IIt’s the story of a Hollywood crook that reads like a wacky movie script. But this real-life story left Tinseltown wondering how an unknown peripheral gamer could have scammed millions of out-of-town investors in hopes of profiting from the boom in streaming platforms like Netflix and HBO.
Last week, Zachary Horwitz, a B-movie actor with a taste for the high life, pleaded guilty to a single count of securities fraud, carrying a maximum sentence of 20 years in prison. But behind the dry legal jargon of his plea, something more – though not necessarily new – has been learned about the thirst for content and profit in the sustainable world capital of the film industry.
Horwitz – who worked under the stage name Zach Avery – had claimed to be in business and find and fire Spanish-language movies and TV series to Netflix and HBO. But according to the FBI, he actually ran a five-year, multi-million dollar Ponzi scheme that defrauded wealthy private investors of at least $ 227 million.
Like many before him, including the notoriously Wall Street fraudster Bernie Madoff, the ploy was based in part on the perpetrator’s criminality and in part on the greed of his investors. Like Madoff, Horwitz promised unlikely returns on investment loans.
But there was something else: Hollywood’s ineffable allure.
It’s a centuries-old story, of course, with institutions and individuals hoping to cash in on film and discover, as it always has been, that Hollywood is a small town industry that even in the age of globalization and billion dollar streaming services, runs on who you know.
Originally from Indiana, Horwitz received a degree in psychology from the University of Chicago and came to Los Angeles. In a 2019 Swagger cover, the actor said he moved “with nothing more than his dog, a few suitcases and a big dream” and the support of Mallory Hagedorn, a hairdresser, whom he married more late.
Horwitz hired an acting trainer and went on the auditions circuit. The pieces were scarce. But he did meet a potential producer, Julio Hallivis, and they set up a company, 1inMM Productions (“One in a Million”) that planned to fund low-budget horror and sci-fi films with plum roles. for “Zach Avery”.
He has starred in a number of streaming films, including Hell is Where the Home Is, Last Moment of Clarity (2020), The White Crow (2018), Trespassers and The Devil Below and Farming (2018) with Kate Beckinsale and directed by Adewale Akinnuoye-Agbaje.
But some jarring aspects of Howitz’s acting life didn’t work out, including a lavish $ 6 million house in Westside with a screening room, gym, and 1,000-bottle wine cellar. He traveled by private jet, enjoyed expensive cars and a luxury watch subscription, high-flying weekends in Vegas. In court documents, former friends said he often bought seats on the field at Lakers games and had tried to tip a waitress in the past $ 5,000.
“Every Hollywood con artist has a character,” says Allison Hope Weiner, LA investigative reporter. “This is the place where you can become what you want to be. Horwitz understood the importance of the image. He looked the part, people could believe him flying, doing well, and that’s how it works.
The program began in October 2014, when investment firms began to enter into a series of six- and 12-month promissory notes with 1inMM Capital. Each note was supposed to provide money to 1inMM Capital to acquire the rights to a specific film.
In one case, the Chicago group loaned $ 1.4 million to buy the rights to an Italian film, Lucia’s Grace, and resell it to Netflix for distribution in Chile, Argentina, Brazil and a few dozen decades. ‘other countries. Investors were promised a refund of $ 2 million a year later.
To prevent his investors from suspecting anything out of the ordinary, Horwitz provided bogus licensing deals, as well as bogus distribution deals with Netflix and HBO, all of which contained forged or fictitious signatures.
But the ploy began to crumble in 2019 when Horwitz was unable to meet investor reimbursement demands and it became clear that his claim of “strong relationships” with streaming platforms was a lie.
“During the lull period – the period when the payments stop, but the fraudster is able to buy time – in this case it was done by very sophisticated means,” says Brian Michael, lawyer at King & Spalding representing three of Horwitz’s friends in Chicago who alerted the Securities and Exchange Commission (SEC).
“Horwitz engaged a well-respected national institution that focused on serving clients in the entertainment industry, had a large global law firm representing 1inMM, fabricated a comprehensive suite of seemingly genuine documentation and communications between 1inMM, HBO and Netflix and had previously paid off millions of loans on time, ”adds Michael.
A federal grand jury indicted Horwitz in May with five counts of securities fraud, six counts of wire fraud and two counts of aggravated identity theft. As part of his plea deal last week, he admitted defrauding more than 250 investors – the Chicago trio, as well as their parents, grandparents, siblings and in-laws.
Horwitz was arrested at dawn on April 6, when FBI agents raided the house. His wife, Mallory, quickly filed for divorce, saying in court that her husband “cheated and manipulated me and everyone around him, and that he was not the person I thought he was.” it was “.
According to an SEC complaint, in order to delay the repayment of investors, primarily Chicago investors, of $ 490 million, Avery “fabricated email communications with HBO representatives as well as bogus collection accounts allegedly showing funds available from HBO and Netflix for distribution “.
“There is a lot of money ‘missing’ here,” said US magistrate Jean P Rosenbluth during Howitz’s indictment. Brian Michael says “his understanding is that the investigation is ongoing.”
Perhaps the most interesting question is not how Horwitz pulled off the scam, but the broader circumstances of the film and television industry. It might not have worked at all if it had been logged into the company consistently.
But streaming platforms are spending billions on content in a battle for subscription growth and for every White Lotus or The Squid Game there are thousands of shows, in all languages and for all audiences, that don’t. never arrive on Netflix or HBO. facing page and exist to keep people on the platform.
Streamers’ spending on the production and licensing of new entertainment content (excluding sports) is estimated to have increased 16.4% in 2020 to reach $ 220.2 billion. The Walt Disney Company alone spent $ 28.6 billion, and overall spending on streaming content is expected to exceed a quarter of a trillion this year.
“By deceiving his victims, Horwitz took advantage of fictitious documents and communications as well as the fact that these are sophisticated platforms with a good reputation and known deep pockets in the market to acquire content from aggressively, ”says Michael.
According to Hope Weiner, the scam was as much about people falling under the spell of Horwitz’s lifestyle traps as it was about the mystique of the fast-growing streaming platforms – and how few people understand how it works. of this business.
“It’s like the dotcom boom. There is incredible competition between these services, everyone wants to come in, and there is a lot of talk about how much money is being made. Maybe the global nature of the business has made it easier for people to lie, but people also forget that this is a small town, ”Weiner said.
Several years ago, investor-playboy Jho Low entered town with millions linked to Malaysia’s 1MDB sovereign wealth fund scandal. He funded The Wolf of Wall Street, a three-hour epic about bad behavior, starring Leonardo DiCaprio. He flew the actor and his friends for a double New Year’s Eve in California, then Australia, bought art, and made a big foothold in the city.
But the latest scandal has little criminal panache and Jho Low’s red carpet. “Horwitz was dealing with people who weren’t informed,” says Hope Weiner. “Someone from LA would ask, ‘Who is this guy, what has he produced, who does he know. OK, so he’s an actor. What else?'”
But – this being Hollywood – there is always someone looking to capitalize on infamy.
Orson Oblowitz, the director of Trespassers, a 2018 horror film set in Malibu in which the actor twisted on the deck of a swimming pool with a large dagger stuck in his stomach, told the LA Times he was not moved by Horwitz’s game but hoped the scandal might give his film cult status.
“It’s mind-blowing,” Oblowitz told the newspaper. “This guy doesn’t seem like a criminal mastermind to me. I am amazed. “