Scooter Braun’s Company Files Suit Against Troy Carter Over Alleged $10M Loan Default

Scooter Braun’s Ithaca Management Holdings filed suit in Los Angeles Superior Court on Wednesday against Troy Carter, his wife and his company, Atom Factory, alleging fraud and breach after Carter allegedly failed to pay back a $10 million loan.  

The suit alleges Carter — who left his post as Spotify’s global head of creator services earlier this month — is in default of his obligation to pay back a loan secured under a June 3, 2016, promissory note in excess of $10 million, including outstanding principal, interest and other fees, according to documents obtained by Billboard.

Braun, who manages Ariana Grande and Justin Bieber, among others, is not mentioned as a plaintiff and his name never appears in the suit. However, sources tell Billboard that Ithaca is Braun’s $120 million investment fund that also acts as a holding company for his Scooter Braun Projects, as well as ownership interest in a number of music management companies. 

According to the suit, Carter put up Atom Factory’s Culver City, California, property as collateral to secure the note, and on or about Sept. 23, 2016, executed and delivered a deed of trust, assignment of leases and rents, and other documents to Ithaca. 

At the time the parties entered into the note, Carter, who is Lady Gaga’s former manager, and Atom Factory were involved in an arbitration with an unnamed party. According to the terms of the note, if AFACT (Carter’s LLC) settled the arbitration, AFACT had to pay Ithaca the cash proceeds received by Atom Factory from the arbitration minus expenses, including legal fees, or the amount due under the note, whichever was smaller.

The suit alleges that Atom Factory settled the arbitration in March 2018 without the consent of Ithaca, in violation of the terms of the note. Furthermore, the suit claims that AFACT committed tortious interference with a contract by transferring the settlement proceeds to unknown recipients and/or diverting the proceeds so that they were not received by AFACT, thereby not paying back Ithaca and breaching the agreement.

On Aug. 23, 2018, Ithaca sent written notice demanding AFACT pay in call all its obligations to Ithaca, but as of the filing, Ithaca had not received any money. 

In addition to the monies owned, Ithaca is also claiming it is entitled to judicial foreclosure on Atom Factory’s Culver City property, as well as any resulting legal fees.

After initially telling TMZ, which reported the lawsuit on Wednesday, that he didn’t borrow money from Ithaca, Carter then told TMZ early Thursday morning that he did owe Ithaca money and that the repayment amount was being negotiated when Ithaca filed the lawsuit.

Carter initially provided a long statement to Billboard, accusing Braun of damaging his reputation as one of a handful of black executives in the music business, but then asked that the statement not be used per the advise of his attorney.

Additional reporting by Hannah Karp.

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