Whistleblower employee David Kovacs was terminated and then defamed for
refusing to participate in the scheme
Since Kovacs' termination, AudioEye is trading
400% higher than at any time in the last two years
NEW
YORK, June 26, 2024 /PRNewswire/ -- The law firm
of Walden Macht & Haran LLP filed a lawsuit with the
Supreme Court of the State of New
York today on behalf of former AudioEye executive
David Kovacs against AudioEye, the
company's, Chief Executive Officer David
Moradi and Executive Chairman, Dr. Carr Bettis, amongst others. Kovacs was
wrongfully terminated after refusing to participate in a stock
manipulation scheme developed by Moradi and supported by
Bettis.
The lawsuit alleges that the stock manipulation
scheme was initiated after Kovacs' termination. AudioEye is trading
approximately 400% higher than at any time in the last two years on
substantially higher trading volume – substantially outpacing the
performance of the S&P 500 and many industry peers. This
irregularly high share price and volume are based on extremely
limited publicly available information, suggesting a nefarious
scheme is in play.
Kovacs began working with AudioEye – a provider of website
accessibility compliance services to businesses – in January 2014 as an independent contractor. He
became a Strategic Advisor in October
2016 and Vice President of Business Development in
April 2019. He held the position
until January 17, 2024, when he was
terminated for refusing to participate in Moradi's stock
manipulation scheme.
Kovacs also co-founded the video game maker First Contact with
Moradi, who served as Executive Chairman. In a late August 2023 phone call, Moradi instructed Kovacs
to download a virtual private network (VPN) to enable him to write
and leave fake reviews for First Contact's latest game, Firewall
Ultra. At this time, First Contact was engaged with Bank of America
and in the process of being sold. During the same phone call,
Moradi directly instructed Kovacs to use a VPN to conduct,
according to the lawsuit:
"market manipulation and insider trading
activities for AudioEye, including by receiving non-public material
information about AudioEye from Moradi, and providing it to wealthy
acquaintances before such information was released to the public.
Moradi explained that inducing these individuals to purchase
AudioEye's stock would attract additional investors and pump up the
price of AudioEye's shares before the information at issue was
released to the general public…after the information was released
to the general public, the price of AudioEye shares would further
increase to levels they would not have reached without the initial
pumping up of the price to an inflated price bases through the
insider trading."
The lawsuit goes on to state that under Moradi's scheme, once
the share price was elevated, "Moradi and his co-conspirators could
sell their shares of AudioEye's stock at higher prices than they
otherwise could have sold them for.".
In a subsequent call, Kovacs made clear he did not want to do
anything illegal, upsetting Moradi, who said, "Buddy, if you're not
going to help with this, maybe you won't get your equity in First
Contact, and maybe I won't feel like supporting your health
benefits or your role at AudioEye anymore."
Per the lawsuit, once it became clear to Moradi that Kovacs
would not participate in the scheme, during an August 28, 2024, phone call, Moradi said, "I am
the law, I have the best lawyers in the world, I will never be in
trouble, Buddy. I'm worth $200
million, and you're a f*cking employee at AudioEye working
for me." In the same phone call, Moradi said: "First, do these
reviews [for First Contact], then I need you to help me get
AudioEye's stock up." Kovacs once again stated he would not
participate in the AudioEye scheme, enraging Moradi again, who –
according to the lawsuit – said:
"I will not support your healthcare and your
salary, you mother**cker, earn your keep. You do what I say and
when I say it. Respect your elders, mother**cker. You will do the
reviews and you will do what I tell you to do with AudioEye's
stock. Do what I tell you and set it [the VPN] up now."
Throughout Moradi's pressure campaign, Kovacs regularly spoke
with AudioEye Chairman Bettis. In a late August 2023 phone call, Kovacs told Bettis that
Moradi had asked him to do "things that were unethical and that"
made Kovacs uncomfortable. Bettis responded that Kovacs "must do
what Moradi had asked of him." Throughout these interactions,
Bettis regularly reminded Kovacs to follow Moradi's "instructions,
and if Kovacs didn't, Moradi was going to ruin Kovacs' life."
On November 13, 2023, Kovacs
emailed Brittani Morelli, Vice
President of Human Resources at AudioEye, requesting a confidential
meeting and asking Bettis to be present. After receiving the
request, Morelli informed Moradi and the meeting never took place.
On January 17, 2024, AudioEye
terminated Kovacs' employment, stating his services were no longer
needed, and in a subsequent email, general counsel James Spolar informed Kovacs that the
termination was "for cause." According to AudioEye, the "cause" was
Kovacs not being truthful about his work and educational history,
despite having worked with the company for nearly a decade and
having long-standing relationships with Moradi and Bettis.
According to the lawsuit, both accusations are demonstrably false,
and claiming otherwise is a clear case of defamation.
Per the complaint filed by Milton
Williams and Deanna Paul of
Walden Macht & Haran, Mr.
Kovacs informed the Securities and Exchange Commission (SEC) of the
stock manipulation scheme.
Milton Williams said,
"David Kovacs was terminated and
defamed because he refused to participate in David Moradi's illegal market manipulation
scheme."
Share Price and Trading Volume Timeline
- August 28, 2023, AudioEye closed
at $4.71, with 10,900 shares traded.
Its market cap was approximately $55,500,000
- November 13, 2023, AudioEye
closed at $4.11, with 14,100 shares
traded.
- January 17, 2024 – the day Kovacs
was terminated – AudioEye closed at $5.24 on 28,600 shares traded.
- As of May 29, 2024, AudioEye
closed at $25.59 with 536,200 shares
traded and an estimated market cap of $300,000,000
Biographies
David
Moradi is the CEO and largest shareholder of AudioEye and
the founder of Sero Capital. He previously helped fund
now-convicted criminal Martin
Shkreli's purchase of KaloBios (NASDAQ: KBIO) and served on
its Board of Directors. He has worked at both Pequot Capital and
Soros Fund Management.
David Kovacs is an investment
banker, private equity executive, venture capitalist, and
entrepreneur known for his futurist approach. He leverages
experience in both mature and emerging markets to restructure
institutions and develop new markets.
Kovacs began his career in 2003 as a Business Analyst at
Citigroup Global Markets and held positions at Blackstone Capital
Markets as an associate consultant, at the Hinduja Group as
Managing Director of Private Equity Investments and Strategic
Relationships, and at Fitch Learning as Head of Investment Banking
and Private Equity, Americas.
Kovacs was the Founder and CEO of Emmersive Entertainment, the
Managing Director at Audioeye, and the Head of Public Policy at
Humanigen. He also served on the technology transition committee
for New York City Mayor
Eric Adams and lectures at top
investment banks, private equity firms, sovereign wealth funds, and
government agencies.
Kovacs earned a Bachelor of Science in Economics and Finance
from the College of Staten Island,
City University of New York, and
attended Columbia University from 2003
to 2004.
Contact:
Frank De Maria
frank@purposefuladv.com
+1 347 647 0284
Elie Jacobs
elie@purposefuladv.com
+1 646 330 2585
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