LEXINGTON, Ky. _ Prominent Thoroughbred owner and breeder Ahmed Zayat is back in legal trouble, this time involving breeding rights to Triple Crown winner American Pharoah.
At an emergency hearing on Wednesday, Fayette County Judge Kim Bunnell granted a motion ordering a receiver to seize control of Zayat Stables, including its horses.
The move came after a New York investment group filed a lawsuit in Lexington this week seeking at least $23 million dollars from Zayat, accusing him of selling breeding shares to 2015 Triple Crown and Breeders' Cup winner American Pharoah that were being used for collateral on outstanding debts.
Zayat and Zayat Stables are named as defendants in the lawsuit, which was filed Tuesday in Fayette County Circuit Court by MGG Investment Group, a New York-based investment firm, according to court records.
MGG had made multiple loans to Zayat Stables, which were being secured by all of Zayat's assets, horses and breeding rights, according to the lawsuit.
In the lawsuit, MGG accuses Zayat of misrepresenting those assets. The investment firm says Zayat defaulted on the millions in loans in September.
The firm asked for a receiver appointed to take over the day-to-day operations of Zayat Stables to protect its interest in the remaining horses, which are collateral, according to the suit. Bunnell granted that motion Wednesday.
American Pharoah, the 2015 Horse of the Year and 2014 Eclipse Champion, stands at Coolmore's Ashford Stud in Versailles for a private stud fee reportedly above $200,000. In 2019, according to The Jockey Club, American Pharoah was bred to 178 mares. He was champion U.S. freshman sire last year.
But MGG says that Zayat claims he is broke.
In an email to the investor in the lawsuit filing, Zayat said "I have pushed myself to the brinks of bankruptcy personally by using every dollar I have in America to fund the company until I find an investor to pay you in full." He indicated he planned to meet with Fasig-Tipton about a potential dispersal sale.
"On the basis of Mr. Zayat's communications with MGG it is clear that Zayat Stables and Mr. Zayat no longer have the resources necessary to continue to pay for the upkeep of their valuable equine assets that are MGG's Collateral. In fact, according to Mr. Zayat's January 12, 2019 email to MGG, in order to keep Zayat Stables in operation he has exhausted all of his savings and his business and personal bank accounts, and has resorted to seeking loans from friends, family, and even payday lenders," according to the suit. "Because Zayat Stables and Mr. Zayat lack the cash flow necessary to fund basic services, the Equine Collateral will at best diminish in value and at worst be permanently lost. If Zayat Stables or Mr. Zayat are unable to feed and care for the Equine Collateral, or make additional efforts to dispose of assets, the foreclosure process will simply take too long and the Equine Collateral will be lost."
Zayat sold off nine breeding shares to American Pharoah without telling the firm and hid $3.3 million in proceeds rather than using the money to pay back part of the loan as required, according to the suit.
Zayat also is accused of secretly selling off and hiding proceeds from the sale of assets related to other horses including Bodemeister, Eskendereya, American Cleopatra, Grammajo, Danyelli, Lezendary, Old Glory, Lemoona, Amandrea, Ash n' Em, Majid, El Kabeir, Zensational, Justin Philip and Prayer for Relief.
Zayat could not be reached for a response; his attorney did not immediately respond to a request for comment.
Zayat has been in legal trouble before. In 2009, Fifth Third Bank sued Zayat for $34 million, alleging that he had defaulted on loans. A deal was reached in 2010 in federal bankruptcy court in New Jersey to replay the loans as well as reorganizing Zayat Stables.
