EDITOR'S NOTE, NOV. 18: A lawyer representing Joseph Rallo issued the following statement: "On October 18, 2024, all claims asserted against Joseph Rallo in the civil lawsuit filed were dropped, and beyond an initial legal filing, no evidence was ever presented to support or substantiate the allegations. Mr. Rallo vehemently denies any allegation of wrongdoing, mismanagement, or drug/alcohol-related issues.”
An emotionally charged dispute between investment bank EF Hutton's co-founders, marked by charges of substance abuse and corporate wrongdoing, has spilled into a second lawsuit.
Fired EF Hutton CEO Joseph T. Rallo, accused in a recent lawsuit of stealing millions from the firm by faking expense reports, has now filed a complaint himself, contending the investment bank's current CEO and general counsel unlawfully ousted him in a "coup d'etat."
Accused of Stealing Millions
EF Hutton, in a lawsuit filed last week in the commercial division of the New York Supreme Court in New York County, alleges Rallo stole millions from the firm by falsifying his expense reports and caroused at a "gambling den" during the workday.
Rallo, firing back in a lawsuit filed Monday in Delaware's Court of Chancery, describes EF Hutton's complaint as "frivolous" and "meritless," and alleges his former business partner, now the firm's CEO, acted out of personal and professional jealousy.
Since casting Rallo out, firm co-founder David Boral and its general counsel "have engaged in further misconduct in an attempt to solidify their position, including defaming Rallo to employees and making entirely false claims that he is broke, suffers from addiction issues, and that it was he who, in fact, tried to oust Boral.
"Such misstatements are the ultimate form of 'gaslighting,' as it is Boral who suffers from addiction problems. His instability and erratic conduct, which now proceed unchecked by Rallo, continues to place the company in severe jeopardy," Rallo's complaint alleges.
EF Hutton LLC and EF Hutton Partners contend Rallo used company funds for extravagant personal expenses, writing at least some off on his tax return despite the reimbursements, and has a "severe gambling problem."
Among other allegations in its lawsuit, the firm reports 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 firm also alleges Rallo fraudulently prompted it to reimburse him for private jets for family vacations, tickets for premium seats at sporting events he attended with his bookie and intravenous drips to treat hangovers from excessive alcohol and drug usage, among other personal expenses.
Claim: Old and New Jealousy
Rallo, who co-founded the firm and helped revive a once-storied Wall Street brokerage's name, alleges in his lawsuit that Boral — described as his formerly trusted business partner — now holds the CEO post unlawfully.
EF Hutton Holdings and the firm's general counsel, Ryan Whalen, also are named as defendants. Rallo contends the firm filed its lawsuit in New York last week as a preemptive move to discredit him, in anticipation of his complaint.
Rallo alleges Boral's "substance abuse and jealousy of Rallo" strained their relationship and led to the purported coup.
He cites a 2022 weekend that he and his wife hosted at their family home, in which "Boral's wife remarked that Rallo, and not her husband, was clearly the 'Alpha' at EF Hutton. Boral became extremely agitated over this and retired early to bed in a foul mood."
Rallo, comparing his upbringing to Boral's, contends this "jealousy" started years earlier.
"Rallo developed a respect for Boral and his drive and determination to make something of himself in the face of a difficult childhood. Rallo grew-up in a tight-knit, middle class Maryland family, whereas Boral grew up raised by a single mother, and with an absentee father abusing, and selling, narcotics," the complaint alleges.
"After the death of his mother, Boral gravitated toward Rallo and his family and began developing a close relationship with Rallo's parents. It was not uncommon for Boral to contact Rallo's parents directly, particularly Rallo's father, for advice.
"At times, however, Boral made clear he was jealous of Rallo's tight-knit family — a jealousy that would rear its head again in the years to come," Rallo's complaint alleges.
