Preview
FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022
NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023
IN ARBITRATION BEFORE THE
AMERICAN ARBITRATION ASSOCIATION
Marcus Abrams, Clearwater Ventures, Inc.,
Lisa Abrams, and the Lisa Marie Abrams
Revocable Trust,
Case No.:
Claimants,
Statement of Claim
-against-
Russell Abrams, Sandra Abrams, and
“RussellCar and its related entities” defined in
the parties’ agreement as “Issuer”,
Respondents.
Claimants, Marcus Abrams (“Marc”), Clearwater Ventures, Inc., Lisa Abrams (“Lisa”),
and the Lisa Marie Abrams Revocable Trust (the “Trust”) (together the “Claimants” or
“Purchaser”) by their attorneys, LaSasso Law Group PLLC, bring the following Statement of
Claim against Russell Abrams (“Russell”), Sandra Abrams (“Sandra”) and “RussellCar and its
related entities” defined in the parties’ agreement as “Issuer” (together, “Respondents”) for
damages, injunctive, and equitable relief. In support thereof, Claimants allege as follows:
Nature of the Case
1. Claimants and Respondents are parties to a 2016 agreement whereby Claimants
purchased $1,460,000 of Issuer’s convertible debt, with a seven-year term, secured by Issuer’s
assets and a personal guaranty from Russell (the “Agreement”).
2. The Agreement requires Respondents to inter alia make minimum quarterly payments,
issue monthly financial statements and repay an amount equal to the investment and appreciation
at the end of term, subject to Claimants’ option to convert the debt to equity in Issuer on Most
Favored Nation terms.
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3. The Agreement also includes a personal guaranty requiring Russell to pay $1,000,000
within three years of the investment.
4. Respondents have not made any quarterly payments or provided any financial
statements, and Russell has breached his personal guaranty.
5. Moreover, Russell has breached his fiduciary duty as a trusted confidant and agent to his
brother and sister-in-law, Marc and Lisa, for his own personal gain by disavowing the payments
and the broader opportunity he promised Claimants, which induced them to make their
investment, and by lying to subsequent investors and potential investors that such an obligation
does not exist.
6. Claimants are entitled to (i) declaratory relief inter alia identifying each entity
constituting “Issuer,” as defined by the Agreement, which includes a web of inter-related entities,
including Aracar Group Holdings Corp., (ii) an equitable accounting of these related entities and
person, (iii) injunctive relief requiring Respondents to provide the required financial information
contemplated by the Agreement, (iv) an award of damages against Russell for breach of the
personal guaranty, and an award of damages against Respondents, along with arbitration costs,
attorney’s fees, and pre-judgment interest, (v) imposition of a constructive trust over the
proceeds of Claimants’ investment, and (vi) preliminary and final injunctive relief providing pre-
award attachment securing the final award in this proceeding.
Parties
7. Claimant Marcus Abrams is a natural person over the age of 18 years and residing in the
State of Connecticut, County of Fairfield.
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8. Claimant Clearwater Ventures, Inc. is a New York business corporation with an address
c/o S & E Azriliant, P.C., 36 West 44th St., Suite 1100, New York, New York, 10036.
Clearwater is owned and controlled by Marc.
9. Claimant Lisa Abrams is a natural person over the age of 18 years and residing in the
State of Connecticut, County of Fairfield.
10. Marc and Lisa are husband and wife.
11. Claimant The Lisa Marie Abrams Revocable trust is an independent, Generational
Skipping Trust created under the Laws of the State of Connecticut established on June 12, 2015
formed for the benefit of Lisa Marie Abrams and the children of Marc and Lisa. Lisa is the
trustee of the Trust.
12. Respondent Russell Abrams is a natural person over the age of 18 years, residing in New
York County. Russell has additional residences in Argentina and Uruguay. Russell is a founder
and the CEO of RussellCar Inversora SA and Aracar Group Holdings Corp. He is Marcus
Abrams’ elder brother and married to Sandra Piedrabuena Abrams.
13. Respondent Sandra Abrams, also known as Sandra Abrams and Sandra Piedrabuena
Abrams (“Sandra”), is a natural person over the age of 18 years residing in New York County.
Sandra has additional residences in Argentina and Uruguay. Sandra is a founder and officer of
RussellCar and Aracar. At a various times, Sandra has held herself out as the President of
RussellCar.
14. Respondent “RussellCar and its related entities” defined in the parties’ agreement as
“Issuer”, is a group of entities defined in the Agreement to include “all subsidiaries, directly and
indirectly owned (or subsequently created legal structures) created to take advantage of the
economic benefit related to the growth and expansion of RussellCar” (Ex. A). Along with
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Russell and Sandra, a non-exhaustive list of those entities, including the “Aracar” entities created
as a rebranding of “RussellCar’s” lending business, is set forth in Appendix 1 and incorporated
by reference herein.
Jurisdiction & Venue
15. The Agreement was entered into in February 2016 and its terms are reflected in a series
of emails (Exs. B, C and D) and a Purchase Memorialization dated July 18, 2016 (Ex. A) which
provides “in the event that a dispute arises, the parties will endeavor to reasonably resolve the
dispute…[and] the parties agree to enter binding private arbitration in the event any dispute
cannot be resolved between the parties.”
16. Respondents breached the Agreement by failing to make quarterly payments, failing to
provide financial information, and failing to honor the personal guaranty to pay the sum of
$1,000,000 within three years.
17. On February 7, 2020, Claimants served upon Russell, Sandra, Aracar Group Holdings
Corp., and Russellcar, a Notice of Intent to Arbitrate pursuant to CPLR § 7503(c) (Ex. E). No
application objecting to or requesting a stay from arbitration was made.
18. Claimants, Russell, and RussellCar entered into an agreement dated February 25, 2020
for submission of the dispute to arbitration before the American Arbitration Association under its
commercial rules (Ex. F) (the “Arbitration Agreement”).
19. As part of this Arbitration Agreement, the arbitrator is empowered to resolve the parties’
claims and determine which entities or parties constitute “Issuer”, each of which shall be joined
as parties to the Arbitration Agreement nunc pro tunc (Ex. F).
General Allegations
A. Solicitation, Representations, & Initial Funding
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20. Russell is Marc’s older brother and assumed a father-figure role in Marc’s life following
their father’s abandonment of the family during Marc’s childhood. Russell and Marc shared a
relationship of trust and confidence, and Marc relied on Russell’s guidance from sports, to life, to
investments.
21. This relationship of trust continued when Marc and Russell worked closely together from
2000 to 2009 at Titan Capital Group 1, an investment management business creating and running
hedge funds based in New York.
22. Given the brother’s close relationship, Russell, Sandra, Marc, Lisa and their young
children were in close contact and spent time together as an extended family.
23. Until recently, Marc never had a reason to doubt his brother and sister-in-law’s loyalty.
24. In 2007, Russell and his Argentinian wife Sandra started a business, which focused on
opportunities in Argentina and greater Latin America.
25. At the core of the opportunity set was that Russell and Sandra had a strong cash flowing
business that needed working asset expansion, which in turn would allow for them to provide
Argentina with affordable credit in the form of car loans, while at the same time dealing with the
inflation-issue.
26. Originally, Russell and Sandra referred to their business as “RussellCar,” even though in
actuality “RussellCar” was not any one specific legal entity. Rather, “RussellCar” was a label for
a broad web of existing and yet to be formed future entities focused on taking advantage of the
opportunities related to their broad vision for the growth and expansion of their business
throughout Latin America.
1
Although Titan ceased to operate as an investment manager in or about 2015, the purpose for
which it was created, Titan Capital Group entities remain active and are utilized by Sandra and
Russell as alter egos for their various dealings and to facilitate payments for the entities
constituting Issuer.
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27. Given the close family relationship, Russell and Sandra used their position of trust with
Marc and Lisa to repeatedly solicit an investment in their Latin American vision. In addition to
seeking a financial investment, just as with Titan, Russell wanted Marc to act as a marketing and
fundraising counterpart for his business.
28. However, Marc and Lisa were having cash flow problems. Indeed, in 2015 and early
2016, concerned about their ability to generate sufficient income from their investments to
provide for their family, Marc and Lisa were considering selling their home in Connecticut and
moving to an area with a lower cost of living.
29. During this time, Russell and Sandra had created a pooled investment fund called
Argentina Real Asset Partners, LP (“ARAP”), through which they sought to raise a total of $200
million dollars through convertible debt securities issued by RussellCar Inversora, S.A. Annexed
hereto as Ex. G are relevant provisions of the offering documents for Argentina Real Asset
Partners, LP.
30. The offering documents for ARAP indicate that the funds raised would be used both to
finance the acquisition of vehicles and taxi licenses and “such other investments in operating
businesses in Latin America” (Ex. G, page 1). The investment monies entitled the investor to
50% of earnings created by the investment and fixed interest returns at the rate of 6%.
31. Russell and Sandra approached Claimants to invest in their Latin American vision
through ARAP, however without a solution to their cash flow problems, this investment was a
nonstarter.
32. As such, Claimants chose not to make any investment on the terms being offered at the
time, and Russell and Sandra otherwise failed at closing their $200 million investment round.
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33. Following this failure, and in great need of a financial investment, Russell and Sandra re-
approached Claimants with a refurbished investment opportunity with more attractive investment
terms than they previously offered through ARAP-—which included inter alia minimum cash
flow payments.
34. In addition to minimum cash flows, the new deal provided for larger earnings (now 100%
of earnings from invested monies versus the 50% previously offered), quarterly payments,
significant information rights, and a personal guaranty from Russell of $1,000,000 within three
years.
35. Russell and Sandra leveraged their position of trust with Claimants and promised them
that the quarterly payments would be the solution to Claimants’ cash flow problems. Moreover,
the parties discussed having their children share a future together that would be funded by the
expansive growth plan for the company.
36. While the deal did contemplate an equity conversion option, Russell and Sandra’s motive
in providing such a rich cash flow opportunity to Claimants was Russell and Sandra’s desire to
keep as much equity as possible given the extensive growth plan they envisioned.
37. When Russell and Sandra insisted that an investment in their business would solve Marc
and Lisa’s cash flow problems, Claimants did not question their sincerity. Claimants relied upon
their close relationship and assurances from Russell and Sandra that the money would be safe
and payments would be made exactly as agreed.
38. Russell and Sandra represented that there was a significant growth plan to their taxi
business which included expansion into numerous other lines of business, including a lending
business. Every assurance was given that Claimants’ investment would have a tremendous
upside as the growth plan for their grand Latin American vision unfolded.
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39. After extensive solicitation by Russell and Sandra, Claimants agreed to invest up to
$1,464,234 in the convertible debt of “Issuer,” which the parties broadly defined as “RussellCar
and its related entities,” to capture the understanding that the business would expand beyond a
taxi business in Argentina into additional revenue streams throughout Latin American, including
the lending business, and require new operating businesses (Ex. A).
40. The investment was funded through a series of wire transfers from Claimants and a
distribution of Marc’s money held in trust by Russell and Sandra. The first wire, from Marc and
Lisa, in the amount of $200,000 was sent on February 2, 2016. The second wire, from the Trust,
in the amount of $500,000 was sent on February 3, 2016. The third wire, from the Trust, in the
amount of $300,000 was sent on April 6, 2016. On October 17, 2016, the final portion of the
investment was funded by way of disbursement of $460,000 from monies held in trust for Marc
by Russell and Sandra in a brokerage account under the name of UY Trading Ltd.
B. Terms of the Agreement
41. The parties entered into an Agreement whereby Claimants purchased convertible debt in
Issuer for a seven-year term with an option to convert the debt to equity in conformity with the
objectives of a Most Favored Nation provision. (Ex. A, Ex. C).
42. While the Agreement was reached based on the emails and discussions culminating with
the first wires in February 2016, the Parties further memorialized their understanding of the
Agreement with the Purchase Memorialization (Ex. A).
43. The key terms of the Agreement are summarized as follows:
a. purchase by Purchaser (the Claimants) of up to $1,464,234 of convertible debt issued
by Issuer (Ex. A);
b. the investment was to be utilized to purchase taxi licenses and equipment which
would exponentially grow the working fleet and form the needed basis for the growth
plan, which included lending (Exs. A, B, C, and D);
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c. accrual to Claimants of any appreciation of the price of the taxi licenses (Ex. B);
d. quarterly return on investment equal to 100% of earnings made by Issuer on the
invested monies in accordance with the “Quarterly Payment Calculation” (Ex. A,
section 1; Ex. B);
e. quarterly minimum cash payments from Issuer to Purchaser equal to the greater of
6% per annum or the Quarterly Payment Calculation (Ex. A, section 1);
f. Claimants’ option to forego some or all of their quarterly payments to reinvest these
monies and potentially increase the value of their conversion option (Ex. A, section
1);
g. payment at the end of the 7-year term of an amount equal tothe principal/cost basis of
the debt and monies reinvested plus the appreciation (Exs. A, section 3, B, C);
h. the option for Purchaser to convert the debt to equity within three years of the end of
the term pursuant to a Most Favored Nation provision (Ex. A, pages 1 and 2; Ex. C;
Ex. D); Claimants’ conversion option has a floor of five percent (Ex. A, section 2);
i. representations and warranties from Issuer, Russell and Sandra to provide extensive
information rights, inter alia, a monthly financial update and other investor
statements (Ex. A, section 1), market information, company information, and future
risks (Ex. A, pages 1 and 2); and
j. a personal guaranty from Russell of $1,000,000 in payments within three years that
would be booked for tax reasons as a return of principal (Ex. A, section 3; Ex. D).
Parties to the Agreement
44. The Agreement contemplates the purchase by Claimants, denoted in the Purchase
Memorialization as “Purchaser”, of debt issued by and backed by the assets of Respondents,
denoted in the Purchase Memorialization as “Issuer” (Ex. A).
45. “Issuer” is defined as “RussellCar and its related entities.” (Purchase Memorialization,
first paragraph). “Issuer” is further defined in the paragraph denoted “Parties” as follows:
The “transaction” herein described related to the issuance of debt backed by the
assets of the “Issuer” collectively referred to as RussellCar including all
subsidiaries, directly and indirectly owned (or subsequently created legal
structures) created to take advantage of the economic benefit related to the
growth and expansion of RussellCar, that the parties herein agree, is created by
this investment.
(Ex. A, page 1) (emphasis added).
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46. The identity of the legal entities which constitute “Issuer” are relevant for determining (i)
the entities liable to Claimants for breach of the Agreement, (ii) the holding companies into
which the debt is convertible, (iii) the actual amounts owed to Claimants per the “Quarterly
Payment Calculation” as defined by the Agreement (iv) the assets available for securing the debt
owed under the Agreement, and (v) the information rights provided for under the Agreement.
47. As detailed in Appendix 1, Exs. G, H, I, J, I, K, L, M, N, and herein, there are
numerous entities “directly and indirectly owned by RussellCar (or subsequently created legal
structures) created to take advantage of the economic benefit related to the growth and expansion
of RussellCar,” including the various Aracar-branded entities. As such, those entities constitute
“Issuer”.
48. As previously mentioned, although Russell and Sandra originally referred to their Latin
American business as “RussellCar,” in actuality “RussellCar” was not any one specific legal
entity. Rather, “RussellCar” was a brand label for a broad web of existing and yet to be formed
future entities focused on taking advantage of the opportunities related to Russell and Sandra’s
vision for the growth and expansion of their business throughout Latin America (see, e.g., Ex.
G).
49. At the time of the Agreement, in 2016, the primary holding company for “RussellCar”
was RussellCar Inversora, S.A. and its subsidiaries included, inter alia, Taxcorp, S.A., Crosstax,
S.A, Carcorp, S.A., and Russellcar S.R.L (Ex. G).
50. Initially, “RussellCar” focused on the acquisition, ownership and operation of taxicab
licenses, but the vision always contemplated expanding to provide financing, among myriad
other services within the industry (see, e.g., Exs. A, B, C, D, G, H, I, J, L, M, N, P) (i.e.,
advertising, partnerships with e-commerce companies, cross-selling of commercial insurance &
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maintenance package, vehicle financing, black car rental business, corporate fleet leasing &
administrative businesses).
51. Indeed, RussellCar’s physical taxicab business was just Phase 1 in a three-phase growth
strategy; RussellCar’s loan business was Phase 2.
52. Towards that end, in 2017, Russell and Sandra launched the “Aracar Group” to attract
investments to fund RussellCar’s loan business, which would extend vehicle financing to its
clients (see, e.g., Exs. H, J, L, M, and N).
53. In May 2017, Russell and Sandra told investors “Russellcar is creating an SME financing
facility for the purpose of extending credit to clients who will operate within RussellCar’s Fleet
Management Business.” (Ex. H, page 9).
54. To entice investors, the marketing materials state “RussellCar Combines A Leading
Local Operator With An Innovative Lending Process,” and outlines RussellCar’s “Growth
Strategy” to include numerous other lines of business in addition to the vehicle financing
business it was marketing (Ex. H, pages 8, 12, 22 (citing advertising, partnerships with e-
commerce companies, cross-selling of commercial insurance & maintenance package, vehicle
financing, black car rental business, corporate fleet leasing & administrative business)).
55. Similarly, a July 2017 RussellCar Aracar Group Investor Presentation (Ex. J) also
identified the loan business as a RussellCar venture, highlighting the following:
a. “RussellCar’s Robust Risk Management as a Key Differentiator in support of the
investment opportunity”;
b. “Loan Collateral Assets Never Leave the RussellCar Ecosystem”;
c. “RussellCar Cashflows Are Well-Protected”;
d. “RussellCar cash flows are indexed to inflation”;
e. “Mutually-Beneficial Lending Model for RussellCar & Borrowers”;
f. “RussellCar” Administration business operates vehicles in case of default.
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56. Indeed, the presentation lays out the RussellCar loan business plan as having already
“successfully completed” so-called “Phase One”:
a. “300+ fleet vehicles acquired”,
b. “Physical infrastructure fully developed”,
c. “350+ employees in New York and Buenos Aires”,
d. “Fleet technology implemented and deployed”,
e. “Financial and accounting systems in place”
57. However, while proclaiming to investors that RussellCar’s vehicle acquisition was the
critical first successful step in realizing the success of RussellCar’s loan business, Russell and
Sandra falsely represented to investors that this was done without Claimants’ debt financing.
58. Russell and Sandra’s concealment of Claimants’ debt speaks volumes regarding their
intent to dishonor the parties’ agreement for their own selfish gain. By concealing Claimants’
debt from future investors, Russell and Sandra would appear (i) wealthier, (ii) more successful,
and (iii) have more shares for themselves and to bargain with.
59. At that time, “RussellCar’s Fleet Management and Financing business” was going to be a
wholly-owned subsidiaries of the ARACAR Group, a planned holding company [that had not yet
been created] to be listed on a public exchange" (Ex. H, page 11).
60. By June 2018, the decision was made to operate RussellCar’s loan business through a
series of new and previously established affiliate entities, which the parties broadly and
collectively called “Aracar.” At that time, the investor documents stated that RussellCar’s
affiliate Aracar Financieria, S.A. would originate loans directly and through partners and that this
opportunity comes from 10 years of experience via RussellCar Inversora SA (Ex. I, pages 1-4).
61. The new structure—created to take advantage of the opportunities arising out of
RussellCar’s success, networks, vendors, relationships, and regulatory know-how—purported to
utilize yet another set of entities, some of which had not yet been created at the time of the
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offering. Aracar Group SPV I LLC and Aracar Group Holdings Corporation were formed in or
about 2017. Aracar Group SPV II LLC was formed in 2018 and Aracar Group SPV III LLC was
formed in 2020. Aracar SPV II LLC, for example, contemplated feeding investor money into a
Canadian Trust, which would pass it to an Argentinian Trust which would then in turn purchase
loans issued by Aracar Financiera, S.A., an affiliate owned entirely by Aracar Group Holdings
Corporation.
62. Notwithstanding the separation of the loan business from existing entities, the Aracar
offering documents continued to market the investment opportunity based on RussellCar’s self-
proclaimed success and experience in the taxi business in Argentina and detail the inter-
relationship and dependency between RussellCar-branded entities and the newly created Aracar-
branded entities (see, e.g. Ex. J, an investor presentation and Ex. I, relevant portions of a private
placement memorandum for Aracar SPV II LLC). 2
63. The 2017 and 2018 Aracar offerings and presentations (Exs. H, I, J, L, M, and N) clearly
demonstrate that the now “Aracar” loan business is simply a repackaging of the same broad
Latin American vision Russell and Sandra sold to Claimants’ in 2016 and marketed to new
investors in 2017 as “RussellCar”—to take advantage of the myriad opportunities Russell and
Sandra saw in Latin America (including the lack of affordable and accessible credit) for the
purpose of financing RussellCar affiliates with asset backed debt securities.
64. Notably, Russell and Sandra enlisted Marc’s help with their fundraising efforts for
“RussellCar/Aracar”. In this role, Marc marketed the vision for RussellCar’s asset-backed
lending business (that had been sold to he and Lisa) to prospective investors in order to attract
2
These documents, along with Exs. K, L, M, and N, are just a sampling of the evidence
reflecting that the “Aracar” entities are part of “Issuer”.
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additional financing. Only after meetings with the World Bank and other potential investors
failed to elicit further investment was the idea of rebranding the asset-backed lending
opportunity of “RussellCar” under a new subsidiary raised.
65. In consideration of the manner in which Russell and Sandra utilize separate entities for
raising money, holding assets, facilitating portions of the operating businesses, and routing
financing to customers of the operating businesses (lending), the Agreement was defined broadly
to capture the value of the vision and opportunity “to take advantage of the economic benefit
related to the growth and expansion of RussellCar” without regard to changes in corporate
structure or where monies were specifically deployed (Ex. A, page 1).
66. What Russell and Sandra now refer to as “Aracar” is contemplated by the Agreement,
reflected in the Purchase Memorialization, and each of the entities facilitating the Aracar
business falls within the definitions of “Issuer”.
67. Even, assuming arguendo, taking a narrow application of the definition of “Issuer,” the
equity and assets of “Aracar” are at least available to Claimants as security for the debt based on
both a plain reading of the “transaction” term of the Agreement (Ex. A, page 1) and equitable
theories of alter ego, veil piercing, constructive trust, and fraudulent conveyance of assets.
68. In addition to explicit references to RussellCar’s loan business (and the use of
RussellCar’s experience and intellectual property) throughout the investment documents,
according to Russell, “Aracar” was built using RussellCar resources and was funded by
Russellcar (Ex. K (“russellcar is funding aracar – where do you think the money for aracar is
coming from? later after aracar is funded it could pay a dividend or loan repayment to
russellcar”) and Ex. I, page 1 (“Indeed, Aracar’s ability to obtain the senior funding for our
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lending strategy is the direct result of the relationships and track record of RussellCar and
Aracar’s founders.”).
69. RussellCar and Aracar Group share executives, office space, and intellectual property.
The earlier, “RussellCar” branded entities, paid salaries for Aracar Group executives and
Aracar’s investor documents and advertised opportunity rely directly on the purported success of
the RussellCar business, infrastructure, and relationships.
70. The Aracar organization is simply a rebranding and expansion of the Latin America
opportunities originally offered to early investors that began with Russellcar Inversora, S.A. and
grew as contemplated by the Agreement, as demonstrated by the shared management, personnel,
office space, intellectual property, experience, intellectual property, experience base and other
resources.
71. Further illustrating the lack of separation between the companies, Russell and Sandra
have diverted funding intended for RussellCar’s fleet management business to entities within
Aracar for the loan business.
72. Indeed, to the extent RussellCar’s performance fell short of the promises made by Russell
and Sandra, this shortfall is inextricably linked to their diversion of resources including senior
personnel, management, attention, and relationships to developing the new lending business
under “Aracar”. This is in addition to other monies intended for RussellCar that Russell and
Sandra took for themselves to maintain the façade of their “wealth”.
Agreed Upon Returns & Minimum Cash Flow Payments
73. The Agreement between the parties set forth robust earnings and cash flow components.
The deal was mutually-advantageous to both parties: the deal would provide Marc and Lisa the
strong cash flows they required while allowing for Russell and Sandra to maintain more equity
than they would have otherwise kept in a straight equity deal.
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74. The Agreement entitles Purchaser to a quarterly return on Claimants’ investment equal to
100% of earnings received by Issuer on the invested monies pursuant to a “Quarterly Payment
Calculation” (Ex. B; Ex. A, section 1).
75. The Agreement further entitles Claimants to minimum quarterly cash payments from
Issuer to Purchaser equal to the greater of a minimum return of 6% per annum or the “Quarterly
Payment Calculation” (Ex. A, section 1).
76. The Purchase Memorialization defines the “Quarterly Payment Calculation” as “taking
the current percentage ownership”—which is based on the share of assets funded by Claimants
as a proportion of Issuer’s overall assets—and “multiplying it by the total gross revenue of the
company after subtracting out the operating expenses” (Ex. A, Section 1).
77. According to Section 1 of the Purchase Memorialization, only operating expenses
appropriate "for sustainability of the number of cars/units the purchaser’s interest represents” is
permitted in calculating the Quarterly Payment Calculation (Ex. A, Section 1). In other words,
the parties specifically negotiated that no officer salaries or other “overhead” would be included
in the calculation.
78. Apart from these definitions, Russell promised Claimants that the Quarterly Payment
Calculation would result in payments equal to or greater than 21.8% returns on the investment.
(Exs. B and D).
79. Russell forecasted even higher returns due to economies of scale, claiming that the
infrastructure for a larger fleet was already in place, there would be no additional fixed costs, the
cost per car would go down as the fleet size increased, and the addition of future lines of
business. Russell further represented that Issuer could obtain additional low-cost debt from local
banks and development banks, increasing the returns significantly.
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80. Russell promised that the taxi business and the roll out of RussellCar’s initial advertising
business alone would create a return to Claimants of $300,000 to $500,000 per year. To
demonstrate his confidence that Claimants would receive these cash flows, Russell personally
guaranteed $1,000,000.00 of those payments—or $333,333.33 per year, i.e. representing the
more conservative end of his projections.
81. Pursuant to the Agreement, Claimants’ have the option to forego some or all these
distributions to reinvest in the business and increase the value of their conversion option.
82. The payments are to be made no later than 25 calendar days after the end of each quarter
and the amount of any deductions for operating expenses are to be accounted for and listed on a
monthly investor statement furnished by Issuer (Ex. A, Section 1). Moreover, the Issuer shall
provide a monthly report, which details the ongoing account balances for the Purchaser.
83. No payments whatsoever have been made.
84. Although the quarterly returns and the corresponding quarterly minimum payments owed
to Purchaser continue to become due, Respondents state that they do not intend to make the
payments required under the Agreement and have repudiated all of their obligations.
85. As further detailed below, Respondents have not provided any of the required financials
for the various entities constituting Issuer. As such, Claimants require an order directing
Respondents to produce these items and an equitable accounting of the web of inter-related
entities that constitute “Issuer” to account for the quarterly payments due.
Russell’s Personal Guaranty of Payments
86. Russell personally guaranteed payments of $1,000,000 within three years (Ex. A, section
3; Ex. D).
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87. The first $1,000,000 of the investment was funded by three wire transfers: $200,000 on
February 2, 2016, $500,000 on February 3, 2016, and $300,000 on April 6, 2016. Not a single
payment was made to Claimants and accordingly the personal guaranty from Russell to
claimants became due as to $200,000 on February 2, 2019, an additional $500,000 on February
3, 2019, and the final $300,000 on April 6, 2019.
88. Russell has breached by failing and refusing to pay Claimants the $1,000,000.00 that he
owes under the guaranty.
Information & Reporting Obligations
89. Section 1 of the Purchase Memorialization provides that the “Quarterly Payment
Calculation,” amounts available for distribution, operating and capital reserves shall all be
accounted for and listed on the monthly investor statement provided to Claimants. (Ex. A, page
1-2, Section 1).
90. Additionally, pursuant to the paragraph “Representation and Warranty” on page 1 of the
Purchase Memorialization, the Agreement requires Issuer to periodically provide information
and disclosures to Purchaser:
“Issuer” warrants that it will provide information listed in Section 3 and that such
information shall be accurate to the best of issuer’s knowledge in all respects.
That the Issuer shall also always provide complete transparency in regard to the
financial books and records of the company and provide all past and future
audited financial statements (when possible). Issuer shall also proactively advise
the Purchaser on market trends and other non-tangible information that may in
any respect impact the value of the investment and or future prospects of the
company, either positive or negative.
(Ex. A, page 1).
91. Section 3 outlines the “Monthly Information to be provided,” which includes but is not
limited to market information, a monthly financial update and other monthly financial
statements, information regarding company assets, revenues and expenses, total cash-flow return,
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cumulative hold back amount, the amount available for quarterly distribution, and estimated
current account value. (Ex. A, section 3, pages 2-3).
92. Respondents have failed to provide the monthly financial update, investor statements,
financial books and records and other information called for by the Agreement.
93. Given that Issuer includes the broad web of RussellCar and Aracar-branded entities,
Claimants seek an order enforcing their information rights with respect to both brands of entities
and any other entities operating to deliver on the RussellCar growth plan contemplated by the
Parties’ Agreement and clearly articulated in the 2017 presentation materials (see Exs. H, J, L,
M, and N).
Conversion Option
94. The Agreement provides for conversion, at Purchaser’s option, to equity in Issuer at the
end of the seven-year term (Ex. A, page 1) or within three years thereafter (Ex. B).
95. The Parties agreed that Claimants could “convert [their] investment to own 5% of the
entire company (russellcar inversora), which includes the taxi administrator and any other
service providers we create that the taxi administrator will utilize.” (Ex. B). The 5% conversion
is a minimum to protect Claimants from dilution anticipated as the result of future investments.
(Ex. C, page 1 (“if there is no dilution it converts into 13% of the holding company”)).
96. Section 2 of the Purchase Memorialization contains a Most Favored Nations provision,
which states that “The Purchaser shall have the sole right to convert the investment into equity
shares equivalent in all respects to those held by Russell and/or Sandra Abrams or any other
investor in conformity with the objectives of a Most Favored Nation provision” (Ex. A)
97. At the end of the seven-year term, or within three years thereafter, Claimants have the
option to convert the investment into equity shares in Issuer (Exs. A, section 3, B, C). The
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conversion amount includes the initial cash investment, any reinvestment or monies held back
from distributions, and the value of the appreciation on the medallions (Exs. A, section 3, B, C).
98. Claimants have not exercised their conversion option.
99. Nonetheless, when Claimants have made demands for payments owed under the
Agreement, Russell’s responses have varied, sometimes falsely claiming that Marc already
converted Claimants’ debt into equity in Aracar Group Holdings Corp.
100. To be clear, the only shares of Aracar Group Holdings Corp. owned by any Claimant
herein are 6,500 shares of common stock issued to Marc on December 17, 2018. These shares
were issued to Marc as founder’s equity with a cost basis of zero in consideration for his work
developing the lending opportunity branded under “Aracar” (see Ex. O, Marc’s Aracar share
certificate and a March 5, 2020 email from John Ogle, an Aracar executive).
101. Had Claimants converted the debt at issue herein, each Claimant would be entitled to
equity in the appropriate entities constituting “Issuer”, not just Aracar Group Holdings Corp.,
and not just Marc. Claimants made no such election and Lisa, Clearwater, and the Trust do not
possess equity shares in any of the related entities constituting “Issuer”. Moreover, had such an
election been made, the share certificate would reflect the cost basis of the debt converted, not a
cost basis of zero.
102. What Russell’s false claims regarding Claimants’ alleged conversion do show, however,
is that Russell himself sees Aracar Group Holdings Corp., and all of the affiliated entities, as an
inextricable extension of RussellCar and part of “Issuer”. Indeed, although Russell has claimed
that Marc somehow already converted Claimants’ debt into Aracar, at other times, appearing to
acknowledge that this has not happened, Russell has attempted to pressure Claimants to elect the
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conversion. Still at other times, Russell has rejected making t
Preview
FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 IN ARBITRATION BEFORE THE AMERICAN ARBITRATION ASSOCIATION Marcus Abrams, Clearwater Ventures, Inc., Lisa Abrams, and the Lisa Marie Abrams Revocable Trust, Case No.: Claimants, Statement of Claim -against- Russell Abrams, Sandra Abrams, and “RussellCar and its related entities” defined in the parties’ agreement as “Issuer”, Respondents. Claimants, Marcus Abrams (“Marc”), Clearwater Ventures, Inc., Lisa Abrams (“Lisa”), and the Lisa Marie Abrams Revocable Trust (the “Trust”) (together the “Claimants” or “Purchaser”) by their attorneys, LaSasso Law Group PLLC, bring the following Statement of Claim against Russell Abrams (“Russell”), Sandra Abrams (“Sandra”) and “RussellCar and its related entities” defined in the parties’ agreement as “Issuer” (together, “Respondents”) for damages, injunctive, and equitable relief. In support thereof, Claimants allege as follows: Nature of the Case 1. Claimants and Respondents are parties to a 2016 agreement whereby Claimants purchased $1,460,000 of Issuer’s convertible debt, with a seven-year term, secured by Issuer’s assets and a personal guaranty from Russell (the “Agreement”). 2. The Agreement requires Respondents to inter alia make minimum quarterly payments, issue monthly financial statements and repay an amount equal to the investment and appreciation at the end of term, subject to Claimants’ option to convert the debt to equity in Issuer on Most Favored Nation terms. 1 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 3. The Agreement also includes a personal guaranty requiring Russell to pay $1,000,000 within three years of the investment. 4. Respondents have not made any quarterly payments or provided any financial statements, and Russell has breached his personal guaranty. 5. Moreover, Russell has breached his fiduciary duty as a trusted confidant and agent to his brother and sister-in-law, Marc and Lisa, for his own personal gain by disavowing the payments and the broader opportunity he promised Claimants, which induced them to make their investment, and by lying to subsequent investors and potential investors that such an obligation does not exist. 6. Claimants are entitled to (i) declaratory relief inter alia identifying each entity constituting “Issuer,” as defined by the Agreement, which includes a web of inter-related entities, including Aracar Group Holdings Corp., (ii) an equitable accounting of these related entities and person, (iii) injunctive relief requiring Respondents to provide the required financial information contemplated by the Agreement, (iv) an award of damages against Russell for breach of the personal guaranty, and an award of damages against Respondents, along with arbitration costs, attorney’s fees, and pre-judgment interest, (v) imposition of a constructive trust over the proceeds of Claimants’ investment, and (vi) preliminary and final injunctive relief providing pre- award attachment securing the final award in this proceeding. Parties 7. Claimant Marcus Abrams is a natural person over the age of 18 years and residing in the State of Connecticut, County of Fairfield. 2 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 8. Claimant Clearwater Ventures, Inc. is a New York business corporation with an address c/o S & E Azriliant, P.C., 36 West 44th St., Suite 1100, New York, New York, 10036. Clearwater is owned and controlled by Marc. 9. Claimant Lisa Abrams is a natural person over the age of 18 years and residing in the State of Connecticut, County of Fairfield. 10. Marc and Lisa are husband and wife. 11. Claimant The Lisa Marie Abrams Revocable trust is an independent, Generational Skipping Trust created under the Laws of the State of Connecticut established on June 12, 2015 formed for the benefit of Lisa Marie Abrams and the children of Marc and Lisa. Lisa is the trustee of the Trust. 12. Respondent Russell Abrams is a natural person over the age of 18 years, residing in New York County. Russell has additional residences in Argentina and Uruguay. Russell is a founder and the CEO of RussellCar Inversora SA and Aracar Group Holdings Corp. He is Marcus Abrams’ elder brother and married to Sandra Piedrabuena Abrams. 13. Respondent Sandra Abrams, also known as Sandra Abrams and Sandra Piedrabuena Abrams (“Sandra”), is a natural person over the age of 18 years residing in New York County. Sandra has additional residences in Argentina and Uruguay. Sandra is a founder and officer of RussellCar and Aracar. At a various times, Sandra has held herself out as the President of RussellCar. 14. Respondent “RussellCar and its related entities” defined in the parties’ agreement as “Issuer”, is a group of entities defined in the Agreement to include “all subsidiaries, directly and indirectly owned (or subsequently created legal structures) created to take advantage of the economic benefit related to the growth and expansion of RussellCar” (Ex. A). Along with 3 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 Russell and Sandra, a non-exhaustive list of those entities, including the “Aracar” entities created as a rebranding of “RussellCar’s” lending business, is set forth in Appendix 1 and incorporated by reference herein. Jurisdiction & Venue 15. The Agreement was entered into in February 2016 and its terms are reflected in a series of emails (Exs. B, C and D) and a Purchase Memorialization dated July 18, 2016 (Ex. A) which provides “in the event that a dispute arises, the parties will endeavor to reasonably resolve the dispute…[and] the parties agree to enter binding private arbitration in the event any dispute cannot be resolved between the parties.” 16. Respondents breached the Agreement by failing to make quarterly payments, failing to provide financial information, and failing to honor the personal guaranty to pay the sum of $1,000,000 within three years. 17. On February 7, 2020, Claimants served upon Russell, Sandra, Aracar Group Holdings Corp., and Russellcar, a Notice of Intent to Arbitrate pursuant to CPLR § 7503(c) (Ex. E). No application objecting to or requesting a stay from arbitration was made. 18. Claimants, Russell, and RussellCar entered into an agreement dated February 25, 2020 for submission of the dispute to arbitration before the American Arbitration Association under its commercial rules (Ex. F) (the “Arbitration Agreement”). 19. As part of this Arbitration Agreement, the arbitrator is empowered to resolve the parties’ claims and determine which entities or parties constitute “Issuer”, each of which shall be joined as parties to the Arbitration Agreement nunc pro tunc (Ex. F). General Allegations A. Solicitation, Representations, & Initial Funding 4 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 20. Russell is Marc’s older brother and assumed a father-figure role in Marc’s life following their father’s abandonment of the family during Marc’s childhood. Russell and Marc shared a relationship of trust and confidence, and Marc relied on Russell’s guidance from sports, to life, to investments. 21. This relationship of trust continued when Marc and Russell worked closely together from 2000 to 2009 at Titan Capital Group 1, an investment management business creating and running hedge funds based in New York. 22. Given the brother’s close relationship, Russell, Sandra, Marc, Lisa and their young children were in close contact and spent time together as an extended family. 23. Until recently, Marc never had a reason to doubt his brother and sister-in-law’s loyalty. 24. In 2007, Russell and his Argentinian wife Sandra started a business, which focused on opportunities in Argentina and greater Latin America. 25. At the core of the opportunity set was that Russell and Sandra had a strong cash flowing business that needed working asset expansion, which in turn would allow for them to provide Argentina with affordable credit in the form of car loans, while at the same time dealing with the inflation-issue. 26. Originally, Russell and Sandra referred to their business as “RussellCar,” even though in actuality “RussellCar” was not any one specific legal entity. Rather, “RussellCar” was a label for a broad web of existing and yet to be formed future entities focused on taking advantage of the opportunities related to their broad vision for the growth and expansion of their business throughout Latin America. 1 Although Titan ceased to operate as an investment manager in or about 2015, the purpose for which it was created, Titan Capital Group entities remain active and are utilized by Sandra and Russell as alter egos for their various dealings and to facilitate payments for the entities constituting Issuer. 5 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 27. Given the close family relationship, Russell and Sandra used their position of trust with Marc and Lisa to repeatedly solicit an investment in their Latin American vision. In addition to seeking a financial investment, just as with Titan, Russell wanted Marc to act as a marketing and fundraising counterpart for his business. 28. However, Marc and Lisa were having cash flow problems. Indeed, in 2015 and early 2016, concerned about their ability to generate sufficient income from their investments to provide for their family, Marc and Lisa were considering selling their home in Connecticut and moving to an area with a lower cost of living. 29. During this time, Russell and Sandra had created a pooled investment fund called Argentina Real Asset Partners, LP (“ARAP”), through which they sought to raise a total of $200 million dollars through convertible debt securities issued by RussellCar Inversora, S.A. Annexed hereto as Ex. G are relevant provisions of the offering documents for Argentina Real Asset Partners, LP. 30. The offering documents for ARAP indicate that the funds raised would be used both to finance the acquisition of vehicles and taxi licenses and “such other investments in operating businesses in Latin America” (Ex. G, page 1). The investment monies entitled the investor to 50% of earnings created by the investment and fixed interest returns at the rate of 6%. 31. Russell and Sandra approached Claimants to invest in their Latin American vision through ARAP, however without a solution to their cash flow problems, this investment was a nonstarter. 32. As such, Claimants chose not to make any investment on the terms being offered at the time, and Russell and Sandra otherwise failed at closing their $200 million investment round. 6 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 33. Following this failure, and in great need of a financial investment, Russell and Sandra re- approached Claimants with a refurbished investment opportunity with more attractive investment terms than they previously offered through ARAP-—which included inter alia minimum cash flow payments. 34. In addition to minimum cash flows, the new deal provided for larger earnings (now 100% of earnings from invested monies versus the 50% previously offered), quarterly payments, significant information rights, and a personal guaranty from Russell of $1,000,000 within three years. 35. Russell and Sandra leveraged their position of trust with Claimants and promised them that the quarterly payments would be the solution to Claimants’ cash flow problems. Moreover, the parties discussed having their children share a future together that would be funded by the expansive growth plan for the company. 36. While the deal did contemplate an equity conversion option, Russell and Sandra’s motive in providing such a rich cash flow opportunity to Claimants was Russell and Sandra’s desire to keep as much equity as possible given the extensive growth plan they envisioned. 37. When Russell and Sandra insisted that an investment in their business would solve Marc and Lisa’s cash flow problems, Claimants did not question their sincerity. Claimants relied upon their close relationship and assurances from Russell and Sandra that the money would be safe and payments would be made exactly as agreed. 38. Russell and Sandra represented that there was a significant growth plan to their taxi business which included expansion into numerous other lines of business, including a lending business. Every assurance was given that Claimants’ investment would have a tremendous upside as the growth plan for their grand Latin American vision unfolded. 7 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 39. After extensive solicitation by Russell and Sandra, Claimants agreed to invest up to $1,464,234 in the convertible debt of “Issuer,” which the parties broadly defined as “RussellCar and its related entities,” to capture the understanding that the business would expand beyond a taxi business in Argentina into additional revenue streams throughout Latin American, including the lending business, and require new operating businesses (Ex. A). 40. The investment was funded through a series of wire transfers from Claimants and a distribution of Marc’s money held in trust by Russell and Sandra. The first wire, from Marc and Lisa, in the amount of $200,000 was sent on February 2, 2016. The second wire, from the Trust, in the amount of $500,000 was sent on February 3, 2016. The third wire, from the Trust, in the amount of $300,000 was sent on April 6, 2016. On October 17, 2016, the final portion of the investment was funded by way of disbursement of $460,000 from monies held in trust for Marc by Russell and Sandra in a brokerage account under the name of UY Trading Ltd. B. Terms of the Agreement 41. The parties entered into an Agreement whereby Claimants purchased convertible debt in Issuer for a seven-year term with an option to convert the debt to equity in conformity with the objectives of a Most Favored Nation provision. (Ex. A, Ex. C). 42. While the Agreement was reached based on the emails and discussions culminating with the first wires in February 2016, the Parties further memorialized their understanding of the Agreement with the Purchase Memorialization (Ex. A). 43. The key terms of the Agreement are summarized as follows: a. purchase by Purchaser (the Claimants) of up to $1,464,234 of convertible debt issued by Issuer (Ex. A); b. the investment was to be utilized to purchase taxi licenses and equipment which would exponentially grow the working fleet and form the needed basis for the growth plan, which included lending (Exs. A, B, C, and D); 8 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 c. accrual to Claimants of any appreciation of the price of the taxi licenses (Ex. B); d. quarterly return on investment equal to 100% of earnings made by Issuer on the invested monies in accordance with the “Quarterly Payment Calculation” (Ex. A, section 1; Ex. B); e. quarterly minimum cash payments from Issuer to Purchaser equal to the greater of 6% per annum or the Quarterly Payment Calculation (Ex. A, section 1); f. Claimants’ option to forego some or all of their quarterly payments to reinvest these monies and potentially increase the value of their conversion option (Ex. A, section 1); g. payment at the end of the 7-year term of an amount equal tothe principal/cost basis of the debt and monies reinvested plus the appreciation (Exs. A, section 3, B, C); h. the option for Purchaser to convert the debt to equity within three years of the end of the term pursuant to a Most Favored Nation provision (Ex. A, pages 1 and 2; Ex. C; Ex. D); Claimants’ conversion option has a floor of five percent (Ex. A, section 2); i. representations and warranties from Issuer, Russell and Sandra to provide extensive information rights, inter alia, a monthly financial update and other investor statements (Ex. A, section 1), market information, company information, and future risks (Ex. A, pages 1 and 2); and j. a personal guaranty from Russell of $1,000,000 in payments within three years that would be booked for tax reasons as a return of principal (Ex. A, section 3; Ex. D). Parties to the Agreement 44. The Agreement contemplates the purchase by Claimants, denoted in the Purchase Memorialization as “Purchaser”, of debt issued by and backed by the assets of Respondents, denoted in the Purchase Memorialization as “Issuer” (Ex. A). 45. “Issuer” is defined as “RussellCar and its related entities.” (Purchase Memorialization, first paragraph). “Issuer” is further defined in the paragraph denoted “Parties” as follows: The “transaction” herein described related to the issuance of debt backed by the assets of the “Issuer” collectively referred to as RussellCar including all subsidiaries, directly and indirectly owned (or subsequently created legal structures) created to take advantage of the economic benefit related to the growth and expansion of RussellCar, that the parties herein agree, is created by this investment. (Ex. A, page 1) (emphasis added). 9 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 46. The identity of the legal entities which constitute “Issuer” are relevant for determining (i) the entities liable to Claimants for breach of the Agreement, (ii) the holding companies into which the debt is convertible, (iii) the actual amounts owed to Claimants per the “Quarterly Payment Calculation” as defined by the Agreement (iv) the assets available for securing the debt owed under the Agreement, and (v) the information rights provided for under the Agreement. 47. As detailed in Appendix 1, Exs. G, H, I, J, I, K, L, M, N, and herein, there are numerous entities “directly and indirectly owned by RussellCar (or subsequently created legal structures) created to take advantage of the economic benefit related to the growth and expansion of RussellCar,” including the various Aracar-branded entities. As such, those entities constitute “Issuer”. 48. As previously mentioned, although Russell and Sandra originally referred to their Latin American business as “RussellCar,” in actuality “RussellCar” was not any one specific legal entity. Rather, “RussellCar” was a brand label for a broad web of existing and yet to be formed future entities focused on taking advantage of the opportunities related to Russell and Sandra’s vision for the growth and expansion of their business throughout Latin America (see, e.g., Ex. G). 49. At the time of the Agreement, in 2016, the primary holding company for “RussellCar” was RussellCar Inversora, S.A. and its subsidiaries included, inter alia, Taxcorp, S.A., Crosstax, S.A, Carcorp, S.A., and Russellcar S.R.L (Ex. G). 50. Initially, “RussellCar” focused on the acquisition, ownership and operation of taxicab licenses, but the vision always contemplated expanding to provide financing, among myriad other services within the industry (see, e.g., Exs. A, B, C, D, G, H, I, J, L, M, N, P) (i.e., advertising, partnerships with e-commerce companies, cross-selling of commercial insurance & 10 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 maintenance package, vehicle financing, black car rental business, corporate fleet leasing & administrative businesses). 51. Indeed, RussellCar’s physical taxicab business was just Phase 1 in a three-phase growth strategy; RussellCar’s loan business was Phase 2. 52. Towards that end, in 2017, Russell and Sandra launched the “Aracar Group” to attract investments to fund RussellCar’s loan business, which would extend vehicle financing to its clients (see, e.g., Exs. H, J, L, M, and N). 53. In May 2017, Russell and Sandra told investors “Russellcar is creating an SME financing facility for the purpose of extending credit to clients who will operate within RussellCar’s Fleet Management Business.” (Ex. H, page 9). 54. To entice investors, the marketing materials state “RussellCar Combines A Leading Local Operator With An Innovative Lending Process,” and outlines RussellCar’s “Growth Strategy” to include numerous other lines of business in addition to the vehicle financing business it was marketing (Ex. H, pages 8, 12, 22 (citing advertising, partnerships with e- commerce companies, cross-selling of commercial insurance & maintenance package, vehicle financing, black car rental business, corporate fleet leasing & administrative business)). 55. Similarly, a July 2017 RussellCar Aracar Group Investor Presentation (Ex. J) also identified the loan business as a RussellCar venture, highlighting the following: a. “RussellCar’s Robust Risk Management as a Key Differentiator in support of the investment opportunity”; b. “Loan Collateral Assets Never Leave the RussellCar Ecosystem”; c. “RussellCar Cashflows Are Well-Protected”; d. “RussellCar cash flows are indexed to inflation”; e. “Mutually-Beneficial Lending Model for RussellCar & Borrowers”; f. “RussellCar” Administration business operates vehicles in case of default. 11 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 56. Indeed, the presentation lays out the RussellCar loan business plan as having already “successfully completed” so-called “Phase One”: a. “300+ fleet vehicles acquired”, b. “Physical infrastructure fully developed”, c. “350+ employees in New York and Buenos Aires”, d. “Fleet technology implemented and deployed”, e. “Financial and accounting systems in place” 57. However, while proclaiming to investors that RussellCar’s vehicle acquisition was the critical first successful step in realizing the success of RussellCar’s loan business, Russell and Sandra falsely represented to investors that this was done without Claimants’ debt financing. 58. Russell and Sandra’s concealment of Claimants’ debt speaks volumes regarding their intent to dishonor the parties’ agreement for their own selfish gain. By concealing Claimants’ debt from future investors, Russell and Sandra would appear (i) wealthier, (ii) more successful, and (iii) have more shares for themselves and to bargain with. 59. At that time, “RussellCar’s Fleet Management and Financing business” was going to be a wholly-owned subsidiaries of the ARACAR Group, a planned holding company [that had not yet been created] to be listed on a public exchange" (Ex. H, page 11). 60. By June 2018, the decision was made to operate RussellCar’s loan business through a series of new and previously established affiliate entities, which the parties broadly and collectively called “Aracar.” At that time, the investor documents stated that RussellCar’s affiliate Aracar Financieria, S.A. would originate loans directly and through partners and that this opportunity comes from 10 years of experience via RussellCar Inversora SA (Ex. I, pages 1-4). 61. The new structure—created to take advantage of the opportunities arising out of RussellCar’s success, networks, vendors, relationships, and regulatory know-how—purported to utilize yet another set of entities, some of which had not yet been created at the time of the 12 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 offering. Aracar Group SPV I LLC and Aracar Group Holdings Corporation were formed in or about 2017. Aracar Group SPV II LLC was formed in 2018 and Aracar Group SPV III LLC was formed in 2020. Aracar SPV II LLC, for example, contemplated feeding investor money into a Canadian Trust, which would pass it to an Argentinian Trust which would then in turn purchase loans issued by Aracar Financiera, S.A., an affiliate owned entirely by Aracar Group Holdings Corporation. 62. Notwithstanding the separation of the loan business from existing entities, the Aracar offering documents continued to market the investment opportunity based on RussellCar’s self- proclaimed success and experience in the taxi business in Argentina and detail the inter- relationship and dependency between RussellCar-branded entities and the newly created Aracar- branded entities (see, e.g. Ex. J, an investor presentation and Ex. I, relevant portions of a private placement memorandum for Aracar SPV II LLC). 2 63. The 2017 and 2018 Aracar offerings and presentations (Exs. H, I, J, L, M, and N) clearly demonstrate that the now “Aracar” loan business is simply a repackaging of the same broad Latin American vision Russell and Sandra sold to Claimants’ in 2016 and marketed to new investors in 2017 as “RussellCar”—to take advantage of the myriad opportunities Russell and Sandra saw in Latin America (including the lack of affordable and accessible credit) for the purpose of financing RussellCar affiliates with asset backed debt securities. 64. Notably, Russell and Sandra enlisted Marc’s help with their fundraising efforts for “RussellCar/Aracar”. In this role, Marc marketed the vision for RussellCar’s asset-backed lending business (that had been sold to he and Lisa) to prospective investors in order to attract 2 These documents, along with Exs. K, L, M, and N, are just a sampling of the evidence reflecting that the “Aracar” entities are part of “Issuer”. 13 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 additional financing. Only after meetings with the World Bank and other potential investors failed to elicit further investment was the idea of rebranding the asset-backed lending opportunity of “RussellCar” under a new subsidiary raised. 65. In consideration of the manner in which Russell and Sandra utilize separate entities for raising money, holding assets, facilitating portions of the operating businesses, and routing financing to customers of the operating businesses (lending), the Agreement was defined broadly to capture the value of the vision and opportunity “to take advantage of the economic benefit related to the growth and expansion of RussellCar” without regard to changes in corporate structure or where monies were specifically deployed (Ex. A, page 1). 66. What Russell and Sandra now refer to as “Aracar” is contemplated by the Agreement, reflected in the Purchase Memorialization, and each of the entities facilitating the Aracar business falls within the definitions of “Issuer”. 67. Even, assuming arguendo, taking a narrow application of the definition of “Issuer,” the equity and assets of “Aracar” are at least available to Claimants as security for the debt based on both a plain reading of the “transaction” term of the Agreement (Ex. A, page 1) and equitable theories of alter ego, veil piercing, constructive trust, and fraudulent conveyance of assets. 68. In addition to explicit references to RussellCar’s loan business (and the use of RussellCar’s experience and intellectual property) throughout the investment documents, according to Russell, “Aracar” was built using RussellCar resources and was funded by Russellcar (Ex. K (“russellcar is funding aracar – where do you think the money for aracar is coming from? later after aracar is funded it could pay a dividend or loan repayment to russellcar”) and Ex. I, page 1 (“Indeed, Aracar’s ability to obtain the senior funding for our 14 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 lending strategy is the direct result of the relationships and track record of RussellCar and Aracar’s founders.”). 69. RussellCar and Aracar Group share executives, office space, and intellectual property. The earlier, “RussellCar” branded entities, paid salaries for Aracar Group executives and Aracar’s investor documents and advertised opportunity rely directly on the purported success of the RussellCar business, infrastructure, and relationships. 70. The Aracar organization is simply a rebranding and expansion of the Latin America opportunities originally offered to early investors that began with Russellcar Inversora, S.A. and grew as contemplated by the Agreement, as demonstrated by the shared management, personnel, office space, intellectual property, experience, intellectual property, experience base and other resources. 71. Further illustrating the lack of separation between the companies, Russell and Sandra have diverted funding intended for RussellCar’s fleet management business to entities within Aracar for the loan business. 72. Indeed, to the extent RussellCar’s performance fell short of the promises made by Russell and Sandra, this shortfall is inextricably linked to their diversion of resources including senior personnel, management, attention, and relationships to developing the new lending business under “Aracar”. This is in addition to other monies intended for RussellCar that Russell and Sandra took for themselves to maintain the façade of their “wealth”. Agreed Upon Returns & Minimum Cash Flow Payments 73. The Agreement between the parties set forth robust earnings and cash flow components. The deal was mutually-advantageous to both parties: the deal would provide Marc and Lisa the strong cash flows they required while allowing for Russell and Sandra to maintain more equity than they would have otherwise kept in a straight equity deal. 15 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 74. The Agreement entitles Purchaser to a quarterly return on Claimants’ investment equal to 100% of earnings received by Issuer on the invested monies pursuant to a “Quarterly Payment Calculation” (Ex. B; Ex. A, section 1). 75. The Agreement further entitles Claimants to minimum quarterly cash payments from Issuer to Purchaser equal to the greater of a minimum return of 6% per annum or the “Quarterly Payment Calculation” (Ex. A, section 1). 76. The Purchase Memorialization defines the “Quarterly Payment Calculation” as “taking the current percentage ownership”—which is based on the share of assets funded by Claimants as a proportion of Issuer’s overall assets—and “multiplying it by the total gross revenue of the company after subtracting out the operating expenses” (Ex. A, Section 1). 77. According to Section 1 of the Purchase Memorialization, only operating expenses appropriate "for sustainability of the number of cars/units the purchaser’s interest represents” is permitted in calculating the Quarterly Payment Calculation (Ex. A, Section 1). In other words, the parties specifically negotiated that no officer salaries or other “overhead” would be included in the calculation. 78. Apart from these definitions, Russell promised Claimants that the Quarterly Payment Calculation would result in payments equal to or greater than 21.8% returns on the investment. (Exs. B and D). 79. Russell forecasted even higher returns due to economies of scale, claiming that the infrastructure for a larger fleet was already in place, there would be no additional fixed costs, the cost per car would go down as the fleet size increased, and the addition of future lines of business. Russell further represented that Issuer could obtain additional low-cost debt from local banks and development banks, increasing the returns significantly. 16 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 80. Russell promised that the taxi business and the roll out of RussellCar’s initial advertising business alone would create a return to Claimants of $300,000 to $500,000 per year. To demonstrate his confidence that Claimants would receive these cash flows, Russell personally guaranteed $1,000,000.00 of those payments—or $333,333.33 per year, i.e. representing the more conservative end of his projections. 81. Pursuant to the Agreement, Claimants’ have the option to forego some or all these distributions to reinvest in the business and increase the value of their conversion option. 82. The payments are to be made no later than 25 calendar days after the end of each quarter and the amount of any deductions for operating expenses are to be accounted for and listed on a monthly investor statement furnished by Issuer (Ex. A, Section 1). Moreover, the Issuer shall provide a monthly report, which details the ongoing account balances for the Purchaser. 83. No payments whatsoever have been made. 84. Although the quarterly returns and the corresponding quarterly minimum payments owed to Purchaser continue to become due, Respondents state that they do not intend to make the payments required under the Agreement and have repudiated all of their obligations. 85. As further detailed below, Respondents have not provided any of the required financials for the various entities constituting Issuer. As such, Claimants require an order directing Respondents to produce these items and an equitable accounting of the web of inter-related entities that constitute “Issuer” to account for the quarterly payments due. Russell’s Personal Guaranty of Payments 86. Russell personally guaranteed payments of $1,000,000 within three years (Ex. A, section 3; Ex. D). 17 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 87. The first $1,000,000 of the investment was funded by three wire transfers: $200,000 on February 2, 2016, $500,000 on February 3, 2016, and $300,000 on April 6, 2016. Not a single payment was made to Claimants and accordingly the personal guaranty from Russell to claimants became due as to $200,000 on February 2, 2019, an additional $500,000 on February 3, 2019, and the final $300,000 on April 6, 2019. 88. Russell has breached by failing and refusing to pay Claimants the $1,000,000.00 that he owes under the guaranty. Information & Reporting Obligations 89. Section 1 of the Purchase Memorialization provides that the “Quarterly Payment Calculation,” amounts available for distribution, operating and capital reserves shall all be accounted for and listed on the monthly investor statement provided to Claimants. (Ex. A, page 1-2, Section 1). 90. Additionally, pursuant to the paragraph “Representation and Warranty” on page 1 of the Purchase Memorialization, the Agreement requires Issuer to periodically provide information and disclosures to Purchaser: “Issuer” warrants that it will provide information listed in Section 3 and that such information shall be accurate to the best of issuer’s knowledge in all respects. That the Issuer shall also always provide complete transparency in regard to the financial books and records of the company and provide all past and future audited financial statements (when possible). Issuer shall also proactively advise the Purchaser on market trends and other non-tangible information that may in any respect impact the value of the investment and or future prospects of the company, either positive or negative. (Ex. A, page 1). 91. Section 3 outlines the “Monthly Information to be provided,” which includes but is not limited to market information, a monthly financial update and other monthly financial statements, information regarding company assets, revenues and expenses, total cash-flow return, 18 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 cumulative hold back amount, the amount available for quarterly distribution, and estimated current account value. (Ex. A, section 3, pages 2-3). 92. Respondents have failed to provide the monthly financial update, investor statements, financial books and records and other information called for by the Agreement. 93. Given that Issuer includes the broad web of RussellCar and Aracar-branded entities, Claimants seek an order enforcing their information rights with respect to both brands of entities and any other entities operating to deliver on the RussellCar growth plan contemplated by the Parties’ Agreement and clearly articulated in the 2017 presentation materials (see Exs. H, J, L, M, and N). Conversion Option 94. The Agreement provides for conversion, at Purchaser’s option, to equity in Issuer at the end of the seven-year term (Ex. A, page 1) or within three years thereafter (Ex. B). 95. The Parties agreed that Claimants could “convert [their] investment to own 5% of the entire company (russellcar inversora), which includes the taxi administrator and any other service providers we create that the taxi administrator will utilize.” (Ex. B). The 5% conversion is a minimum to protect Claimants from dilution anticipated as the result of future investments. (Ex. C, page 1 (“if there is no dilution it converts into 13% of the holding company”)). 96. Section 2 of the Purchase Memorialization contains a Most Favored Nations provision, which states that “The Purchaser shall have the sole right to convert the investment into equity shares equivalent in all respects to those held by Russell and/or Sandra Abrams or any other investor in conformity with the objectives of a Most Favored Nation provision” (Ex. A) 97. At the end of the seven-year term, or within three years thereafter, Claimants have the option to convert the investment into equity shares in Issuer (Exs. A, section 3, B, C). The 19 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 conversion amount includes the initial cash investment, any reinvestment or monies held back from distributions, and the value of the appreciation on the medallions (Exs. A, section 3, B, C). 98. Claimants have not exercised their conversion option. 99. Nonetheless, when Claimants have made demands for payments owed under the Agreement, Russell’s responses have varied, sometimes falsely claiming that Marc already converted Claimants’ debt into equity in Aracar Group Holdings Corp. 100. To be clear, the only shares of Aracar Group Holdings Corp. owned by any Claimant herein are 6,500 shares of common stock issued to Marc on December 17, 2018. These shares were issued to Marc as founder’s equity with a cost basis of zero in consideration for his work developing the lending opportunity branded under “Aracar” (see Ex. O, Marc’s Aracar share certificate and a March 5, 2020 email from John Ogle, an Aracar executive). 101. Had Claimants converted the debt at issue herein, each Claimant would be entitled to equity in the appropriate entities constituting “Issuer”, not just Aracar Group Holdings Corp., and not just Marc. Claimants made no such election and Lisa, Clearwater, and the Trust do not possess equity shares in any of the related entities constituting “Issuer”. Moreover, had such an election been made, the share certificate would reflect the cost basis of the debt converted, not a cost basis of zero. 102. What Russell’s false claims regarding Claimants’ alleged conversion do show, however, is that Russell himself sees Aracar Group Holdings Corp., and all of the affiliated entities, as an inextricable extension of RussellCar and part of “Issuer”. Indeed, although Russell has claimed that Marc somehow already converted Claimants’ debt into Aracar, at other times, appearing to acknowledge that this has not happened, Russell has attempted to pressure Claimants to elect the 20 FILED: NEW YORK COUNTY CLERK 02/24/2023 11:53 PM INDEX NO. 654992/2022 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 02/24/2023 conversion. Still at other times, Russell has rejected making t