Drake, OVO, Accused Of Ripping Off Investor & Now The SEC Is Involved

Drake is facing a significant financial issue following the sale of his OVO brand.

A Florida-based investment firm, A.R.I., has filed a 391-page court document asserting that OVO owes them over $5 million in unpaid obligations. They allege that the entire transaction with Authentic Brands Group and Vince was conducted without their notification.

A spokesperson for A.R.I. stated, “We received no portion of the transaction proceeds. Important information regarding the transaction and the treatment of our rights has still not been provided, and we will seek to obtain that information through the court process since OVO has not provided it despite multiple requests.”

The filing was submitted to Ontario Superior Court and raises concerns about the structure of the deal and the knowledge of involved parties prior to the announcement.

A.R.I. had provided financing to OVO through convertible notes, which included specific rights that should have been activated upon the company’s acquisition.

According to the court filing, A.R.I. was to either convert their investment into equity at a discount or receive a cash payment that was 40% higher than their original principal.

Instead, they claim they did not receive anything and were informed of the transaction through a public announcement three days after it closed on August 24.

The investment firm contends that OVO did not inform them about negotiations with Authentic Brands Group or Vince, which they argue is a significant violation of their financing agreement’s information rights.

A.R.I. calculated that as of July 31, there were $3.5 million in outstanding obligations, including interest, default fees, and a Make Whole Fee, which was initially negotiated to ensure a minimum 15% return on their investment.

The significance of the Make Whole Fee lies in its inclusion as part of the original deal structure, established before A.R.I. invested.

OVO CEO Derek “Drex” Jancar signed this agreement, which stated that if the notes did not convert into equity by maturity, investors would receive a payment guaranteeing that minimum return.

A.R.I. claims that they would not have extended financing without these protections.

When Authentic Brands Group announced its acquisition of 51% of OVO’s intellectual property on August 27, the deal valued the IP at $117,647,058.82.

Drake maintained 44% ownership, while Vince acquired 5%.

Public documents filed with the SEC indicate that OVO’s debt was to be repaid and that convertible noteholders would be compensated directly from the purchase price. However, A.R.I. asserts that they never received a payoff letter, did not authorize the release of their claims, and did not receive any proceeds from the transaction.

A.R.I. had previously filed a lawsuit in British Columbia in June, claiming that $3.2 million was owed, indicating that this was not an unexpected claim that arose after the sale.

The investment firm was already engaged in litigation at the time the transaction was finalized and is now seeking to enforce their contractual rights through the courts.