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Giganews Sues Perfect 10 For $20 Million For Trying To Play 'Hide The Assets' After Jury Award

from the perfect-20 dept

If you're not familiar with Perfect 10 by now, it is a company that billed itself as a smutty porn magazine that was actually mostly in the far more immoral business of copyright trolling. Rather than peddling skin, Perfect 10 mostly peddled laughably frivolous copyright lawsuits against roughly everyone, managing in this process to suffer legal losses to Google, CCBill, Amazon, and Visa among others. One of those others was Usenet provider Giganews, which won big in its court battle with Perfect 10 to the tune of the latter being ordered to pay over $5 million in attorney's fees to the former. Perfect 10 immediately cried poor at that point, stating it didn't have the money to cover the award, leading the court to put its assets in receivership. At the time, Mike wrote:

In the most recent Perfect 10 case, we noted that Perfect 10 lost big time earlier this year. It had sued Usenet provider Giganews, but the court found that Perfect 10's legal arguments made no sense at all, and sided completely with Giganews. Most importantly, the court upheld the multimillion fee award that the court had dumped on Perfect 10 for filing such a bogus lawsuit. It turns out that Perfect 10 doesn't seem to have that kind of money, so all of its assets are now controlled by a court-appointed receiver.

Those assets were supposed to be sold off in order to pay the court ordered award to Giganews. According to a new lawsuit filed by Giganews against Perfect 10 not a single cent has been paid, with the porn company instead choosing to play a silly game of hide-the-assets in order to avoid having them sold off.

The claims center around an alleged conspiracy in which Perfect 10 transferred its funds and assets to Zada.

“As of now (over two years since the judgment), Perfect 10 has not voluntarily paid any amount of the judgment,” the complaint begins. “Instead, Perfect 10, through the unlawful acts of Zada and in conspiracy with him, has intentionally avoided satisfaction of the judgment through a series of fraudulent transfers of Perfect 10’s corporate assets to Zada’s personal possession.”

Norman Zada would be the owner of Perfect 10. The suit seeks $20 million for fraud and punitive damages, detailing how Zada made a habit since 2014, when the lawsuits including that against Giganews began to clearly go south for Perfect 10, of selling Perfect 10 physical assets for below-market sums of money and transferring company cash into his personal bank accounts. We're talking about millions of dollars in cash and assets moving around, as a court order to pay Giganews loomed over it all. This, to be as clear as possible, is not the sort of thing that the court looks favorably upon.

Giganews says that Perfect 10 transferred at least $1.75m in cash to Zada. Then, within weeks of the court ordering Perfect 10 to pay $5.6m in attorneys fees and costs, Giganews says that Zada “fraudulently transferred substantially all of Perfect 10’s physical assets” to himself for an amount that did not represent their true value. Those assets included a car, furniture, and computer servers.

Zada, for his part, has the following defense for himself on the record.

When Zada was questioned why the transfers took place, he admitted that “it would have been totally disruptive to have those [assets] seized” in satisfaction of the judgment. Indeed, the complaint alleges that the assets never moved physical location.

That's a fairly clear admission for defrauding the court with regard to its order to pay Giganews. Giganews is asking for the $1.75 million in cash that had been transferred and interest beginning from March of 2015. The fangs are clearly out, but one can hardly blame Giganews, which had to defend itself against what was clearly a frivolous lawsuit filed on behalf of a company that can't seem to figure out how to look anything other than shady in the extreme. To that end, Giganews is asking for another $20 million in punitive and exemplary damages. Here's hoping they get it.


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  • icon
    Ninja (profile), 20 Jul 2017 @ 12:40pm

    I couldn't help thinking that at some point Alan Cooper will pop up in some paper with a fake signature and we'll find out that Steele, Carreon and Heinsmeier's spirit are actually the owners of Perfect 10. Ahem.

    reply to this | link to this | view in chronology ]

  • icon
    That One Guy (profile), 20 Jul 2017 @ 1:57pm

    "Paying someone else would have negatively impacted our business, so we refused."

    When Zada was questioned why the transfers took place, he admitted that “it would have been totally disruptive to have those [assets] seized” in satisfaction of the judgment. Indeed, the complaint alleges that the assets never moved physical location.

    So the assets were left exactly where they were, they just 'changed hands' such that they belonged to someone who wasn't named in the lawsuit.

    You almost have to admire the sheer chutzpah of this slimeball, engaging in such blatant fraud upon the court and giving such a laughable excuse to try to justify it.

    Why yes, paying the court-ordered fines would be disruptive to your business, but that's just too damn bad. You were caught trying to abuse the system for financial gain and the judgement was meant to punish you for this. One can only hope that the judge involved is as furious as they should be by this blatant fraud and brings the hammer/gavel down hard.

    Even if it would certainly backfire I can't help but think about how hilarious it would be if, assuming they can manage to stay in business after this little stunt the next mark Perfect 10 goes after responds by simply pointing out that given paying Perfect 10 would be too much of a bother, and negatively impact their business so they refuse to do so. Somehow I don't imagine the excuse of 'Nah, that would harm our business' would be quite so acceptable.

    reply to this | link to this | view in chronology ]

    • icon
      Bergman (profile), 23 Jul 2017 @ 6:52pm

      Re: "Paying someone else would have negatively impacted our business, so we refused."

      Given that the company basically gave all its assets to a private citizen, I'm wondering if he paid taxes on his sudden windfall income.

      Perhaps the IRS would be interested in his financial records? Just think, he could lose his business, lose millions of dollars AND go to prison for income tax evasion!

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 20 Jul 2017 @ 2:06pm

    Here's to waiting for the $40 million judgement awarded to Giganews after Zada tries some more reshuffling to avoid the $20 million judgement being "disruptive".

    It's reshuffling and fraud all the way down, boys!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 20 Jul 2017 @ 2:12pm

    That name ...

    If only those that had this SOB realized the golden opportunity.

    Zorman Nada.

    Getting the Nada from the Zorman. It could be meme all on its own.

    reply to this | link to this | view in chronology ]

  • icon
    Hugh Jasohl (profile), 20 Jul 2017 @ 2:52pm

    IRS involvement

    I am not a lawyer, but I would assume that anytime someone transfers business assets into personal accounts, there is a great deal of paperwork involved. This guy seems to have just given an excuse for all of his personal assets to be seized pending accounting investigation for this fraud.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 20 Jul 2017 @ 2:52pm

    Out_of_the_blueballs just hates it when copyright law is enforced.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 20 Jul 2017 @ 2:55pm

    I highly doubt that the court will grant Giganews a bonus of $20 million. They won't even get anywhere close to that. they may get the original judgment and possibly a smaller amount but they think they can scam the court with a demand for an additional $20 million. My guess? They'll get less than five million, and maybe not even close to that. Giganews seems to be soaking this for all its worse and the court will smack them down for it.

    reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 20 Jul 2017 @ 3:13pm

      Re:

      ... seriously?

      I might buy the argument that Perfect 10 doesn't have $30 million to pay out and as such Giganews isn't getting it no matter what the judgement, but to argue that Giganews is somehow asking for too much is kinda ridiculous.

      Perfect 10 basically flipped the judge the bird by claiming to be broke such that they needed to sell off assets to cover the original ruling against them, then played a delightful game of 'oh we already sold that... to ourselves' in order to avoid even that.

      If anyone deserves getting smacked down it's the side that tried to avoid paying out their court-ordered fines in the most hilariously obvious asset-shuffle ever.

      reply to this | link to this | view in chronology ]

      • icon
        orbitalinsertion (profile), 20 Jul 2017 @ 8:08pm

        Re: Re:

        Aside from that, it the whole point is for it to be _punitive_. Everyone aims high anyway.

        P10 is still sending bogus infringement notices from their now entirely 100% illegal operation. Giga is doing a service here.

        reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 20 Jul 2017 @ 4:37pm

      Re:

      Maybe you should read more than just the title of the article next time. There's only one group scamming the court and it ain't Giganews.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 20 Jul 2017 @ 2:57pm

    Sure, someone running a barely legal business can move millions around without issue but I can't even deposit a check without my assets being rammed by the bank.

    reply to this | link to this | view in chronology ]

  • icon
    Mononymous Tim (profile), 20 Jul 2017 @ 3:29pm

    Indeed, the complaint alleges that the assets never moved physical location.

    Only because they wouldn't fit in the attic of his house.

    reply to this | link to this | view in chronology ]

  • icon
    DB (profile), 20 Jul 2017 @ 4:21pm

    Looking at the filing, the cash transfers are pretty damning .

    There are lots of ways to transfer other assets for much less than market value when you have control of the company.

    The touchstone for those transfers might be the vehicle. To transfer ownership, the title needs to be transferred. Most states really, including California, really don't like losing out on the tax revenue from vehicle sales. Typically for vehicles less than ten years old the declared sale price must be close to the "blue book" value (the state has its own tables).

    reply to this | link to this | view in chronology ]

  • icon
    That Anonymous Coward (profile), 20 Jul 2017 @ 4:33pm

    It couldn't happen to a nicer company that solely exists to abuse copyright in crazed attempts to profit.

    It's a pity that all the talking heads who claim piracy is ending the world as we know it, aren't willing to point out those copyright holders who are abusing their position and making them look even worse.

    reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 20 Jul 2017 @ 11:55pm

      Re:

      Doing so would be to admit that the law can be and is being abused and used for ill-intent, which would rather undercut the 'the law is great, and the only people that it impacts are those that deserve it' narrative they like to run with.

      reply to this | link to this | view in chronology ]

  • icon
    Bill Silverstein (profile), 20 Jul 2017 @ 4:47pm

    Corporate sheild

    I was thinking that there would be a corporate shield until he started co-mingling his and the company funds. So, either the funds are fraudulently transferred or the there is no corporate separation so that his personal assets are at risk.

    At the very least, I would think there should be an order to prevent transfer of his personal assets.

    reply to this | link to this | view in chronology ]

  • icon
    orbitalinsertion (profile), 20 Jul 2017 @ 8:10pm

    So... where the hell is the receiver in all this? Dissolve on the wind or something?

    reply to this | link to this | view in chronology ]

  • identicon
    David, 20 Jul 2017 @ 11:38pm

    So what's next?

    "Being in prison would have harmed my business, so I decided not to go."

    I have some suspicion that the court will not be overly amused with that kind of reasoning.

    reply to this | link to this | view in chronology ]

  • identicon
    Pixelation, 21 Jul 2017 @ 9:09am

    Keep digging!

    Please, Zada, Carreon. We need the entertainment.

    reply to this | link to this | view in chronology ]


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