A New York court has found that the billionaire Reuben brothers were defrauded by a family friend of an old business contact who took $25 million of their money to invest in a Russian poultry business.
The judgment is the culmination of eight years of legal action by the Reubens over the investment into a fund run by Elliot Daniloff — who, according to testimony heard in court, was viewed by David Reuben as “a younger version of himself.”
David and Simon Reuben, who have combined net worth of $13.6 billion according to the Bloomberg Billionaires Index, made their first fortune in the take-no-prisoners world of metal trading in 1990s Russia, before building one of the world’s biggest portfolios of retail, office and residential properties.
David Reuben initially demurred when he was introduced to Daniloff, who was seeking an investment in his Russian poultry and grain business, United Meat Group, because he “no longer invested in Russia,” according to the judgment.
But eventually he agreed to invest $25 million — in part on the strength of Daniloff’s relationship with Reuben’s longstanding business partner, Arkadiy Orkin.
When Daniloff failed to repay the loan, the Reubens, through their company Bloomfield Investment Resources Corp., began legal action. Daniloff argued that, because the deal had been formally structured as an investment into a fund, it carried no guarantee of repayment.
However, the Reubens maintained that it had in fact been a short-term loan made to appear as a fund investment in order to conceal Reuben’s involvement given his high profile status, and to allow Daniloff to borrow more money from banks.
This agreement was made only orally, but the court upheld it. “According to Reuben, a contract was never signed in the majority of the business deals he had entered into in Russia. Instead, business agreements were entered into and honored on the strength of trust and confidence grounded on the bonds of family and friendship,” according to the judgment.
Daniloff was ordered to pay $18.5 million, the amount that remains unpaid after $6.5 million of repayments in 2015 and 2016, plus interest.
“We strongly disagree that I could in anyway deceive one of the world’s most well-known investors and are evaluating all options,” Daniloff said in an emailed statement to Bloomberg News.
(Updates with comment from Daniloff in final paragraph)
