(Bloomberg) — EF Hutton, the Wall Street household name that was reborn as a leading SPAC investment bank, is splitting up after the two partners who revived the brand agreed to drop lawsuits against each other and hit the road theirs.
The firm said in a statement released Sunday that Joseph Rallo and David Boral agreed to take their businesses “in different directions.” According to the statement, Rallo will retain the EF Hutton name and trademark, while Boral will retain control of the broker/dealer that operated under the brand. A spokesman for Rallos confirmed the deal on Monday.
EF Hutton unsuspecting Rallo last month, accusing him of stealing millions of dollars in falsified expenses and seeking an order saying he was properly fired as chief executive. Rallo struck again with a lawsuit accusing Boral of illegally trying to take control of the firm out of jealousy that his partner was perceived to be the “driving force” of the resurgent EF Hutton success. Both lawsuits made salacious allegations about the men's personal conduct.
“Any public statements they made about each other as they worked to separate their businesses should not be seen as a reflection on Mr. Rallo or Mr. Boral,” the firm said in a statement. “Like Mr. Rallo and Mr. Boral are pleased to put their dispute behind them and move forward with confidence that their new, separate business ventures will be successful.”
Criminal Investigation
The settlement of their lawsuits may not be the end of legal trouble for Rallon. In its lawsuit, EF Hutton disclosed that Rallo was the subject of a federal criminal investigation. It is not clear what the focus of the investigation is, which may not result in charges. In his lawsuit, Rallo alleged that Boral pressured him to reveal details of the government's investigation.
In a statement Monday, Rallo's attorney Seth DuCharme addressed the criminal investigation, saying Rallo was served “a search warrant to obtain limited information” as “a routine investigative step” by the government.
“We have no indication that Joe will be charged with a crime,” DuCharme said.
The dispute drew attention to the resurgence of EF Hutton, which was founded in 1904 and became one of the largest retail agents in the US. In the 70s and 80s, she was known for one advertising campaign who proclaimed, “When EF Hutton speaks, people listen.”
That firm merged with Shearson Lehman/American Express Inc. in 1988. The EF Hutton trademark was acquired in 2021 and adopted as a rebrand of Kingswood Capital Markets, the investment banking arm of Benchmark Investments LLC. Rallo, who joined Benchmark in 2020 from Aegis Capital Corp., became CEO of EF Hutton and held a large stake in the firm.
Trump SPAC
In 2021 and 2022, EF Hutton became a leading underwriter of special purpose buyout company listings, including for the SPAC that later acquired Trump Media & Technology Group. According to the firm's lawsuit, EF Hutton had banking and insurance income of almost $150 million in 2021. It said Rallo was paid more than $44 million in compensation in 2021 and 2022.
The firm's lawsuit said agents from the Department of Homeland Security and the US Postal Inspection Service arrived at Rallo's home in May and served him with a warrant for his phone. EF Hutton said it subsequently learned that Rallo was the subject of a federal investigation and determined that he could not continue in his role as CEO while it was ongoing.
People familiar with the matter later confirmed that Rallo was served with a search warrant as part of a securities and wire fraud investigation led by the US attorney's office in Brooklyn, New York.
In his lawsuit, Rallo alleged that Boral obtained a federal order to take control of EF Hutton.
The cases are EF Hutton Partners LLC v. Rallo, 654880/2024, New York State Supreme Court (Manhattan) and Rallo v. Boral, 24-0987, Delaware Cancer Court (Wilmington).