The CEO of investment bank E.F. Hutton has been accused of improperly funneling millions into his own pocket by falsifying expense reports for, among other things, private planes to sporting events with his wife and bookmakermore than $1 million worth of restaurant meals and nearly $100,000 worth of intravenous drips “to treat hangovers caused by excessive alcohol and drug use.”
Joseph Rallo, who helped make Donald Trump’s Twitter clone publicTruth Social also allegedly stole corporate funds to make charitable contributions to his son’s school, lavish his wife with lavish stays at extravagant resorts, buy life insurance and live far beyond his already well-funded means, according to an explosive lawsuit filed by the firm and obtained by The Independent.
Rallo, 39, who the lawsuit says has a “serious gambling problem,” allegedly “squandered tens of millions of dollars” on losing investments and a fleet of exotic cars, including a Rolls-Royce, a Ferrari, a Lamborghini, a Bentley and a custom Mercedes Benz, a $5 million vehicle. Hamptons getaway and a $25 million penthouse in Manhattan. He regularly gambled between six and seven figures at a time and “routinely lost,” the suit claims.
Not only did Rallo steal from his employer, but his sordid lifestyle and “rampant spending” eventually began to encroach on his corporate duties, according to the suit. It says he frequented a gambling den his bookie ran in a residential apartment in New York Cityleaving the office in the middle of the workday “to play and have fun, and then returning to the office in a state that was not conducive or appropriate for a CEO of an investment bank.”
The suit says Rallo, who earned more than $18 million in 2023, “was committed to the facade of having great liquid wealth and was therefore unwilling to curb the personal spending necessary to continue his extravagant lifestyle,” the suit states. “This led Rallo to seek assistance to pay for personal expenses that he could no longer afford.”
E.F. Hutton executives and the legal team representing them in the lawsuit did not immediately respond to requests for comment Wednesday. Rallo did not respond to emails, text messages and voicemails seeking comment.
Rallo took the helm of E.F. Hutton in June 2021, when his company, Benchmark Investments, which was also known as Kingswood Capital Markets, changed its name pursuant to a licensing agreement that would make Hutton a division of Benchmark, the lawsuit says.
That year, the firm recorded about $150 million in investment banking and underwriting revenue, and Rallo’s gross revenue was “in excess of $26,000,000,” according to the suit. In 2022, E.F. Hutton’s revenue declined slightly, though he still recorded $88 million in revenue, the suit continues. As a result, Rallo’s compensation was reduced to $18 million, it continues. Last year, business declined further, with $58 million in revenue; Rallo’s gross revenue for 2023 was still “in excess of” $4 million, the suit says.
By early 2024, Rallo’s behavior began to raise suspicions, the suit says. He requested a $4 million raise from his $1 million base salary to $5 million, to which he “vaguely responded” that it was for “tax reasons,” the suit claims. The company agreed, as it knew Rallo owed the government money, the suit says. But, it claims, E.F. Hutton was operating at a loss at the time, “due, in part, to Rallo reimbursing himself hundreds of thousands of dollars per month in personal expenses that he claimed were business expenses.”
The worsening financial situation meant that Rallo’s co-chief executive had to make a capital infusion to cover Hutton’s payroll and expenses — something the suit says Rallo refused to do “despite receiving approximately $5,000,000 in compensation through May 2024.” When Rallo was told by the company’s finance department that his salary would have to be cut to $1 million because of the shortfall, he instead suggested that other employees’ salaries be reduced, the suit says. (Rallo relented when higher-ups flatly refused, it says.)
A year earlier, Rallo had borrowed $5 million from his business partner to close the purchase of a $25 million apartment on Manhattan’s Upper East Side, according to the lawsuit, which says Rallo He personally leaked the purchase to the mediaAt the same time, his extravagant spending, combined with his gambling losses, meant Rallo could not pay his taxes on time, the suit claims.
On May 6, 2024, the feds showed up at Rallo’s home with a search warrant and seized his cellphone as part of an investigation into securities fraud, wire fraud and conspiracy, the suit says. E.F. Hutton told Rallo he was being placed on administrative leave during that time, to which Rallo threatened to “burn (the company) down,” and has so far refused to cooperate with an internal investigation, according to the suit.
After Rallo left, E.F. Hutton reviewed his books and discovered the alleged scam, which not only misappropriated millions from the company but also claimed false business expenses as tax write-offs, the suit alleges.
He says the amounts paid to Rallo made up the bulk of the company’s overall reimbursements, and an audit found that Rallo billed the company for, in addition to the cars, jets and everything else, $260,000 in life insurance premiums; nearly $1.2 million in meals; more than $35,000 in donations to St. David’s, the private school his son attended; $22,000 in fine wines; $30,000 to stay in the Beverly Hills Hotel during a trip to Los Angeles with his wife and his bookie; $60,000 in round-trip private flights for the three of them; more than $40,000 in tickets for New York Knicks playoff games, which Rallo attended with his bookie; and beyond, according to the lawsuit.
“In addition, from May 2022 through May 2024, Rallo filed, approved, and reimbursed himself seventy-nine separate charges for ‘IV Doc“Totaling more than $90,000,” the suit states. “IV Doc is a New York-based company that advertises services for the treatment of hangovers caused by excessive alcohol and drug abuse. There was no legitimate business purpose for Rallo to incur business expenses of $90,000 or more for IV services.”
In total, Rallo improperly diverted $5,412,344 to himself, according to the lawsuit.
Since Rallo was suspended, the lawsuit says E.F. Hutton has received on average less than $22,000 per month in reimbursed business expenses, “approximately 90% less than the monthly reimbursed business expenses before Rallo went on administrative leave.”
Hutton is suing Rallo for civil conversion/theft, breach of fiduciary duty and unjust enrichment, and wants her money back, plus at least $3 million in damages.
