(Bloomberg) — EF Hutton, the storied Wall Street name that was reborn as a leading SPAC investment bank, is breaking up after the two partners that revived the brand agreed to drop lawsuits against each other and go their own ways.
The firm said in a statement issued Sunday that Joseph Rallo and David Boral agreed to take their businesses “in different directions.” Rallo will keep the EF Hutton name and trademark, while Boral will retain control of the broker/dealer that operated under the brand, according to the statement. A spokesman for Rallo confirmed the agreement on Monday.
EF Hutton sued Rallo last month, accusing him of stealing millions of dollars in falsified expenses and seeking an order stating he had been properly terminated as chief executive officer. Rallo hit back with a suit accusing Boral of illegally trying to take control of the firm out of jealousy that his partner was perceived as the “driving force” of the revived EF Hutton’s success. Both suits made salacious claims about the men’s personal conduct.
“Any public statements they made about each other as they worked through the separation of their business should not be viewed as a reflection on Mr. Rallo or Mr. Boral,” the firm said in the statement. “Both 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 Probe
The resolution of their suits may not be the end of legal troubles for Rallo. In its suit, EF Hutton revealed that Rallo was the subject of a federal criminal probe. It’s not clear what the investigation, which may not result in charges, is focused on. In his suit, Rallo claimed Boral pressed him to reveal details of the government probe.
In a Monday statement, Rallo lawyer Seth DuCharme addressed the criminal probe, 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 re-emergence of EF Hutton, which was founded in 1904 and became one of the largest US retail brokerages. In the 70s and 80s, it was known for an ad campaign that proclaimed, “When EF Hutton talks, 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 EF Hutton’s CEO and held a large stake in the firm.
Trump SPAC
In 2021 and 2022, EF Hutton became a top underwriter of special purpose acquisition company listings, including for the SPAC that later acquired Trump Media & Technology Group. According to the firm’s suit, EF Hutton had banking and underwriting revenue of almost $150 million in 2021. It said Rallo was paid more than $44 million in compensation in 2021 and 2022.
The firm’s suit said that 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 Rallo was a subject of a federal probe and determined that he couldn’t continue in his role as CEO while it was ongoing.
People familiar with the matter subsequently confirmed that Rallo was served 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 suit, Rallo claimed Boral seized on the federal warrant 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 Court of Chancery (Wilmington).