Ex-KIT Digital CEO Tuzman Avoids U.S. Prison in Fraud Case (1)

Former KIT Digital Inc. founder and Chief Executive Officer Kaleil Isaza Tuzman avoided a U.S. prison sentence prison for using market manipulation and fraudulent accounting to prop up the digital-video software startup.

U.S. District Judge Paul Gardephe noted that Tuzman, 49, had already been imprisoned under deplorable conditions in Colombia, where he was arrested at the request of federal prosecutors in Manhattan and held for 10 months before extradition. The judge said the risk to Tuzman’s mental health posed by additional imprisonment “is just too great.”

Gardephe last month sentenced Tuzman’s co-defendant, Omar Amanat, to five years in prison. Prosecutors had urged the judge to send Tuzman to prison for as long as 22 years.

In requesting no additional jail time, defense lawyer Avi Weitzman said Tuzman had been brutalized and assaulted in a Colombian prison after being arrested during a 2015 business trip to the country. Weitzman said his client suffers from nightmares and suicidal thoughts as a result, and argued that additional jail time was likely to “re-trigger his PTSD.”

‘The Elephant’

Tuzman, a Harvard graduate who spent more than four years as a Goldman Sachs Group Inc. investment banker, and Amanat, a pioneer in the early days of online stock-trading who helped produce some of the “Twilight” films, were convicted in December 2017 after a trial in Manhattan federal court. Prosecutors said they worked to prop up KIT Digital by injecting tens of millions of dollars of phony revenue into the company, an operation they referred to as “the Elephant.”

Gardephe faulted Tuzman for his crimes and for damaging KIT Digital, “a real business that generated hundreds of millions of dollars of real revenue.”

The judge also contrasted Tuzman’s expressions of contrition on Friday with the “scorched-earth” litigation tactics his team used to try to win acquittal. Gardephe assured Tuzman’s supporters, seated in his Manhattan courtroom and in an overflow courtroom, that the evidence against him was “overwhelming.”

But Gardephe said he was familiar with the terrible conditions in Bogota’s La Picota prison, where Tuzman was locked up, from trying drug-trafficking defendants. The judge agreed with Weitzman that additional time behind bars could exacerbate Tuzman’s post-traumatic stress disorder.

“Thank you and God bless your honor,” Tuzman said in response to the sentence.

The case is U.S. v. Tuzman, 15-cr-536, U.S. District Court, Southern District of New York (Manhattan).

(Adds details of sentencing in third paragraph.)

To contact the reporter on this story:
Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editors responsible for this story:
Katia Porzecanski at kporzecansk1@bloomberg.net

Anthony Lin

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