Cloth is accused by Cook County investors of operating a Ponzi-style investment scheme that pays existing financiers with money collected from new ones.
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"He starts off with one entity with Canadian investors, and then they all get stiffed. And then he moves on to institutional investors, then they all get stiffed. Then he moves on to a third entity with American investors in Chicago, and then they all get stiffed. Then he moves on to a fourth entity, and he keeps on moving through the entities and using Canadian bankruptcies to stiff the investors," said attorney Alex Loftus.
Cloth most recently produced "Babylon" with Brad Pitt, and is a Hollywood staple, but in the class action lawsuit filed Tuesday in Cook County he and several so-called "Canadian compatriots" allegedly devised a scam to escape bankruptcy over the border and lax securities enforcement in Canada.
Loftus said Cloth targeted some wealthy North Shore residents with his "Hollywood accounting" methods that made Midwesterners easy targets.
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"So, with the movie funding investments, this doesn't work in California, where people actually understand how movie finance works. So, what the movie finance con-men do is they reach out to the Midwest and they get into the Midwest through brokers in the Chicago area," said Loftus.
Metro Chicago investors are said to have lost $35 million, while the class action alleges 100 victims are out $88 million to Cloth.
The I-Team has attempted to find Cloth in Canada and Miami, but we haven't found a working phone or a current attorney. The attorney for Cloth's alleged victims says he believes both the FBI and the Securities and Exchange Commission should be looking at criminal action in the case.