Federal district court judge Paul Gardephe recently spared Keleil Isaza Tuzman from additional jail time, despite Tuzman’s December 2017 convictions for securities and mail fraud, the latest twist in the long, strange saga of KIT Digital. Tuzman was the founder and former CEO of KIT Digital Inc., a publicly traded software startup that offered video management products, but which ended up bankrupt and is now called Piksel Inc. The US Attorney sought a prison term of 17.5-22 years for Tuzman.

Tuzman, and co-defendant Omar Amanat, who was sentenced to five years in jail and fined $175,000, were convicted on multiple counts of manipulating the stock price for KIT Digital and for defrauding investors in a hedge fund known as Maiden Capital.

The KIT Digital conspiracy had three parts. First, from 2009 to 2012, Omar Amanat and his brother, Ifran, helped Maiden Capital conceal losses on its investment in Enable, an asset management firm run Irfan Amanat. In 2008, Maiden Capital invested $1 million in Enable and provided a $2 million loan. Enable used that money to cover KIT Digital’s redemption of its own investment in Enable. In March 2009, the Amanat brothers told Maiden that they lost his entire $3 million investment. Ifran Amanat and Maiden generated fictitious client account statements that failed to disclose the millions of dollars in Enable-related losses. When Maiden’s investors wanted their non-existent money back, KIT Digital helped cover the redemption requests through 2011.

For their second scheme, from December 2008 to September 2011, Amanat, Tuzman, and Maiden manipulated the price of KIT Digital stock by having Maiden trade up the value to benefit Tuzman’s personal holdings.

In the third scheme, Tuzman and members of KIT Digital’s management inflated revenue to make KIT Digital look more attractive for a potential sale. A sale to private equity investors never materialized, however, dooming Tuzman. In 2012, KIT Digital’s board requested Tuzman’s resignation after the company’s auditors dug into KIT Digital’s relationship with Enable. For a more detailed discussion of the facts of the scheme, see the Court’s recitation in United States v. Tuzman, No. 15 CR. 536 (PGG), 2021 WL 1738530 (S.D.N.Y. May 3, 2021), reconsideration denied, No. 15 CR. 536 (PGG), 2021 WL 3167708 (S.D.N.Y. July 27, 2021).

Tuzman, a Harvard alumnus and former Goldman Sachs banker, built KIT Digital into an important player in the multiscreen video management and delivery market. Amanat was an investor in media, finance and technology companies, including the studio behind the “Twilight” movie franchise.

After the schemes unraveled, Tuzman was arrested in September 2015 in Colombia where he spent 10 months in gruesome conditions before being extradited to the United States. At Tuzman’s sentencing earlier this month, Judge Gardephe explained he did not want to order additional jail time because “the risk associated with sending Mr. Tuzman back to prison, the risk to his mental health, is just too great.” According to Mr. Tuzman, he endured horrific conditions including five months in solitary confinement and was raped at knifepoint. He was extradited to the United States in 2017. See Andrew Ross Sorkin, Entrepreneur, Charged in U.S., Recounts Abuse in Colombia Prison (NYT Sept. 25, 2017).

The case is United States v. Tuzman & Amanat, No. 15 CR. 536 (PGG), 2021 WL 1738530 (S.D.N.Y. May 3, 2021), reconsideration denied, No. 15 CR. 536 (PGG), 2021 WL 3167708 (S.D.N.Y. July 27, 2021).

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Stephen Selbst

Stephen Selbst is the co-chair of Herrick’s Restructuring & Finance Litigation Group. He has more than 30 years of experience representing debtors, creditors, official committees, distressed investors and asset purchasers in bankruptcies and out-of-court restructurings. Stephen advises clients from a wide range of…

Stephen Selbst is the co-chair of Herrick’s Restructuring & Finance Litigation Group. He has more than 30 years of experience representing debtors, creditors, official committees, distressed investors and asset purchasers in bankruptcies and out-of-court restructurings. Stephen advises clients from a wide range of industries, including financial services, telecommunications, government agencies and real estate. A skilled commercial litigator, Stephen also has significant experience in district and state courts, where he regularly represents clients in separate litigation arising out of bankruptcy.  He also advises clients on structured finance and derivative transactions.

He is a frequent lecturer on bankruptcy and restructuring topics and has published articles and book chapters on bankruptcy-related topics. He has been frequently quoted in newspaper articles on insolvency related topics and has appeared on CNBC.

Gabrielle Fromer

Gabrielle Fromer is a litigation associate in Herrick’s Restructuring & Finance Litigation Group, where she focuses her practice on bankruptcy and financial restructuring, complex commercial litigation, real estate disputes, and white collar criminal defense and investigations.

Gabrielle has done substantial pro bono work…

Gabrielle Fromer is a litigation associate in Herrick’s Restructuring & Finance Litigation Group, where she focuses her practice on bankruptcy and financial restructuring, complex commercial litigation, real estate disputes, and white collar criminal defense and investigations.

Gabrielle has done substantial pro bono work and helped to bring The Door’s Special Immigrant Juvenile Status Project to Herrick, assisting undocumented youth achieve this status in Family Court and later petition U.S. Customs and Immigration. Additionally, Gabrielle is an active contributor to the City Bar Justice Center’s COVID-19 Small Business Legal Clinic, advising small business owners on real estate and bankruptcy related issues.

Prior to joining Herrick, Gabrielle worked as an Assistant District Attorney in the Trial Division of the Bronx County District Attorney’s Office where she conducted misdemeanor trials and presented felony matters to the grand jury.

While attending law school, Gabrielle served as the Senior Symposium Editor of the Georgetown Journal of Gender and the Law, and worked as a student defense attorney through Georgetown’s Criminal Justice Clinic. As a law student, Gabrielle held internships with the New York County District Attorney’s Office and the Department of Justice. Additionally, Gabrielle summered as a judicial intern for U.S. Magistrate Judge Kevin Nathaniel Fox of the U.S. District Court for the Southern District of New York.