Ashford Stud Responds to Amended Suit Filed by MGG

Ashford Stud, the North American arm of Coolmore Stud, released a statement Feb. 14 addressing the recent decision by New York-based MGG Investment Group to pursue action against several entities that bought horses and breeding rights from the Zayat family and Zayat Stables since September 2017. 

MGG is suing the racing and breeding operation for breach of contract and fraud on loans valued around $42 million and another $10.86 million in refinanced debt. 

The Ashford Stud response came after an ongoing legal battle between Zayat Stables and MGG that first came to light in late January. A lawsuit seeking at least $23 million in damages was filed by MGG Jan. 21 in Fayette County (Ky.) Circuit Court in which Ahmed Zayat and his Zayat Stables were named as defendants. The suit claimed that Zayat's breeding rights to 2015 Triple Crown winner American Pharoah  were being held as collateral against previously outstanding debts incurred by the owner.

"Breeding Rights in the stallion American Pharoah were purchased at arm's length and in good faith by a number of purchasers from members of the Zayat family," the Ashford Stud release stated.

During a Jan. 22 emergency hearing held by Fayette County Judge Kim Bunnell, a receiver was ordered to oversee Zayat Stables, including all of its horses. Elizabeth Woodward, the director of forensic accounting and litigation support at the Lexington accounting firm Dean Dorton, was subsequently appointed as receiver of Zayat Stables, giving her control of the stable's operation and its assets.

In an amended complaint filed by MGG Feb. 11 with the Fayette Circuit Court Division 9, the firm claimed that Zayat Stables misrepresented the assets held by the stable as collateral on the loans and fraudulently concealed the sale of most of these assets until MGG became aware of the transactions in January.

According to court documents, the Zayats closed on the terms of its loans with MGG July 26, 2016. As part of this arrangement, all assets were consolidated under Zayat Stables. In September 2017, the court documents reflect that Ahmed Zayat and his son Justin purportedly began selling off many of these assets, which included nine breeding rights to 2015 Triple Crown winner American Pharoah—who stands at Ashford Stud—as well as additional interests in the stallions El Kabeir and Solomini , grade 1-placed mare American Cleopatra, and race mares Lemoona and Amandrea.

From Dec. 21, 2018, through June 5, 2019, the Zayats purportedly sold their nine American Pharoah breeding rights for $3.3 million. These rights had been valued at $14 million as part of the liquidation plan and at $12.6 million by an independent appraisal done in July 2019. Zayat sold two breeding rights to LNJ Foxwoods at $375,000 each and seven to Orpendale, an entity associated with Coolmore, with two sold for $400,000 and five sold at $350,000 apiece.

In January 2018, MGG entered into a partial lien release agreement that allowed Zayat Stables to sell its interest in Solomini to Orpendale for $800,000. Court documents note that Zayat did give MGG the proceeds from that sale. Following that transaction, around Dec. 3, 2019, Zayat Stables and Orpendale purportedly sold their interests in the stallion for $250,000 to McMahon Thoroughbreds. When it was announced the stallion would enter stud at McMahon's farm near Saratoga Springs, N.Y., reports noted the stallion is owned in partnership by McMahon, Raymond DeStefano, and Chris Bernhard. According to a July 2019 appraisal, Solomini had been valued at $3 million. 

"No liens of record related to those sellers existed. In the case of Orpendale, this entity in fact had a superior right to purchase those breeding rights pursuant to a contract which predated any involvement by MGG," stated the release. "At no time did MGG notify Ashford Stud of any interest or claim it might have relating to American Pharoah. Any suggestion of impropriety is totally untrue and we are treating this matter as a Malicious Prosecution and will hold those responsible to account in full."

MGG contends that LNJ Foxwoods, Orpendale, and Coolmore were all notified of MGG's security interest in all of Zayat Stables' assets, which included the American Pharoah breeding rights. In its amended filing, MGG has requested that the ownership of the horses sold be transferred to Woodward and that other proceeds, for example from the sale of any foals out of the mares, be held in a trust for the benefit of MGG.