EFiled: Feb 28 2022 04:24PM EST

Transaction ID 67352887
Case No. 2022-0145-MTZ
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
JULIA HAART, )
)
Petitioner, )
)
v. ) C.A. No. 2022-0145-MTZ
)
SILVIO SCAGLIA, )
)
Respondent, )
)
-and- )
)
FREEDOM HOLDING, INC., and )
ELITE WORLD GROUP, LLC, )
)
Nominal Respondents. )

AMENDED AND SUPPLEMENTAL VERIFIED PETITION FOR

RELIEF PURSUANT TO 8 DEL. C. § 225 AND 6 DEL. C. § 18-110
AND FOR APPOINTMENT OF A CUSTODIAN PURSUANT TO
8 DEL. C. § 226(a)(2) AND FOR DECLARATORY JUDGMENT
Julia Haart (“Petitioner” or “Haart”), by and through her undersigned counsel,

hereby petitions the Court for relief pursuant to 8 Del. C. § 225 and 6 Del. C. § 18-

110, and for appointment of a custodian for Freedom Holding, Inc. (“Freedom”)

pursuant to 8 Del. C. § 226(a)(2) as well as the Court’s equitable powers, and for a

declaration that certain acts taken by Respondent Silvio Scaglia (“Scaglia”),

including acts purportedly on behalf of Freedom and Elite World Group, LLC, are

unlawful and legally ineffective. In support thereof, Haart alleges as follows:

 INTRODUCTION

1. Julia Haart is the CEO, public face and creative force of Elite World

Group, LLC (“EWG”), the largest and most visible talent/media agency in the

United States. Scaglia, her husband and co-venturer in EWG, has illegally ousted

her from EWG and its parent holding company, Freedom. He has done this out of

pique because Haart is divorcing him and thwarting him from dumping EWG in a

fire sale. He has been uninvolved in the day-to-day business of EWG, which is

growing and thriving as never before under Haart’s guidance. Until two weeks ago,

Scaglia had stood firmly behind Haart’s vision for the company. Now, angry and

scorned, Scaglia would rather destroy EWG than retain the brilliant creative leader

who, after less than three years on the job, has led EWG to a position of dominance

in the industry and quintupled its value after finding it in chaos and retreat when she

joined the enterprise.

2. Haart has successfully transformed EWG from a traditional modeling

agency to a talent/media powerhouse, capitalizing on today’s digital social media to

maximize its clients’ media campaigns, media exposure and to track performance

directly. Thanks to her innovative leadership, futuristic thinking, and plain hard

work, EWG has become the first, and one of the few, “talent/media” businesses.

3. As a result of Haart’s tenure as CEO of EWG, she transformed the

business that had a significant downward trajectory valued at less than $90 million

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when Scaglia was operating EWG to a business worth significantly in excess of $500

million. Scaglia acknowledged in mid 2021 and later to investment bankers when he

was trying to take the business public that “Haart is the CEO and real force behind

EWG’s success and stature in the industry.” In 2022, Scaglia stated on numerous

occasions that he “was in awe of Julia” and “Julia is the best CEO he ever had.”

4. While Haart has been working tirelessly at EWG and creating

tremendous success for EWG, Scaglia has been losing hundreds of millions of

dollars in failed businesses and investments, and is in desperate need of cash. In

order to try to get cash and cause a fire sale of EWG, he has tried to justify his

unlawful conduct with Freedom and EWG by engaging in a PR campaign in the

media by making false, malicious, and scurrilous statements about Haart. He has

approved all of the payments made to Haart, who is owed in excess of $7.3 million

in management fees, while he has been paying his divorce lawyer, his chauffer, maid,

chef and expenses for his Bentley out of EWG notwithstanding the fact that he is not

rendering services for EWG.

5. Haart is a public figure, with her own Netflix television series in which

her position as CEO of EWG features prominently. EWG and Freedom have

benefitted from her media success.

6. Until their recent dispute over the potential sale of both the marital

apartment and EWG, Scaglia not only enthusiastically supported Haart’s vision, but

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pushed for her to realize that vision with unrealistic speed. What changed has

nothing whatsoever to do with Haart’s performance as CEO of EWG or her clear

importance as a driving force behind the businesses. Rather, what changed is that

Haart refused to allow Scaglia to sell off EWG in the equivalent of a fire sale so that

Scaglia could obtain $10 million cash to fund his other business venture. And for

that, Scaglia reacted by tossing away fundamental corporate governance processes,

fiduciary duties, and basic norms of lawful conduct.

7. Without authority and for no reason other than a personal vendetta

against his estranged wife who owns 50% of the business, Scaglia has improperly

and invalidly directed Freedom, as the sole member of EWG, to dismiss Haart, block

access to her office and cut off her corporate credit cards as well as access to

Freedom’s bank account. Scaglia has also executed documents purporting to remove

Haart as a director of Freedom and from all her positions with both Freedom and

EWG. This egregious, bullying, unauthorized conduct not only violates the most

basic corporate governance and fiduciary duty law, but puts at great risk the growing

success of the business itself. These actions warrant prompt and firm judicial

redress.

8. Scaglia is also using the press and the courts to lodge untruthful,

unsubstantiated and substantially false allegations against Haart designed to do

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nothing more than disparage Haart, as Scaglia is keenly aware that the public is

interested in her life and her company.

9. Scaglia’s actions purportedly on behalf of Freedom removing Haart as

a director of Freedom and as a director and CEO of EWG were unlawful, and

therefore null and void. Haart seeks the assistance of this Court to enforce her rights

to continue in her positions as a director of Freedom and a director and CEO of

EWG.

10. Due to the deterioration of the parties’ relationship, no corporate action

that requires approval of both directors or approval of the stockholders can be validly

accomplished. Thus Freedom is currently deadlocked at both the stockholder level

and the board level, which is causing irreparable harm to both Freedom and EWG.

Freedom will remain at a governance standstill—unable to have its corporate

governance machinery oversee the operations of Freedom—if this Court does not

intervene.

11. This amended and supplemental petition is also necessary because of

further unlawful actions taken by Scaglia purportedly on behalf of Freedom after the

Petition was filed in this case, as set forth in detail below.

PARTIES AND JURISDICTION

12. Petitioner is an individual and is a resident of New York. She is one of

two of Freedom’s sitting directors and is the owner of fifty percent (50%) of all

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classes of Freedom’s stock. She is the Chief Executive Officer (“CEO”) and a

director of EWG.

13. Scaglia is an individual and a resident of New York. He is the other

sitting director of Freedom and is the owner of the other fifty percent (50%) of all

classes of Freedom’s stock. Scaglia is the non-executive Chairman of EWG.

14. EWG is a Delaware limited liability company with its principal place

of business located at 55 Hudson Yards, New York, New York 10001. EWG’s

registered agent is BlumbergExcelsior Corporate Services, Inc., 1013 Centre Road,

Suite 403S, Wilmington, Delaware 19805.

15. Haart and Scaglia currently are married, but Haart recently initiated

divorce proceedings in New York.

16. This Court has subject-matter jurisdiction over this matter pursuant to

8 Del. C. § 225, 6 Del. C. § 18-110, 8 Del. C. § 226, and 10 Del. C. § 341.

17. This Court has personal jurisdiction over Scaglia because he has

submitted to the jurisdiction of the Court by his counsel’s entry of appearance, and

pursuant to 10 Del. C. § 3114 because the claims asserted against him are based on

actions taken by him in his capacity as a director and officer of a Delaware

corporation.

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 FACTUAL BACKGROUND

A. Formation of Freedom and Acquisition of EWG

18. The Elite World Group has been a global market leader in the talent and

modeling agency industry for over 50 years, with an ever-growing number of

international agencies.

19. Scaglia acquired Elite World Group in 2011.

20. Scaglia and Haart met in 2015. By November 2018, they were a couple

and intended to marry. At that time, they agreed that Haart should run the Elite

World Group business (which was not yet a limited liability company) and that they

would split that business 50-50, with Scaglia to provide the financing and Haart to

operate the company. Scaglia and Haart agreed that Haart’s “sweat equity” would

be the consideration for Scaglia to transfer 50% of the company to Haart.

21. Pursuant to that end, Freedom was formed in November of 2018. A

Certificate of Incorporation was executed and filed in the office of the Delaware

Secretary of State on November 7, 2018. See Exhibit 1. This Certificate provided,

among other things, that the “total number of shares of stock which this corporation

is authorized to issue is: 200 common shares with no par value.”

22. Both Haart and Scaglia were issued stock certificates showing that each

of them owned 50 shares of the Common Stock of Freedom. See Exhibit 2.

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 23. Although not known to Haart at the time, an Amended and Restated

Certificate of Incorporation was executed and filed in the office of the Delaware

Secretary of State on December 28, 2018. See Exhibit 3. This certificate gave

Freedom authority to issue 150,000 shares of Common Stock and 123,665 shares of

Preferred Stock. Exhibit 3, p. 1, ¶ FOURTH.

24. Also on December 28, 2018, Scaglia executed a Contribution

Agreement between Freedom and Scaglia whereby Scaglia contributed to Freedom

the shares of a company called S.M.S. Finance S.à.r.l, and Scaglia received, in

return, 123,665 shares of Freedom Preferred Stock. See Exhibit 4.

25. Scaglia also executed on that date a Written Consent of the Board of

Directors of Freedom Holding, Inc., consenting to the Contribution Agreement. See

Exhibit 5. Scaglia did not inform Haart about this at that time.

26. In January 2019, Haart and Scaglia formed EWG as a Delaware limited

liability company. Haart and Scaglia were the initial members of EWG. Haart,

Scaglia and Paolo Barbieri (“Barbieri”) were and are the directors of EWG. EWG

was formed to pursue new business opportunities in the digital and talent media

spaces, converging the worlds of modeling and talent representation with media and

advertising to become the first talent media company.

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B. Restructuring: Haart Confirms Her 50% Ownership in Freedom

27. In March 2019, Haart was informed by Scaglia for the first time that

she did not have 50% ownership in Freedom, because Scaglia had issued himself the

Freedom Preferred Shares, which he said gave him a voting majority. Haart

protested to Scaglia that they had agreed that the ownership of the business would

be shared equally. Scaglia agreed that he would take the necessary steps to give her

an equal share.

28. Accordingly, on April 1, 2019, Haart, Scaglia, Freedom and EWG

entered into an Entity Restructuring Agreement whereby Haart and Scaglia assigned

their membership interests in EWG to Freedom, and EWG became a wholly owned

subsidiary of Freedom. See Exhibit 6. The Entity Restructuring Agreement

provides, in pertinent part, as follows:

WHEREAS: The Shareholders by and between them own One

Hundred (100%) Percent of the stock of all classes of capital
stock in Freedom Holding, Inc. (hereinafter “FREEDOM”)

WHEREAS: The Shareholders by and between them own One

Hundred (100%) Percent of the of the [sic] Membership Interests
in Elite World Group, LLC (hereinafter “ELITE”).

***
WHEREAS: The Shareholders, FREEDOM and ELITE wish to
restructure their business asset holdings such that the limited
liability company, ELITE, shall: (a) assume ownership of One
Hundred (100%) Percent of the Stock FREEDOM owns of the
ENTITIES; and (b) become a wholly owned subsidiary of
FREEDOM;

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 ***
NOW, THEREFORE: In furtherance of the plan of
reorganization adopted by the parties and in consideration of the
mutual covenants and agreements contained herein and for good
and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Shareholders agree to fund any and
all Membership Interests in ELITE into FREEDOM, all on terms
and conditions as hereinafter follows:

1. Transfer:

1.1 The Shareholders agree to transfer all of their

Membership Interests in ELITE to their wholly [sic] Delaware
corporation known as FREEDOM, and thus change the structure
of ownership such that FREEDOM shall be owned 50% by each
shareholder, and FREEDOM shall own all of the Membership
Interests in ELITE, which in turn shall own all of the stock in the
ENTITIES.

29. Thus, the Entity Restructuring Agreement unambiguously conferred

upon each of Haart and Scaglia 50% of all of the stock of Freedom.

30. After Haart and Scaglia executed the Entity Restructuring Agreement

and Haart took over the management of EWG, Scaglia repeatedly confirmed both to

Haart and to third parties that he and Haart were 50-50 owners of Freedom and/or

EWG. The following are examples:

 May 4, 2021 email to Jefferies Financial Group (“Jefferies”), wherein

Scaglia states: “Julia and I own an equal share of EWG through own [sic]
common holding company. Julia is the CEO and the real force behind
EWG success and stature in the industry. I am the non-executive
Chairman.” See Exhibit 7 (highlight added).

 July 21, 2021 application for financing to Porter Capital signed by Scaglia
stating that he and Haart own 50% each of Freedom. See Exhibit 8.

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  Minutes of a September 25, 2021 joint meeting of the Freedom directors
and stockholders, wherein Haart and Scaglia are listed as the two directors
and the two stockholders, each of whom holds 50% of the stock of
Freedom. See Exhibit 9.

 January 7, 2022 email from Robert Zaffiris (“Zaffiris”), the CFO of EWG
(recently purportedly fired by Scaglia), stated: “You’ll note Freedom
Holdings is owned 50/50 by Silvio and Julia and in turn Freedom owns
EWG.” See Exhibit 10.

 January 7, 2022 organization chart for EWG showing that Haart and
Scaglia own 50% each of Freedom, with cover email from Zaffiris. See
Exhibit 11.

C. Haart Transforms EWG Into a Talent/Media Powerhouse and

Increases Its Value by at least Five Times in Less than Three Years

31. Once installed as CEO of EWG, Julia Haart had a vision: to transform

EWG from an ordinary traditional modeling agency to the world’s first

“talent/media” company powerhouse which utilizes today’s pervasive social media

to maximize the impact of its talent’s media connection with the purchasing

audience, integrates the process of media campaigns into one seamless operation,

and, unlike traditional advertising, can directly track the effectiveness of media

campaigns.

32. Exhibit 12 is an investor presentation of Haart’s and EWG’s

accomplishments. Haart and her creative team produced Exhibit 12, including the

videos.

33. EWG is one of the world’s first talent media companies, which enabled

Haart to expand vastly the type of talent it represented, creating a more inclusive,

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diverse company. EWG now has an amazing array of talent by which EWG can

connect with brands. EWG also transforms this talent into network and brands

themselves, and transforms this talent’s social media platforms into media channels,

thereby shifting the power dynamic and enabling talent to take control of their own

financial independence and enhancing their career longevity. This also enables her

to provide clients with access to more than 2.2 billion people, bringing the talent and

modeling agency industry into the digital era, and providing under one roof content

production, “Metaverse” (i.e., social platforms like Meta) and CGI, data & analytics,

and media buying. Before Haart came along, clients had to obtain these services

piecemeal: sourcing models from one company, content production from another

company, production, data and analytics from another company, media buying from

yet another company, and so on. See Exhibit 12, pp. 5-7.

34. Haart has also expanded the idea of “talent” to include not just models,

but anyone who has broad media exposure, including actors, artists, athletes,

celebrities, creatives, influencers, models, musicians, and even virtual avatars. She

has signed up an incredible array of diverse talent with a collective 2.2 billion social

media followers. See Exhibit 12, pp. 12-14. See also Exhibit 13, list of talent signed

up by EWG during Haart’s tenure.

35. Thanks to Haart’s efforts, EWG opened offices in Los Angeles and

created new divisions during COVID, including EWG Virtual, EWG Creative, and

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EWG Talent, EWG Sports, and EWG Culture, and expanded relationships with

EWG’s top-notch client base by expanding its service offerings. See Exhibit 12, p.

12.

36. Haart has also pioneered the use of virtual reality in media campaigns

by her innovative creation of metaverse worlds, hyper-realistic virtual avatars, and

digitized product. See Exhibit 12, p. 15, the videos in Exhibit 12, pp. 26-29, and pp.

31-36. (The video at page 27 features an avatar, not a real person.) Numerous

publications have praised the successful launch of the virtual/avatar business and its

successes with Steve Madden and Tommy Hilfiger. These publications include

NBC, BusinessWire, WWD, Fox News Radio, S&P Global, Us Weekly, Ad Week,

Fashion United, Footwear News, Daily Mail, and People Magazine. See Exhibit 14.

37. Steve Madden is a great example of the services EWG offers. EWG

resurrected Steve Madden’s famous “big head” girls campaign from the 1990s.

EWG concepted, cast, created, directed and produced the #stevemaddenverse

campaign, a first of its kind virtual experience, featuring five celebrity avatars, 3D

films, digitized hyper-realistic products, Instagram filters, an AR shoe try-on and an

interactive e-commerce site. In total EWG produced over 135 pieces of original

content. See Exhibit 12, pp. 29-30. The campaign was spectacularly successful.

For the third quarter of 2021, Steve Madden reported its biggest quarter ever,

exceeding pre-pandemic levels, due in great part to EWG’s campaign. In a call with

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investors, CEO Edward Rosenfeld said that consumer response has been “strong in

terms of social media engagement and search interest, which has fueled sales. …

We’re excited about the new campaign and we feel really great about the response.

… We just felt like … now is the time to ... really step up with some exciting

marketing.” Marketer Diana Pavlov, who was involved with this project, reports

on her website that the campaign resulted in a “240% Rise in Social Mentions, 60%

New Visitors to Dedicated Landing Page, 20% Increase in Brand Site Traffic on

Launch Day.” See Exhibit 15.

38. In addition to turning her innovative vision into reality, Haart has

accomplished the following things for EWG in her brief two and a half years there:

 She rescued EWG from the dire condition it was in when she arrived due
to the incompetent management of Scaglia and Paolo Barbieri, who is the
third director of EWG in addition to Haart and Scaglia. See infra at
paragraphs 74-82.

 She reversed Scaglia’s disastrous decision to move to One World Trade

Center. See Exhibit 16, p. 4, paragraph following paragraph numbered 2
(highlighting added).

 She minimized EWG’s losses due to the Covid pandemic, during which
EWG’s revenues by significantly less than other companies in this
business sector (For example, Wilhelmina’s second quarter revenues
dropped 77% from year before. See Exhibit 16a.) This was due to her
emphasis on going digital. While other agencies resorted to layoffs almost
immediately upon the arrival of Covid, EWG kept going until June. See
Exhibit 16b.

 She turned her Netflix series, My Unorthodox Life, into a great media asset
for the company. See infra paragraph 40.

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  She won the 2021 Chi è Chi International Award, an event that
traditionally opens Milan Fashion Week in September of each year. See
https://www.facebook.com/watch/?v=1776308642579430.

39. Thanks to Haart’s business talent, hard work (she has been working 18-

to 20-hour days), and high public profile, EWG’s talent media business grew at an

explosive rate despite the extreme difficulties posed by the Covid pandemic.

Projections show revenues nearly tripling from 2019 to 2023; positive EBITDA, and

a substantial increase in gross margin for talent media.

40. Haart’s Netflix series My Unorthodox Life, which premiered in over

190 countries in July 2021, centers on the personal and professional life of Haart,

particularly how she went from being a member of an ultra-Orthodox Jewish

community to the CEO of powerhouse EWG. Haart has received much recognition

and publicity from this series, earning accolades from numerous publications

describing EWG as a hub for female empowerment, including E! Online, Elle,

Forbes, Forbes.com, Los Angeles Times, The New York Times, Paper Magazine,

People Magazine, The Ellen DeGeneres Show, The Telegraph, Variety, and

Women’s Health. See, e.g., Exhibit 17 (New York Times);

https://dailybuzz.mediamaxonline.com/dailybuzz/play/broadcast/2454477.mp4;

https://dailybuzz.mediamaxonline.com/dailybuzz/play/broadcast/2428403.mp4

(appearances on The Ellen DeGeneres Show and The View). The show features

prominently on EWG’s website. Scaglia has supported the show and acknowledged

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the great benefit that the Netflix series has generated for EWG. See, e.g. Exhibit 18

(markups added).

41. Haart has received plaudits from luminaries at prestigious banks such

Jefferies and Blackstone. See Exhibit 18a.

42. Haart has never received a salary for her role as CEO of EWG for the

entire time she has held that position. Instead, Scaglia created a system whereby her

salary would be called a management fee of 2% of EWG’s revenues. See Exhibits

19, 19a. Scaglia insisted on this arrangement because he could thereby take half

Haart’s salary, as he was a co-owner of Freedom. Much of Scaglia’s expenses were

paid by EWG, including his Bentley, his chauffeur, his maid and his chef. His

ongoing cash needs were taken out of the management fee—that is, in effect out of

what would have been Haart’s salary. Scaglia told her this arrangement was more

tax efficient. But the reality was that it permitted Scaglia, who was chronically short

of cash, to take income equal to that of Haart without doing any work. Thus,

although the public perception is that Scaglia was supporting Haart—in reality Haart

was supporting Scaglia. She did this because she loved him and wanted to support

him. Haart took only a small fraction of the management fee and refused to allow

Scaglia to take the full amount of the management fee, largely due to the fact that,

in light of the Covid pandemic, Haart wanted to ensure there was money left at EWG

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to pay the employees and to avoid terminations. EWG owes Haart $7.3 million in

management fees.

43. Scaglia created a system between Freedom and EWG in which Haart’s

and Scaglia’s expenses were charged at the Freedom or e1972 level, and those

expenses which were not company-related were then charged back against Haart’s

management fee. See Exhibit 20 (highlights added).

D. Scaglia Insists on Trying to Take EWG Public Too Soon

44. At this time Scaglia was invested in one other company, Yewno, a

company that develops artificial intelligence. That investment was not doing well,

and he began insisting on trying take EWG public in order to raise cash for Yewno.

The problem was that EWG was not ready to go public. The divisions upon which

Scaglia was counting had only commenced operations at the end of 2019 and had

been at a standstill due to the Covid lockdown. So EWG had not adequately

developed what is known as “proof of concept.” Nevertheless, Scaglia got Citibank

and a Spac called Galileo involved in the going-public effort. Citibank warned him

that there was no adequate “proof of concept.” This effort finally failed in December

2020. Again, in early 2021, Scaglia again pushed to go public, this time with Stifel.

That effort again failed for the same reason. Haart tried to convince him that going

public was premature; she didn’t want to grow the business without growth

financing, but Scaglia kept assuring her that the money would come and to continue.

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He was warned by both Haart and Barbieri and repeatedly told Haart that she should

continue growing and he would take care of the capital raise.

45. Finally, in late 2021, when EWG had matured to the point where proof

of concept was beginning to show, a going-public attempt made more sense. By this

time Scaglia had exited Yewno at a large loss, relinquishing all his shares in return

for not being sued for starting SHS with employees and technology from Yewno.

See Exhibit 20a. Jefferies was retained with the aim of taking EWG public. But this

time, the effort fell almost entirely on Haart’s shoulders while Scaglia was off diving

in Mexico, although Scaglia directed the financials.

46. Scaglia was so desperate for cash that he was prepared to agree to end

up with a smaller portion of EWG than Haart. See Exhibit 21 (showing proposal

Scaglia taking a smaller portion of EWG than Haart).

47. Scaglia wrote on November 30, 2021, to EWG’s auditor for a PCAOB

audit hired in preparation for bringing EWG public. In that letter, Scaglia committed

Freedom to providing necessary financial support to enable EWG to meet its

financial obligations. See Exhibit 22.

48. Similarly, Scaglia stated to an investment firm in December 2021 that

the company needed to raise “some capital in the short term to leverage and

consolidate the first mover advantage that Julia [Haart] and EWG have created.” See

Exhibit 23.

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 49. In the course of the financing effort, Haart received a Letter of Intent

from a potential investor in December 2021 valuing EWG at $500 million. See

Exhibit 24, at second page of emails and page 7 of LOI (highlights added).

50. EWG was valued at $700 million to $1 billion by a prominent

investment firm. See Exhibit 25 at p. 14 (highlight added).

51. Scaglia himself valued EWG at $1-1.5 billion. See Exhibit 25a.

52. The Jefferies and LOI valuations represented dramatic growth in value

for EWG. In 2018, while Scaglia was embroiled in the divorce proceedings from a

prior wife, the business (which, as noted above, had not yet been formed as an LLC),

was valued at $90 million and on a downward trajectory. With Haart stepping in

and turning the strategic direction of EWG around, the valuation of EWG increased

over five times. Rather than mismanaging EWG as Scaglia has misrepresented,

Haart took a declining asset and greatly increased its value in a short period.

53. As recently as last Christmas and January 28 of this year, Scaglia was

texting Haart saying he was “in awe” of her and that “Knowing you and loving you,

it literally brings tears to my eyes.” See Exhibit 26. On January 31, in the midst of

the IPO effort, Haart was working on the filming of her Netflix show, and Scaglia

was present at the filming. Scaglia told Haart on camera that he was in awe of her,

that despite their plan to divorce he still wanted her as his business partner, and that

she was an exceptional CEO. On February 3, he told Freedom’s attorney Ben

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Kozzin that Haart was the best CEO he had ever had, but that he wanted to retain

sole signing control of the Freedom bank accounts.

54. In the first week of February, the IPO effort had not yet borne fruit,

although it was getting close. Scaglia, desperate for $10 million for SHS, which he

didn’t have, decided to get a second mortgage on the marital apartment. Scaglia and

Haart agreed that if they got a mortgage loan of $20 million, they would split it 50-

50, with Scaglia putting his $10 million into SHS and Haart putting her $10 million

into EWG. If they could only get $15 million, Haart agreed to let Scaglia take $10

million for SHS, and she would take $5 million for EWG. Scaglia was speaking to

two potential mortgage lenders at the time. After speaking to the lenders, Scaglia

became concerned that the deal would not go through. Scaglia then proposed to sell

EWG and the apartment for below market value in order to raise cash. See Exhibit

27. (The “Vestry” referred to in Exhibit 27 is a Freedom subsidiary that held the

apartment.) Haart refused. Scaglia went ballistic when he realized he could not get

his quick $10 million for SHS either from EWG or from the apartment. This is when

he began his unlawful campaign to oust Haart from Freedom and EWG.

55. Despite these events, EWG continued to receive significant indications

of interest in EWG. See Exhibit 28.

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E. Scaglia Purports to Fire Haart

56. During Haart’s tenure as CEO of EWG, including at the time the letter

was sent to the auditor referenced above, Scaglia never articulated any issues with

her performance or competence in her position, nor did he raise any issue with the

expenses incurred through e1972. To the contrary, Scaglia praised her consistently,

both publicly and privately to investors and bankers, and he fully supported Haart’s

decisions on behalf of EWG, both from a business and financial perspective. See

Exhibit 7.

57. Suddenly on February 7, 2022, Scaglia broke bad. He and Barbieri (the

third director of EWG) sent an unauthorized letter to Haart accusing her of

mismanagement and overspending, and stating their intention to remove her as CEO

of EWG at EWG’s next board meeting. See Exhibit 29. The EWG Board had no

legal power to remove Haart as CEO. See infra at paragraph 103. The letter is

incorrect and completely misleading, as shown below at paragraphs 87-98.

58. Additionally, on February 8, 2022, Scaglia unilaterally executed a

written consent, purportedly on behalf of Freedom as the sole member of EWG,

asserting that Haart was thereby removed as a Director of EWG, while “Silvio

Scaglia and Paolo Barbieri shall remain in their roles as Directors of [EWG].” See

Exhibit 30. Scaglia signed the written consent purportedly as the President of

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Freedom. Id. Haart did not consent to this action, and because Haart and Scaglia

were 50-50 owners of Freedom, Scaglia had no authority to take it unilaterally.

F. Haart Pushes Back; Scaglia Takes More Unlawful Actions Against Her

59. In response to Scalia’s actions of February 7 and 8, Haart, through

counsel, sent a letter to Scaglia and Barbieri on the evening of February 8, 2022,

informing them that Scaglia did not have the authority to act by written consent on

behalf of Freedom to remove Haart either as a director or CEO of EWG. See Exhibit

31. Haart’s February 8 letter also noted that Scaglia had been involved in and

supported the actions of Haart in her role as CEO, as well as the fact that the removal

of Haart would have negative implications for EWG and would all but destroy

EWG’s ability to develop business and generate profit. Id. The letter stated Haart’s

intention to avoid litigation and attempt to work together to resolve the personal and

business issues amicably. Id.

60. Along with the February 8 letter, Haart delivered her own written

consent on behalf of Freedom, declaring the actions purportedly taken by Scaglia on

behalf of Freedom, including removing Haart as a director and CEO of EWG, as null

and void. See Exhibit 32.

61. Having been contemplated previously, Haart initiated her divorce

proceeding on February 9, 2022.

- 22 -
 62. Upon receipt of the February 8 letter, and in response to the divorce

filing, Scaglia doubled down on his efforts to malign Haart. On the morning of

February 9, 2022, Scaglia terminated Haart’s access to her EWG email account as

well as her access to her corporate credit card. That same day, Scaglia issued an

internal press release falsely announcing that Haart had stepped down as CEO of

EWG, and purportedly naming Barbieri as EWG’s new CEO.

63. Additionally, news of Haart’s termination was leaked to the press, upon

information and belief under the direction of Scaglia, including unfounded

allegations regarding Haart’s conduct and spending during her tenure as CEO.

64. Also on February 9, Haart’s counsel received a letter from counsel for

Scaglia, claiming that Scaglia had authority unilaterally to act on behalf of Freedom

and that his written consent was “binding and effective.” See Exhibit 33. This letter

demonstrates the impasse the parties face with regard to any decisions made on

behalf of Freedom and thus EWG.

65. Scaglia also fired EWG’s Chief Financial Officer, Robert Zaffiris,

despite his recent praise for completing the PCAOB audit (see infra at paragraph 92)

and satisfying demands of the contemplated financing and investor information

requests, because Zaffiris made it clear that he would not go along with Scaglia’s

pretense that expenses were not approved at the board meeting of October 27, 2021.

He also fired its Chief Operating Officer, Robert Brotherton, many other EWG

- 23 -
employees, and Haart’s driver, butler and chef. Meanwhile, his driver, maid, car and

chef are still being paid by EWG. He also threatened Haart’s assistant (who he also

fired), and driver that he would file criminal complaints against them if they didn’t

return the automobile that Haart uses and is owned by a subsidiary of Freedom.

(Haart continues to personally pay salaries for select employees as well as division

heads and other employees who resign or get fired.) On information and belief,

Scaglia is intimidating employees still at EWG not to support Haart and to lie about

her, based on his treatment of employees whom he has already fired. Any statements

which may be submitted by any of these employees should be considered with this

in mind.

66. Scaglia’s vengeful actions did not stop there. Scaglia threatened to

bring movers to remove all of the belongings from the parties’ marital apartment.

(At this point Scaglia had moved out of the apartment.) On February 10, 2022, he

terminated Haart’s access to Freedom’s bank account.

67. Haart commenced this action on February 11, 2022.

68. Two days later, on February 13, 2022, Scaglia escalated his unlawful

campaign to oust Haart by executing more documents purportedly on behalf of

Freedom, as follows:

a. Freedom Holding, Inc. Consent of the Sole Member of the Board of

Directors (Exhibit 34), executed by Scaglia purporting to be the
majority stockholder. This document purports to remove Haart as a
director of Freedom.

- 24 -
 b. Freedom Holding, Inc. Consent of the Sole Member of the Board of
Directors (Exhibit 35). This document, executed by the purported
Board, which now purportedly consists only of Scaglia, purports to
(i) remove Haart from all her positions with Freedom Holding and
(ii) consent to removal of Haart from all her positions with EWG.

c. Written Consent of the Sole Member of EWG (Exhibit 36), which

purports to remove Haart from all her positions with EWG.

d. Amended and Restated By-laws of Freedom (Exhibit 37).

e. Notice of Stockholder Action Taken by Consent in Lieu of a

Meeting of Stockholders dated 2/13/2022 (Exhibit 38), giving notice
of the above actions.

69. All of the above actions were unlawful and ineffective because they

were based on the inaccurate premise that Scaglia held a majority of Freedom’s stock

and voting power—which he did not—and/or that Scaglia otherwise was authorized

to take such unilateral action—which he was not.

70. Scaglia has continued to harass and persecute Haart to the point where

she has had to obtain an order of protection against him in the Family Court of the

State of New York. See Exhibit 39 (order of protection). He and accomplices broke

into the marital apartment to take two large and valuable paintings while Haart and

her daughter were sleeping. He has caused EWG’s counsel, Ayisha Morgan, and

his assistant to threaten associates of Haart with criminal complaints because Haart

will not give up the automobile, leased by a subsidiary of Freedom, that she has been

in possession of for almost two years and for which she has tendered lease payments

- 25 -
for February March 2022. See Exhibit 40. He caused EWG to cease representation

of Haart’s daughter. See Exhibit 40a.

71. Scaglia filed a specious lawsuit against Haart in New York on February

10 alleging that she misappropriated $850,000 from a Freedom account in violation

of an agreement that the limit on withdrawals would be $250,000. There is no such

agreement, and the account in question was the account holding Freedom’s

management fee, which Haart had reluctantly agreed to accept in lieu of salary. He

also accused her of other unauthorized spending on clothing and cosmetics. This is

fatuous. As shown below, Scaglia has been given an exact breakdown of all of

Haart's expenditures from the time she became CEO until now, and he has reported

them as business expenses on Freedom’s taxes. See infra at paragraphs 90-92.

Spending on image is a necessity for Haart because of her extremely high visibility

as a television star and the face of the company. The treatment of these tax

deductible expenses have been approved by an independent tax advisor, DDK,

which provides tax guidance to EWG, Freedom and E1972. Scaglia has long been

aware of these expenses and has reported them as business expenses on Freedom’s

tax returns. That this was done solely to generate hostile publicity is shown by the

fact that Haart hasn’t been served even though the lawsuit was commenced two

weeks ago.

- 26 -
 72. Scurrilous and malicious articles have appeared in the New York Post

Page Six gossip rag, including an item about Haart’s breast implants and items

repeating the falsehoods in Scaglia’s lawsuit. See Exhibit 41. It is a reasonable

inference that Scaglia or someone acting on his behalf planted these stories and that

Scaglia filed the lawsuit for this express purpose.

73. Despite all of the above, Haart is still receiving expressions of interest

in providing financing to EWG, because EWG is growing and thriving. It is likely

that Scaglia will destroy this potential if he is permitted to continue to control EWG.

See Exhibit 28.

G. Scaglia and Barbieri Are Incompetent and Cannot Run EWG

74. By mutual agreement, Scaglia has never participated in the operation

of EWG. As shown below, Scaglia has only been directing the financial statements

and tax returns for Freedom and EWG.

75. If Haart is not restored to her position as CEO of EWG and a director

of EWG and Freedom, it is likely that EWG will fail because of Scaglia’s lack of

understanding of and inability to run EWG. As alleged previously, Scaglia is only

interested in EWG as a source of quick cash to shore up his failing company SHS

(see supra paragraphs 44-46, 54). EWG will likely lose the extremely valuable

deals, contacts, and goodwill that Haart has accumulated for EWG over the last two

and a half years.

- 27 -
 76. Despite his fake image as a billionaire businessman, Scaglia has lost

hundreds of millions of dollars on failed investments, leaving him unable to find

sufficient funding for SHS. His one-time windfall was on the sale of his interest in

a company called Fastweb in 2007. Fastweb was founded in 1999 by Scaglia,

Ruggero Gramatica and Francesco Micheli. Gramatica was also the founder of

Yewno, the company in which Scaglia had to relinquish his shares and was ejected

from the Board. Scaglia has lost hundreds of millions on poor investments in Italian

lingerie company La Perla, and an internet/television platform called Babelgum. His

current project called SHS is struggling and is starved for cash.

77. By contrast, Haart’s work has brought Scaglia’s EWG investment to a

point where profitability is imminent. On information and belief, EWG is the only

Scaglia investment that is still viable.

78. Scaglia has a history of firing executives at his whim. At La Perla,

where he was CEO, he ran through four CFOs in five years: Marco Mancini (who

lasted one year and eight months), Elisabetta Salvani (one year and eleven months),

Luca Pianura (eight months), and Paolo Vanucchi (two years and one month). See

Exhibit 42 (highlights added). He also ran through five La Perla creative directors

in five years: Pedro Lourenco, Emiliano Rinaldi, Alexandre Vauthier, Giovanni

Bianchi, and Haart. At EWG and its predecessor entities, he has run through six

CEOs in ten years: Cristian D’Ippolito, Stefania Valente, Christophe Chenut, John

- 28 -
Hooks, Paolo Barbieri, and Haart. Prior to Haart’s becoming CEO, there was no

corporate CFO or corporate head of human resources. The first CFO hired for EWG

under Haart’s leadership was in November 2019. Since then, he has fired two CFOs,

Mark O’Brien and Robert Zaffiris.

79. EWG was in a disastrous condition when Haart took over as CEO in

April 2019. According to the company’s CFO, Mark O’Brien (hired in November

2019), this is what the company’s financial controls looked like:

 There was a general lack of respect for Corporate, with every

office acting independently—this was particularly the case with
Finance where requests from the Finance group were ignored and
there was little regard for timely submissions of financial data

 There was little to no interaction in the past between the U.S.

operations and Corporate Finance—in fact no one in the
Corporate Finance Group knew what entities should be included
with Elite World Group and what entities were outside of Elite
World Group

 The budgeting process was top down and there was little
opportunity for interaction or feedback so the budgets were not
taken seriously

 Rather than address budget variances and alter expectations or

make changes, “adjustments” were made to justify the variances
and to make it appear that they did not exist. So called
“Chairman Expenses” that had a substantial impact on cash and
the P&L were simply ignored and never discussed.

 There was no monthly close process and even the quarters were
not “consolidations” in the true sense because the only
individuals with knowledge of how to consolidate were outside

- 29 -
 consultants who were brought in once a year to do consolidated
financial statements for the auditors.

 Advanced accounting concepts like proper currency translations,

equity accounting, revenue recognition and consolidation
accounting were not skills that existed in the Corporate Finance
group and outside resources were used extensively to deal with
these matters

 Cash controls over disbursements and cash collections were not

priorities at the local offices, although substantial progress was
made before my arrival on the cash collection issue in 2019—I
believe initially due to pressure from Scaglia and then Paolo. But
it should have never gotten as bad as it was.

 There was not a relationship between the Finance function and

leaders of the offices, which is essential to working together in a
respectful manner. Again, this was due to a lack of perceived
value from the Corporate Finance Group.

 With respect to systems, there was a perception that getting all

offices onto NetSuite would solve Elite’s financial reporting
issues, so work arounds kept being developed while the
implementation of NetSuite was delayed. However, even though
some of the local accounting systems were antiquated, NetSuite
was not the proper solution for Management Reports on the
consolidated business—that required a database system that
could standardize the presentation of financial information
irrespective of what accounting system generated it. This was
solved for by the extensive use of Excel spreadsheets for every
Corporate report.

 Cash and Accounts Receivable reports were prepared using

different basis such that the information was not comparable
between entities.

See Exhibit 43.

- 30 -
 80. Due to the incompetence and inattention of Scaglia and Barbieri, who

was CEO at the time, EWG’s subsidiary called Women NY was raided by an agency

called Elite USA (not related to EWG). Elite USA was owned by Eddie Trump and

run by Dejan Markovic, who had previously started and owned the Women network

all over the world and had relationships with most of the agents there. Haart walked

straight into this fiasco. Scaglia was blasé about it, not listening to advice that losing

Women NY would cause EWG to lose half its talent, which is exactly what

happened, causing substantial harm to EWG. Although the agents tried to blame the

hiring of Haart as the reason for their defection, evidence of contract tampering to

add key man clauses to models and mother agents contracts (in order to enable these

agents to bring the talent with them when they left), were found before Haart had

even joined the company, proving that this plan had been initiated during Barbieri’s

reign as CEO, right under his nose. See Exhibit 44.

81. Markovic then set his sights on EWG’s European subsidiaries Women

Paris and Women Milan. Haart spent the months of July through December of 2019

saving Women Paris and Women Milan by going to every agent in every EWG

agency around the world, telling them her vision for the company and convincing

them to trust and believe in her. The effort was successful. Markovic failed to empty

Women Paris and Women Milan, and Haart saved an empty agency, Women NY.

At the upcoming fashion week of 2022 Women NY is set to dominate. See Exhibit

- 31 -
16 at pp. 4-5 for a more detailed description of Haart’s handling of the Women NYY

situation. EWG is currently the claimant in an arbitration concerning these events.

82. Another example of Scaglia’s and Barbieri’s inattention was a bad

situation at EWG’s agencies in China. These agencies had been ignored until Haart

sent an employee to China to check them out. It turned out that they were a mess,

with agencies suing models just to get cash into their accounts and agencies refusing

to provide information. See Exhibit 45.

83. Scaglia has had run-ins in the past with Haart over imagined wrongs.

In January 2021, for example, he wanted to fire the company’s then-CFO, Mark

O’Brien, because he wanted O’Brien to transfer a letter of credit from Freedom to

EWG, which would free up $1.2 million in Freedom, but would freeze $1.2 million

in EWG, which it could not afford in the midst of the Covid pandemic, and Scaglia

wasn’t willing to wait for O’Brien to finish work on financials for the purpose of

getting a new investment. Haart finally convinced him that it would be madness to

fire O’Brien, the CFO, in the middle of negotiations for financing, but O’Brien found

out that Scaglia was planning to fire him. This caused additional delays, legal fees

and payments for promised bonuses that EWG could not afford at such a precarious

time. See Exhibit 16 at pp. 12-13 (Haart email to Scaglia of January 21, 2021);

Exhibit 46a.

- 32 -
 84. Scaglia is interested in EWG only as a source of quick cash for his failed

investment in SHS and to support his luxurious lifestyle. Indeed, while Haart was

taking only a fraction of her share of the management fee, Scaglia was constantly

demanding his full share. Haart has repeatedly had to deal with Scaglia’s demands

for immediate cash, and generally irrational demands. See, e.g. Exhibit 16 passim;

Exhibits 46, 46a (highlights added).

85. Haart was very unhappy with the arrangement that she take part of

Freedom’s 2% management fee in lieu of salary and on several occasions has

protested. Scaglia continued to insist on it. See Exhibit 47.

86. While Haart has been working incredible hours so that EWG can

survive and thrive, Scaglia has been on a four-month vacation in Mexico, for which,

again, he needs cash. See Exhibits 48 (sampling of Haart’s meeting schedule); 49

(Scaglia’s vacationing).

H. Scaglia’s Letter to Haart of February 7 is Incorrect and Misleading

87. As noted above, Scaglia and Barbieri sent a letter dated February 7,

2022 to Haart purporting to dismiss her from her position as CEO of EWG. Exhibit

29. As is explained below, the letter gives a completely misleading picture of the

state of EWG and Haart’s leadership.

88. The letter makes six basic arguments: (1) EWG’s negative EBITDA is

attributable to oversize corporate costs, including those attributable to e1972; (2)

- 33 -
Haart’s attempts to raise new capital have failed: (3) Haart’s other target, to develop

the digital division, has not produced the intended results, never breaking even; (4)

urgent cost-cutting is necessary; and (5) the Elite Model Look contest has completely

lost its relevance and (6) the licensing business has shrunk to almost nothing. The

following paragraphs rebut these arguments.

89. Negative EBITDA and high corporate costs. Until the date of the

February 7th letter, Haart and Scaglia had always agreed that, in order to grow the

business, EWG would need to go through a few years of unprofitability. In fact, as

noted above, he signed a going concern document promising to provide financial

support if necessary. See supra at paragraph 47; Exhibit 22. There was no ambiguity

about it; Scaglia was on board with this plan. Indeed, it is Business 101 that new

ventures or expansions often require an initial period of unprofitability. In fact, as

noted above, EWG is projected to reach profitability this year.

90. Costs. Scaglia’s complaints about costs are a pretext. Scaglia has also

taken funds out of EWG for his own purposes. See, e.g. Exhibit 50 (with Scaglia

expenses circled in red). Moreover, Scaglia has always directed EWG’s financials.

See, e.g., Exhibit 51, which contains a few examples of the voluminous

documentation of Scaglia’s involvement in the financials.

91. Scaglia always had a detailed itemized spreadsheet of Haart’s costs ever

since she started at EWG. See Exhibits 51aa, 51ab, 51ac, and 51ad, containing

- 34 -
itemizations for 2019, 2020, and 2021. He pushed for the structure of allocating

those costs to e1972, which is not a subsidiary of EWG but rather of Freedom. He

signed and filed the tax returns allocating those costs, even while signing those

returns. See, e.g. Exhibit 52 (excerpts from 2020 Freedom tax return).

92. Furthermore, a PCAOB audit was performed for 2018, 2019 and 2020

and these audits determined that no funds were misspent. A PCAOB audit is a very

intense and invasive process. The only concern the PCAOB had was that the

company was still running at a loss, so Scaglia signed the going-concern letter. See

Exhibit 52a (PCAOB audit).

93. Further, it was Scaglia who was constantly pushing EWG for a quick,

cheap transaction to provide the cash he needed for SHS. See supra at paragraphs

44-46, 54.

94. Failure to obtain new capital investment. The company was on the

verge of closing an investment deal—indeed, Haart received information on

February 8 regarding six interested parties—when Scaglia torpedoed it by purporting

to fire Haart. See Exhibit 28. Scaglia has frightened other investors away by his

insistence on being able to remove funds from EWG for his own benefit upon the

closing of any fund raise (which he would then apply to support his SHS venture or

use for personal expenses).

- 35 -
 95. The digital division has not performed as intended. Again, Scaglia was

fully on board with developing the digital division—which is essential to developing

EWG into a one-stop, comprehensive and integrated provider of talent media

services as a described above, and knew that this would require an initial period of

unprofitability. The digital division was started at the end of 2019 and then had to

shut for most of the year in 2020 and only began making deals once the lockdown

restrictions were slightly lifted. This division, while still not profitable, is the reason

EWG only lost 34% of its revenues in 2020 and 11% in 2021 (compared to 2019),

during the pandemic, compared to the industry average which was around 70%.

96. Cost-cutting is necessary. Because financing was still not finalized,

Haart came up with a cost-cutting strategy that would not destroy all that has been

built. Her idea was to spin off those new divisions – digital, virtual and metaverse,

which while growing quickly were still not profitable. This would transform EWG

instantaneously into an EBITDA positive talent management company, which

would enable a loan to finance the new spinoff until VC funding could be obtained.

Scaglia was enthusiastic, his only concern being how to get money out for himself.

See Exhibit 52b.

97. The Elite Model Look contest has failed. This is an old, stale issue that

was resolved years ago. The Elite Model Look contest was basically an old-

fashioned “Miss Universe”-style beauty contest. It was an anachronism, never made

- 36 -
much money, and was incompatible with the message of female empowerment that

EWG wants to project, as Haart advised Scaglia back in 2019. See Exhibit 46, p. 2.

Moreover, the Covid pandemic made these events impossible during 2020 and 2021.

98. The licensing business has shrunk to almost nothing. When Haart

began as CEO, the licensing business was in a state of disarray. There was no clear

licensing strategy or distribution, and EWG was engaged with sub-par vendors

creating cheap and brand-damaging goods sold in down-market stores. Haart and

the Board set a strategy to develop breakthrough partnerships with well-established

global organizations that are well positioned to meet the needs of EWG’s global

business and audience. As an example, Haart has just negotiated a licensing

agreement with Elysium, a science-backed supplement business, to create a

revolutionary skincare line with the help of Nobel Prize-winning scientists.

I. Scaglia’s Ongoing Occupation of EWG and Lockout

of Haart is Grievously Harming EWG and Freedom

99. Scaglia’s unauthorized actions with regard to the purported removal of

Haart as the CEO and a director of EWG have been taken in retaliation for Haart’s

divorce filing and the deterioration of the parties’ personal relationship and in order

to fund Scaglia’s other cash-strapped venture. Without Haart at the helm of EWG,

EWG will lose many of the potential deals Haart has negotiated, including,

importantly, opportunities for the sale of EWG. As stated by EWG’s CFO Robert

Zaffiris, “efforts to remove Julia will be extremely detrimental to the business and

- 37 -
our chances of financing, whereby we continue to generate new interested parties

who are quite worthy.” Exhibit 28. (Shortly after Zaffiris sent this email, Scaglia

illegally fired Zaffiris.) Because all EWG profits flow directly to Freedom, Scaglia’s

actions are not in the best interest of Freedom either.

100. Scaglia had no authority to take any of these purported actions on behalf

of Freedom as the sole member of EWG, and those actions are legally ineffective

and should be declared invalid.

101. Scaglia is causing irreparable harm to both Freedom and EWG. His

actions must be stopped before he causes further harm.

J. Scaglia’s Purported Ouster of Haart was Unlawful

102. Scaglia’s several actions purportedly taken on February 7 and 13, 2022,

as the majority stockholder of Freedom (see supra at paragraphs 58, 68) were

unlawful, null and void because the Entity Restructuring Agreement of April 1, 2019

(Exhibit 6), expressly and unambiguously provides that Scaglia and Haart each own

50% of all classes of stock of Freedom. There is nothing in Freedom’s governing

documents giving Scaglia the power to act unilaterally on Freedom’s behalf. Scaglia

therefore cannot take any action on behalf of Freedom without Haart’s consent.

103. Scaglia’s and Barbieri’s February 8 ouster of Haart as the CEO of EWG

(see supra at paragraph 57) was unlawful. Scaglia may argue that he and Barbieri

had the power to do so because they had the majority of the directorships of EWG

- 38 -
and could therefore outvote her. This is incorrect. The EWG Directors were

delegated their authority by EWG’s sole Member, Freedom. The EWG Operating

Agreement provides: “The Member may delegate any or all of the Member’s powers

and responsibilities to an agent, employee, or officer as set forth in a written

appointing resolution of the Member.” See Exhibit 53. Therefore the EWG

Directors were acting as agents of the Member. It is hornbook law that an essential

element of agency is the principal’s right to control the agent’s actions. Here, the

principal is Freedom, which was and is owned 50-50 by Scaglia and Haart. Because

Haart did not and would not consent to her removal, and therefore Freedom as the

Member of EWG could not have so consented, it was beyond the scope of the agent’s

(i.e. the EWG Board’s) authority to remove her.

COUNT I
(Relief Pursuant to 8 Del. C. § 225)

104. Petitioner repeats and realleges the foregoing paragraphs as if fully set

forth herein.

105. 8 Del. C. § 225 provides in pertinent part that:

Upon the application of any stockholder or director, or any

officer whose title to office is contested, the Court of
Chancery may hear and determine the validity of any
election, appointment, removal or resignation of any
director or officer of any corporation, and the right of any
person to hold or continue to hold such office, and, in case
any such office is claimed by more than 1 person, may
determine the person entitled thereto; and to that end may
make such order or decree in any such case as may be just

- 39 -
 and proper, with power to enforce the production of any
books, papers and records of the corporation relating to the
issue.

106. This case meets the requirements of 8 Del. C. § 225. Haart contests

Scaglia’s purported removal of her as a director of Freedom and from any other

positions she holds in Freedom. As shown above, Haart has the right to continue to

hold her position as a director of Freedom because Scaglia and Haart were 50-50

owners of Freedom, and thus Scaglia did not control a majority of Freedom’s

stockholder voting power.

107. Accordingly, Haart respectfully requests that the Court, pursuant to 8

Del. C. § 225, determine that Scaglia’s purported removal of Haart as a director and

officer of Freedom Holding, Inc. was invalid and of no legal effect and that Haart

continues to hold the positions in Freedom from which Scaglia purported to remove

her.

108. Haart does not have an adequate remedy at law.

COUNT II
(Relief Pursuant to 6 Del. C. § 18-110)

109. Petitioner repeats and realleges the foregoing paragraphs as if fully set

forth herein.

110. 6 Del. C. § 18-110 provides in pertinent part as follows:

(a) Upon application of any member or manager, the

Court of Chancery may hear and determine the validity of
any admission, election, appointment, removal or

- 40 -
 resignation of a manager of a limited liability company,
and the right of any person to become or continue to be a
manager of a limited liability company, and, in case the
right to serve as a manager is claimed by more than 1
person, may determine the person or persons entitled to
serve as managers; and to that end make such order or
decree in any such case as may be just and proper, with
power to enforce the production of any books, papers and
records of the limited liability company relating to the
issue.

***
(c) As used in this section, the term “manager” refers to
a person
(1) Who is a “manager” as defined in § 18-101 of
this title; and
(2) Whether or not a member of a limited liability
company, who, although not a “manager” as defined in §
18-101 of this title, participates materially in the
management of the limited liability company.

111. This case meets the requirements of 6 Del. C. § 18-110. Haart contests

Scaglia’s removal of her as the CEO of EWG. As the CEO who ran the day-to-day

operations of EWG, Haart qualifies as a “manager” under 6 Del. C. § 18-110(c)(2).

Barbieri and Haart both claim the right to serve as the CEO.

112. According to the Action by Written Consent of [EWG] that Scaglia

signed on February 8, 2022, purportedly as President on behalf of Freedom as sole

member of EWG (but which Scaglia had no authority to do), the position of Director

of EWG to which Haart, Scaglia and Barbieri were appointed on March 1, 2020 were

officer positions governed by Delaware law regarding fiduciaries and

principal/agent concepts. As such, Scaglia and Barbieri exceeded their agency and

- 41 -
officer authority to act on behalf of Freedom to remove Haart without the approval

of Freedom’s board of directors or the consent of Haart.

113. Accordingly, Haart respectfully requests that the Court, pursuant to 6

Del. C. § 18-110, determine that the removal of Haart and installation of Barbieri as

the CEO of EWG was invalid and of no legal effect and that Haart remains the CEO

of EWG.

114. Haart does not have adequate remedy at law.

COUNT III
(Appointment of a Custodian Pursuant to 8 Del. C. § 226)

115. Petitioner repeats and realleges the foregoing paragraphs as if fully set

forth herein.

116. Pursuant to 8 Del. C. § 226(a)(2), this Court is empowered, upon the

application of any stockholder, to appoint a person to be a custodian of and for a

Delaware corporation if:

[t]he business of the corporation is suffering or is

threatened with irreparable injury because the directors are
so divided respecting the management of the affairs of the
corporation that the required vote for action by the board
of directors cannot be obtained and the stockholders are
unable to terminate this division.

117. As alleged herein, Scaglia purported to remove Haart as a director of

Freedom, but that purported removal was legally ineffective. The statutory

prerequisites for the appointment of a custodian pursuant to Section 226(a)(2) have

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been satisfied here. The appointment of a custodian for Freedom is critically

necessary, as the Board is deadlocked on actions without which the Company and

EWG both risk significant injury to its business, and the stockholders and

directors—Haart and Scaglia—are unable to terminate the deadlock because each

owns 50% of the stock of Freedom.

118. The Company’s corporate governance structure is untenable on a long-

term basis. Key decisions cannot validly be made and fundamental and entrenched

differences of opinion exist between Haart and Scaglia.

119. Because of the deadlock, the affairs of both the Company and EWG are

being irreparably harmed.

120. Accordingly, Haart respectfully requests that the Court, acting pursuant

to 8 Del. C. § 226(a)(2), appoint a custodian for the Company with the authority

necessary to act in the best interests of the Company and its stockholders.

Appointing such a custodian would break the deadlock.

121. Haart does not have an adequate remedy at law.

COUNT IV
(Declaratory Judgment)

122. Petitioner repeats and realleges the foregoing paragraphs as if fully set

forth herein.

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 123. A genuine dispute exists between Haart and Scaglia regarding whether

actions taken by Scaglia purportedly on behalf of the Company as the sole member

EWG were and are unlawful and null and void.

124. Haart seeks a declaration that:

a. Scaglia’s written consent purporting to remove Haart as a director

of EWG was and is unlawful and without legal effect;

b. The purported removal of Haart and installation of Barbieri as the

CEO of EWG was and is unlawful and null and void; and

c. Haart remains a director of EWG, and that actions taken without

proper notice to Haart, proper voting, or otherwise material
compliance with the Company’s corporate governance were and are
unlawful and null and void.

COUNT V
(Breach of Fiduciary Duty)

125. Petitioner repeats and realleges the foregoing paragraphs as if fully set

forth herein.

126. As a director of the Company, Scaglia owes fiduciary duties to the

Company and its shareholders, including Haart.

127. By engaging in the actions described above, which inure to the

detriment of both the Company and EWG, Scaglia has violated his fiduciary duties

to the Company.

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 128. Scaglia’s actions are unauthorized, have caused a deadlock at the

Company, and have risked any profit to be realized for EWG, all due to Scaglia’s

personal vendetta.

129. Haart has no adequate remedy at law.

PRAYER FOR RELIEF

WHEREFORE, Petitioner respectfully requests that this Court enter a

decision and order:

A. Reinstating Haart as Chief Executive Officer of EWG,

director of EWG, and director of Freedom;

B. Appointing a custodian pursuant to 8 Del. C. § 226(a)(2)

to act with the limited purpose of breaking the deadlock with regard to

the Board of the Company and to act in the best interest of the Company

and its stockholders;

C. Declaring that Scaglia’s actions purporting to remove

Haart from her positions in Freedom, including her positions as a

director and officer of Freedom, are unlawful and without legal effect;

D. Declaring that Scaglia’s actions purporting to remove

Haart from her positions at EWG, including her positions as CEO and

a director of EWG, are unlawful and without legal effect;

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 E. Declaring that Haart remains in all positions at Freedom

and EWG, including but not limited to those aforesaid;

F. Temporarily and permanently enjoining Scaglia from

exceeding his authority with respect to Freedom and EWG;

G. Enjoining Scaglia from approving, directing or engaging

in any extraordinary transaction by Freedom or EWG without the

express permission of Haart;

H. Awarding to Petitioner her costs and expenses, including

reasonable attorneys’ fees, incurred in connection with this action; and

I. Granting such other and further relief as this Court shall

deem equitable, just and proper.

CONNOLLY GALLAGHER LLP

/s/ Henry E. Gallagher, Jr.

OF COUNSEL: Henry E. Gallagher, Jr. (#495)
Matthew F. Boyer (#2564)
Thomas R. Ajamie Scott E. Swenson (#4766)
Wallace A. Showman 1201 North Market Street, 20th Floor
AJAMIE LLP Wilmington, Delaware 19801
460 Park Avenue, 21st Floor (302) 757-7300
New York, NY 10022 hgallagher@connollygallagher.com
(917) 459-6494 mboyer@connollygallagher.com
sswenson@connollygallagher.com

Attorneys for Petitioner Julia Haart

Dated: February 28, 2022

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