EF Hutton Says Its Fired CEO Stole Millions
A lawsuit alleges Joseph Rallo used firm money for lavish personal expenses, including IV drips to treat hangovers.
EF Hutton, an investment bank carrying the name of a storied Wall Street brokerage, alleges co-founder and dismissed CEO Joseph Rallo stole millions from the firm by falsifying his expense reports and caroused at a “gambling den” during the workday.
Rallo, whose LinkedIn profile identifies him as the current CEO, used company funds on extravagant personal expenses, writing at least some off on his tax return despite the reimbursements, and has a “severe gambling problem,” EF Hutton LLC and EF Hutton Partners allege in a lawsuit filed Tuesday in the commercial division of the New York Supreme Court in New York County.
EF Hutton also reports that federal agents seized Rallo’s phone at his home in May in connection with a U.S. attorney’s office investigation seeking records related to potential securities and wire fraud.
The firms soon learned that Rallo is a “subject” of the investigation, meaning his conduct falls within the scope of a grand jury probe, according to the complaint.
The investment bank, formerly Benchmark Investments, alleges Rallo’s gambling problem involves six- and seven-figure bets, and “he typically loses.” He has incurred several million dollars in gambling losses since 2021, including losses from wagers made through a bookie with an illegal sports book, the lawsuit states.
Rallo also frequented the bookie’s “gambling den” in a New York apartment during the workday “to gamble and carouse” and would return to the office “in a state that was not conducive or becoming of a CEO of an investment bank,” the firms allege.
“This lawsuit arises from Joseph Rallo’s egregious corporate theft and self-dealing” while EF Hutton CEO and EF Hutton Partners managing member, the complaint states.
The firms allege Rallo caused them to reimburse him for:
- Private jets and hotel rooms for family vacations
- Tickets for premium seats at sporting events he attended with his bookie
- Lavish personal meals
- Charitable contributions to his children’s private school
- Intravenous drips used to treat hangovers from excessive alcohol and drug usage.
While the damages amount will be presented at trial, these personal expenses exceeded several millions of dollars from January 2022 through May 2024, the firms allege.
Among other allegations, the plaintiffs allege that on May 21, when the firm’s general counsel called Rallo and told him he needed to go on administrative leave pending the U.S. attorney’s office investigation, the CEO threatened to “burn [EHF] down.”
They allege he lost control over his “extravagant lifestyle, poor investing and illegal gambling losses.”
Despite having gross compensation exceeding $44 million in 2021 and 2022, Rallo starting in 2021 “squandered tens of millions of dollars” on “ill-advised stock market and commodity investments” and several luxury cars, including a Rolls-Royce, Ferrari, Lamborghini and a customized Mercedes-Benz and Bentley, the firms allege.
The plaintiffs also cited luxury properties, including a $5 million summer home in East Hampton, New York, and a 5,600-square-foot apartment in New York City for over $25 million.
“Rallo was committed to the façade of having vast liquid wealth and thus unwilling to curb the personal spending necessary to continue his extravagant lifestyle,” the lawsuit alleges. ”This led to Rallo seeking help to pay for his personal expenses that he could no longer afford.”
At points in 2022 or 2024, the suit contends, Rallo was unwilling or unable to pay his share of capital contributions to the firm for payroll and other short-term obligations.
EF Hutton claims civil theft, breach of fiduciary duty and unjust enrichment, and seeks disgorgement of funds allegedly received, punitive damages and a declaration that Rallo was properly terminated from his CEO position.
Rallo didn’t immediately respond to a message sent through LinkedIn seeking comment.
EF Hutton handled the deal to publicly list former President Donald Trump’s social media venture, Trump Media & Technology Group, which owns his Truth Social platform, via a merger with a special purpose acquisition company, or SPAC.
The complaint, filed electronically, hadn’t yet been reviewed by the court clerk.
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