Attorneys for MGG Investment Group, which is suing Zayat Stables for allegedly defaulting on a $23 million loan, filed paperwork Feb. 11 naming a slew of additional defendants, many of whom purchased horses or breeding rights privately from Zayat Stables.
Yeomanstown Stud was named for its purchase of El Kabeir; Hill 'n' Dale for its purchase of American Cleopatra; LNJ Foxwoods and Orpendale (Coolmore) for their purchase of American Pharoah breeding rights; Flintshire Farm and Brad Sears for its purchase of breeding rights to mare Lemoona; Thomas Clark Bloodstock for its purchase of Lemoona from Flintshire (from consignment of Taylor Made Sales Agency, agent, at the 2020 Keeneland January Sale for $250,000); MyRacehorse.com for its purchase of part of Amandrea; and McMahon Thoroughbreds of Saratoga for its purchase of Solomini.
The complaint claims the purchasers of horses and breeding rights from Zayat possess assets which do not rightfully belong to them and that they knew or should have known that MGG was owed proceeds from those sales as repayment for Zayat's loan.
The amended complaint also names Zayat Stables owner Ahmed Zayat's children Justin, Ashley, Benjamin and Emma, and his wife Joanne. The complaint explains that the nine American Pharoah breeding rights, which had been moved from family members to Zayat Stables as collateral when the MGG loan was executed, were later sold by Zayat's wife and children. MGG claims it never received the proceeds of those sales, which it says it was entitled to per its financing agreement with Zayat.
The complaint seeks $14 million in damages from Zayat's wife and children, $10.89 million from Coolmore, and a minimum of $100,000 from Flintshire Farm and Brad Sears. The document also seeks the return of horses or breeding rights to a court-appointed receiver who now controls Zayat Stables and aims to block the sale of any offspring of mares foaled while they are in the possession of their purchasers.
The updated complaint is here.
None of the new defendants has had an opportunity to file their responses to the allegations.
Elizabeth Woodward of the Dean Dorton Allen Ford accounting firm was appointed receiver by a Fayette County Circuit Court judge in January after MGG Investment Group claimed it learned Zayat sold a number of horses without informing the investment group before defaulting on his loan. An initial report from the receiver, who is charged with maximizing the value of the company, indicated that in the course of a few weeks a long line of farm managers, trainers, and veterinarians had approached her to say they were owed thousands of dollars by Zayat Stables.
A statement from Dean Dorton said Woodward was not aware an amended complaint was being filed by MGG Investment Group.
“This morning the Receiver was notified that MGG amended its Complaint to add several additional parties,” the statement read. “Neither the Receiver nor her consultant Gatewood Bell participated in the preparation or filing of the Complaint. She takes no position on the issues raised in the original Complaint or the amendments to it and does not intend to do so. The Circuit Court's Order appointing the Receiver directs her to take possession of the collateral and maximize its value, which is the work she is doing. The Receiver works for and reports to the Court, not MGG, or any other party.”
The first group of Zayat Stable horses went up for auction earlier this week. Four of six horses sold for a total of $366,000, in stark contrast to the $1.9 million valuation Zayat had provided to MGG in December for that same group of horses.
A motion by Zayat's attorneys to remove the receiver was denied last week.
Part of MGG's complaint has been that first the investment group, and later the receiver, have struggled to extract from Zayat an accurate list of horses owned by Zayat Stables. Emails from Zayat in mid-January indicate there remained confusion on this point. In one email, Zayat told MGG it “is simply not true” that Zayat Stables “ever sold any position in that stallion” when asked about El Kabeir. A bill of sale for the stallion dated September 20, 2017, is among the exhibits attached to the amended complaint.
The receiver for the stable has indicated she intends to sell the remaining Zayat Stable horses gradually, choosing auctions that are most likely to result in the best return and she expects some will remain in training.
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