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May 13, 2015

U.S. News

Judge Halts Takeover of MonaVie Pending Hearing in Shareholder Suit

On the heels of a lawsuit filed on behalf of MonaVie employees, a federal judge has temporarily halted foreclosure proceedings that would transfer almost all the assets of MonaVie Inc. to Jeunesse Global LLC.

U.S. District Judge Bruce Jenkins issued the order on Monday at the request of Bankers Trust Co. of South Dakota, the trustee over Utah-based MonaVie’s employee stock ownership program (ESOP), according to a report by the Salt Lake Tribune.

A class action lawsuit filed on behalf of employees who participated in the ESOP alleges the South Dakota bank failed in its trustee duties by allowing MonaVie to sell its stock at a highly inflated value using a loan carrying an exorbitant interest rate. Employees purchased shares valued at $186 million through the program, but soon afterward the company’s stock value dropped nearly 100 percent.

Despite topping $800 million in revenue just four years after its founding in 2005, the health and wellness company apparently faced mounting debt leading up to its March acquisition deal with Florida-based Jeunesse Global. As part of the agreement, Jeunesse purchased MonaVie’s $182 million note, secured by virtually all of the company’s assets, from TSG-MV Financing LLC. Last week, MonaVie’s leadership told shareholders they would enter into a strict foreclosure and default on the note, meaning the company would voluntarily transfer those assets to Jeunesse.

Bankers Trust requested that the court ban any further exchange of documents between the companies as it reviews documents related to the deal, which it claims did not follow strict foreclosure procedure. Jenkins granted the request, citing a lack of clarifying information on the series of transactions. The order extends until May 29, when the court will hold a hearing on the proposed lawsuit.