A prominent Silicon Valley investor is in a heated dispute with his former employer, one of the world’s largest asset managers, accusing him of fraud and attempted bribery.
In a lawsuit filed in California on Thursday, Josh Raffaelli, who was a fund manager at Brookfield Asset Management until the second half of last year, said the company abused investors’ funds by trying to make up for losses in other parts of its business.
The 100-page complaint is noteworthy in part because Mr. Raffaelli has a close connection with Elon Musk, the world’s wealthiest man. This relationship allows Mr. Raffaelli’s money to be put into Mr. Musk’s private company, a coveted opportunity in Silicon Valley. However, Mr Raffaelli’s allegation was that Brookfield improperly restricted the amount he invested in Musk on behalf of Brookfield clients.
Brookfield fired Raffaelli in December, shortly after he filed a complaint with the SEC, according to his lawsuit.
“Brookfield repeatedly betrayed the trust and best interests of its investors and then fired employees who challenged their behavior,” said Mr Rafaelli’s attorney Mark Mermelstein.
Brookfield represents the pension program, with government investment funds and financial institutions managing more than $1 trillion. Until January, its chairman was Canada’s new Prime Minister Mark Carney.
“There is absolutely no merit in this set of lawsuits, and these unfounded claims run counter to how Brookfield manages its business,” said Brookfield spokesman Kerrie McHugh. “We will vigorously defend this priceless lawsuit filed by disgruntled former employees.”
Mr. Raffaelli, 45, has a long career in Silicon Valley. In 2004, he became an analyst at Draper Fisher Jurvetson, a leading venture capital firm. At that time, Mr. Musk was rising in Silicon Valley. He recently founded Rocket Company SpaceX and made an early investment in Tesla, which will become the most valuable automotive company in the world.
According to 2009, Mr. Rafali was an observer for the Board of Directors of SpaceX and Tesla. LinkedIn profile. This has the right to attend confidential board meetings of the company. The distance from Mr. Musk also provides Mr. Raffaelli with the opportunity to invest his clients’ funds into the private businesses of billionaires. In Silicon Valley, this access makes Mr. Rafarley himself a popular commodity.
In 2017, he joined Brookfield and worked in his San Francisco office. His job is to manage a small number of funds that can invest clients’ money in technology companies. His base salary is $500,000, according to the lawsuit, but his boss told him that if his funds perform well, his total compensation could end up being tens of millions of dollars.
Brookfield has agreed to some extent to put his money into Raffaelli’s funds, meaning the company’s financial interests will be consistent with the financial interests of its clients. By 2024, his funds have co-managed more than $1.75 billion, which comes from pension funds, other investors and Brookfield itself.
Mr Raffaelli’s lawsuit and familiar with investing people said Raffaelli contacted Mr Musk’s track and arranged for his funds to invest in several of Mr Musk’s private businesses, including SpaceX, AI company XAI and Mr Raffaelli’s familiar with investing, including AI company XAI and a tunnel construction joint venture known as the boring company.
However, according to the lawsuit, Brookfield soon encountered financial problems. The COVID-19 pandemic hammered the commercial real estate industry, with Brookfield and its branches being the main investors. Brookfield Property Partners, a sister company of asset management companies, Losed about $2 billion 2020.
Raffaelli said in the lawsuit that this laid the foundation for Brookfield to start engaging in fraud.
Brookfield, in 2024, retracing hundreds of millions of dollars with Mr Raffaelli’s money with outside investors, the lawsuit says.
At about the same time, Brookfield also vetoed an unspecified “major foreign conglomerate” proposal that hopes to invest $100 million in a Raffaelli fund, calling the decision “unrefutable.”
The overall result is that Mr. Rafari invested less money than expected. This in turn limits potential gains for Brookfield external clients, the lawsuit says.
Rafari said he has been forced to reduce drastically – from $25 million to $5 million, which is the money he plans to invest in Mr. Musk’s Xai. (The lawsuit does not identify XAI by name, but people familiar with the investment confirm this.)
“It’s like getting rid of the opportunity to buy Facebook or Apple stock,” the lawsuit said. “The market expects this investment to be of no help, and that’s exactly what’s happening.” Over the past year, XAI’s estimated value has exceeded $80 billion.
According to his lawsuit, Brookfield told Mr Rafaley last summer that the company was considering combining its funds into a company called Pinegrove Capital Partners.
Mr. Raffaelli began researching Pinegrove, the asset manager that Brookfield owns primarily. He was shocked by what he found. He said Pinegrove exaggerated its capital level by more than $100 million, making it seem financially stronger than it actually is. Hundreds of agencies — including nonprofits and pensions for police and firefighters — were persuaded to fake pretending to entrust their money to Pinegrove, the lawsuit says.
Last October, Mr. Raffaelli reported his findings to Brookfield anonymously through the company’s whistleblower website. He said a few weeks later he filed a complaint with the SEC
Not long after, Mr. Raffaelli’s boss Anuj Ranjan told him that Brookfield’s CEO had signed the decision to fold its funds to Pine Grove. According to the lawsuit, Mr Ranjan admitted to Mr Raffaelli that the move was detrimental to his clients but was intended to support Pinegrove and save money for Brookfield. Mr. Raffaelli believes this is a violation of federal securities laws.
Mr Ranjan did not respond to a request for comment.
Investors in Mr. Raffaelli’s funds need to approve the Pinegrove merger. Brookfield pushed Mr Raffaelli to promote it, “because his credibility would resonate better among investors who trust him.”
Rafarley said Brookfield was willing to pay him “more than what he currently owe” in exchange for his help. He said the head of the company’s human resources department then sent him a spreadsheet showing that he should eventually reach $46 million under his existing compensation agreement.
Mr Raffaelli said he thought Brookfield had bribed him.
The following week, Mr. Raffaelli sent General Counsel to Brookfield Asset Management, who had previously sent to the SEC
“It’s uncomfortable for me, and I want to share it with you, and I feel I have an obligation to whistle some illegal acts,” he wrote.
Rafarley said he was fired nine days later.
