Jim Chanos, the short seller who made his name and fortune with the downfall of Enron Corp., was sued by a partner who accused him of embezzling company funds for his personal gain and enriching his girlfriend in the method.
Conlon Holdings, which invested in Chanos & Co. in 2020, claims he used his firm, formerly often called Kynikos Associates, as a “piggy bank.” Chanos, who denies the allegations, closed his hedge funds at the top of last 12 months after nearly 4 a long time.
The lawsuit, filed in New York state court over the weekend, concerns $10 million in outstanding loans Chanos borrowed from his firm over greater than a decade. Conlon claimed Chanos “never intended to repay the firm, but instead used his power as a general partner to bankrupt the firm, reap the tax benefits of his financial machinations, and leave his partners empty-handed.”
The lawsuit also alleges that Chanos sold his luxury Miami condo – owned by Chanos & Co. – earlier this month for $17.8 million without informing his partners.
Chanos’ girlfriend, Crystal Conners, acted as a sales representative on the deal, which might have earned her $540,000 at a standard commission rate, the lawsuit says.
“In other words, Chanos not only sold the company’s property, but did so in a manner that allowed him to pay his girlfriend more than half a million dollars in money that did not belong to him,” the lawsuit states.
Conners didn’t immediately reply to messages looking for comment.
“Puzzling and unfounded”
In an interview, Chanos, 66, called the lawsuit “puzzling and baseless,” adding: “The facts will show that the company’s internal loan in question was repaid in 2021.”
Conlon, a Chicago-based firm led by Sean Conlon, alleged that Chanos attempted to reclassify capital contributions to the corporate as loan payments.
Brian Nichols, Chanos’ former chief financial officer, said in an affidavit filed with the lawsuit that his boss admitted on his 2022 tax return that the loan was still outstanding.
Conlon Holdings is looking for an injunction stopping Chanos from remitting the proceeds from the sale of the Miami condo, his removal as general partner of his firm and the appointment of a short lived receiver.
Chanos reached the peak of his fame when he shorted Enron in 2000, when the stock was a Wall Street darling. In the second half of 2001, revelations of accounting fraud sent investors fleeing, resulting in the corporate’s bankruptcy. Chanos emerged from the collapse as a star within the investment world.
In recent years, his investments have been less successful. A brief position in Tesla Inc. failed and Chanos announced last 12 months that he was winding down his funds. At the time, they were price lower than $200 million, in comparison with around $8 billion in 2008.
