The CEO of investment bank EF Hutton has been accused of improperly funneling millions into his own pocket by falsifying expense reports for, among other things, private jets to sporting events with his wife and bookie, more than $1 million in restaurant meals, and nearly $100,000 worth of intravenous drips “to treat hangovers from excessive alcohol and drug usage.”
Joseph Rallo, who helped take public Donald Trump’s Twitter clone, Truth Social, also allegedly pilfered corporate funds to make charitable contributions to his son’s school, treat his wife to lavish stays at extravagant resorts, buy life insurance, and otherwise live far beyond his already well-capitalized means, according to a bombshell lawsuit filed by the firm and obtained by The Independent.
Rallo, 39, who the lawsuit claims has a “severe gambling problem,” allegedly “squandered tens of millions of dollars” on losing investments, a fleet of exotic cars, including a Rolls-Royce, a Ferrari, a Lamborghini, a Bentley, and a customized Mercedes Benz, a $5 million Hamptons getaway, and a $25 million Manhattan penthouse. He regularly wagered six- to seven-figures at a time, and “typically loses,” the lawsuit states.
Not only was Rallo stealing from his employer, his sordid lifestyle and “wild spending” eventually began to encroach on his corporate duties, according to the suit. It says he frequented a card room his bookie ran out of a residential apartment in New York City, leaving the office in the middle of the workday “to gamble and carouse, and afterwards come back to the office in a state that was not conducive or becoming of a CEO of an investment bank.”
The lawsuit says Rallo, who earned more than $18 million in 2023, “was committed to the façade of having vast liquid wealth and thus unwilling to curb the personal spending necessary to continue his extravagant lifestyle,” the lawsuit states. “This led to Rallo seeking help to pay for his personal expenses that he could no longer afford.”
EF Hutton executives and the legal team representing them in the suit did not immediately respond to requests for comment on Wednesday. Rallo did not return emails, texts and voicemails seeking comment.
Rallo took the helm at EF Hutton in June 2021, when his firm, Benchmark Investments, which had also been known as Kingswood Capital Markets, rebranded pursuant to a licensing deal that would turn Hutton into a division of Benchmark, the lawsuit states.
That year, the firm booked some $150 million in investment banking and underwriting revenues, and Rallo’s gross income was “in excess of $26,000,000,” according to the suit. In 2022, EF Hutton’s revenues declined slightly, although it still booked $88 million in revenue, the lawsuit continues. As a result, Rallo’s compensation went down to $18 million, it goes on. Last year, business declined even further, with $58 million in revenues; Rallo’s gross income for 2023 was still “in excess of” $4 million, the lawsuit says.
In early 2024, Rallo’s behavior began to raise eyebrows, according to the suit. He requested a $4 million increase to his $1 million base salary, to $5 million, which he “vaguely responded” was for “tax reasons,” the suit contends. The company agreed, since it knew Rallo owed money to the government, the lawsuit says. But, it states, EF Hutton was by then operating at a loss, “due, in part, to Rallo reimbursing himself hundreds of thousands of dollars per month in personal expenses that he claimed were business expenses.”
The worsening financial situation meant Rallo’s co-manager had to make a capital infusion to cover Hutton’s payroll and expenses, which the suit alleges Rallo declined to do “despite receiving approximately $5,000,000 in compensation through May 2024.” When the company’s finance department told Rallo his pay would have to be rolled back to $1 million because of the shortfall, he instead suggested that other employees’ salaries be reduced, according to the lawsuit. (Rallo gave in when higher-ups flatly refused, it says.)
A year earlier, Rallo had borrowed $5 million from his business partner to close on a $25 million apartment on Manhattan’s Upper East Side, according to the lawsuit, which says Rallo personally leaked the purchase to the media. At the same time, his profligate spending, combined with his gambling losses, meant Rallo was unable to pay his taxes on time, the lawsuit states.
On May 6, 2024, the feds showed up at Rallo’s home with a search warrant and seized his cell phone as part of an investigation into securities fraud, wire fraud and conspiracy, the suit says. EF Hutton told Rallo he was being put on administrative leave for the duration, to which Rallo threatened to “burn [the company] down,” and has thus far refused to cooperate with an internal investigation, according to the suit.
After Rallo took leave, EF Hutton reviewed its books and discovered the alleged scam, which not only improperly diverted millions from the company, but also claimed the bogus business expenses as tax write-offs, the suit contends.
It says the amounts paid back to Rallo made up the bulk of the firm’s overall reimbursements, and an audit found Rallo billed the company for — in addition to the cars, jets, and everything else — $260,000 in life insurance premiums; nearly $1.2 million in meals; more than $35,000 donation to St. David’s, the private school his son attended; $22,000 in fine wines; $30,000 to stay at the Beverly Hills Hotel during a trip to Los Angeles with his wife and bookie; $60,000 on round-trip private flights for the three of them; in excess of $40,000 for tickets to New York Knicks playoff games, which Rallo attended with his bookie; and beyond, according to the lawsuit.
“Additionally, from May 2022 through May 2024, Rallo submitted, approved, and reimbursed himself for seventy-nine separate charges for ‘IV Doc’ totaling over $90,000,” the suit states. “The IV Doc is a New York based business that advertises services for the treatment of hangovers caused by excessive alcohol and drug abuse. There was no legitimate business purpose for Rallo to incur $90,000 or more in business expenses for intravenous services.”
In all, Rallo improperly directed $5,412,344 to himself, the lawsuit alleges.
Since Rallo was suspended, the suit says EF Hutton has averaged less than $22,000 per month in reimbursed business expenses, “approximately 90% less than the monthly reimbursed business expenses prior to Rallo going on administrative leave.”
Hutton is suing Rallo for conversion/civil theft, breach of fiduciary duty, and unjust enrichment, and wants its money back, plus at least $3 million in damages.
