1D = 1730701176 - Doc Typeerage 9 of 28) 1 || Deadline, digital media site Mashable and Australian technology publication, Startup Smart. See, 2lleg., Michelle Hammond, “Leonardo DiCzprio-joins celebrity tech start-up investors,” (Startup 31] Smart: October 26, 2011), avilable at: htp:/Avww statupsmartcom au/advice/growth/eonard. 5 25, Defendants parlayed the attention gamered from DiCaprio’s alleged investment into attracting other high profile investors. Thus, in late January 2012, when former cyclist Lance | Armstrong announced that he had invested in Mobli and joined its board of advisors, news media surrounding this announcement (including publication such as TechCruch, Bloomberg News and the New York Observer) continued to reiterate misrepresentations regarding DiCaprio's alleged 10] investment. See, eg, Robin Wauters, “After Leo DiCaprio Invests, Lance Armstrong Races To 11]}Promote, Advise Mobli,” (TechCrunch: January 30, 2012), available at: 12] httpsz/techcrunch,com/2012/01/30/after-leo-dicaprio-lance-armstrong-races-to-promote-advise- 13 mobi. 4 26, Later, in 2012, Mobli continued to bank on its notoriety and allegedily completed a 15|}$22,000,000 round of financing. According to a January 2, 2013 public statements by Hogeg, the 16] completion of this roiind brought its total funds raised to $28,500,000. : 7 27. Then, in late 2013, Mobli announced its alleged relationship with Carls Slim and 18||his América Mévil. On November 6, 2103, the Company made the following announcement, 19]] which Defendant Hogeg re-tweeted the same day: 20 Mobli Announces a Strategie Investment by América Mévil tt Deal Includes a Business Collaboration Arrangement to Bring the Visual Sharing n ‘App to Millions of Users in Latin America _ November 6, 2013, 07:10 AM Eastern Standard Time __23lloffer and sale of securities to Plaintiff on behalf of the third-party individual investors- 3 24fseners. Soa 74. Despite acting as a broker-dealer with respect to the sales to Plaintiff of = 26 || Mobti securities, Lyons was not licensed, authorized or quslified as a broker-dealer in 27|| the State of California as required under Cal. Corp. Code § 25210. COMPLAINT 8 ‘Deck 2 Page# 20 - Doo 1D ~ 1720702176 - Dee Type = OTErage 22 of 25) 1 75. Under Cal. Corp. Code § 25501.5, Plaintiff is entitled to the retum of all 2|] consideration paid for his Mobli securities plus pre-judgment interest, and attorneys’ fees. 3 76. _ Inaddition, pursuant to Code of Civ. Proc. Code § 1029.8, Lyons, as an unlicensed 4|| broker is tiable to Plaintiff for certain treble damages and attorneys’ fees, 5 © SIXTH CAUSE OF ACTION 6 NEGLIGENT MISREPRESENTATION 7 (Against Lyons) 8 77. This cause of action is asserted in the alternative, Plaintiff incorporates by 9||roference each allegation contained in each preceding paragraph above as if fully set 10]| forth herein, except those alleging intentional fraud. u 78. Defendant Lyons negligently misrepresented to Plaintiff’ that important 12}}facts were true. His representations were not true and he no reasonable grounds for 13 | believing these representations when he made them. 4 79. Defendant intended that Plaintiff rely on his representations. Plaintiff 15 || reasonably relied on these representations. 16 80. Plaintiff was harmed and his reliance on Defendant Lyon's representation 17 || was a substantial factor in bringing about his harm. 18 ‘SEVENTH CAUSE OF ACTION 9 UNJUST ENRICHMENT/RESTITUTION 20 (Aga dant a 81. Plaintiff incorporates by reference each allegation contained in each 22|| preceding paragraph above as if fully set forth herein. gS B 82. Defendants were unjustly enriched by their receipt and retention of benefits 2 24||duc to their misconduct, as alleged herein, and it would be unconscionable to allow them 1 25||to retuin the benefits thereof. be 26 7 28 CompLamT 9 oot 1 Paget 21 - Doo 1D = 1730701176 ~ Doe type = OmERage 22 of 28) 1 83. To remedy Defendants’ improper gains, and to avoid unjust enrichment, the Court should order them to disgorge to the Plaintiff all of the funds they received in 2 3 |[connection with Rechnitz’s purchases of Mobli shares. 4 PRAVER FOR RELIEF El WHEREFORE, Rechnitz prays for relief as follows: 6 L For damages or rescission in an amount to be proven at trial but believed to exceed 7 $4,750,000.00; |] 2. —_Fortrele damages and punitive and exemplary damages in an amount suficent 9 punish Defendant; tol] 3. _—_Fordiagorgement of ll il-goten gain; 11] 4. Forattomeysfes as provided by law, 12 5. For costs of suit incurred herein; B 6. For pre-judgment and post judgment as allowable; and 4 7. For other further relief as the Court may deem just and proper. 15 6 sURY DEMAND 7 Rechnitz hereby demands a trial by jury for all causes and issues so triable. 18 ated: March 7,2018 GLASER WEIL FINK HOWARD iol AVCHEN & SHAPIRO LLP 2 By Aa~ a Pe ia L. Glaser 2 Attorneys for Plaintiff. ao a 25 £ Sm 27 2B nee e Dost 1 Paget 22 - neo ID ~ 1730701176 - Doo type = OnER