Vishal Garg ruled to pay $5.5M in a decade-long lawsuit

A New York jury found Vishal Garg, CEO and founder of digital mortgage lender, liable for breach of fiduciary duty and conversion in a decade-long lawsuit filed by his former partner, Raza Khan. Garg intends to appeal. 

The court ordered Garg to pay $5.5 million to Educational Investment & Finance Corporation (EIFC), the company the partners founded in 2009. This includes $2.3 million for breach of fiduciary duty, $2.2 million for conversion, and $1 million for punitive damages. 

The resources will be directed to pay the firm’s creditors, including Internal Revenue Services (IRS) and Garg, who loaned at least $2.5 million to the business. The trial took place from May 6 through May 17 in New York Supreme Court in Manhattan.  

Garg was not found liable for unjust enrichment. Meanwhile, Khan, whose initial request was for $100 million in damages, was also found responsible for conversion, according to court filings in May. Attorneys for Garg complained to the judge on July 2 that Khan failed to place money in escrow related to another conversion judgment related to the case.

Khan’s attorney, David Moreno, said in a brief email that his client was not found liable for conversion, but did not respond to requests for additional information or provide documentation.

The civil litigation started in 2013 when Khan sued his long-time friend and business partner Garg for taking “unilateral action to fraudulently” transfer about $2.8 million from two companies, EIFC and Embark, into his personal account or funds to third parties.

Khan and Garg, who met at Stuyvesant High School and attended New York University together, co-founded EIFC, a company specialized in asset management and advisory services for private student loan portfolios, in 2009. Each of them has 50% of the company. EIFC was a 25% shareholder of Embark, a company that created proprietary software for college applications. 

In a statement to HousingWire, Garg said he intends to “pursue all efforts to overturn the verdict” since he kept EIFC and Khan “afloat for years by pouring personal money into the company.” 

“Raza and I grew up like brothers in Queens, and went to high school and college together. We were best friends when we started this business. We should have kept better books and records. I’m grateful that the overwhelming majority of claims in this case have been dismissed over the years and am optimistic that the truth about these final claims will prevail on appeal. I’m glad to have this case finally concluded.”

Garg’s attorney, Jason Berland, said: Khan already has a judgment outstanding against him for conversion, “and the court has stated there will be a finding of contempt against Khan and a penalty at the conclusion of the trial based on his deceptive conduct. Mr. Khan was previously stripped of control of EIFC for mismanagement by another judge. We appreciate and agree with the jury’s ruling that Mr. Garg was not liable for unjust enrichment, meaning that Mr. Garg did not personally benefit whatsoever from the allegations.”

A spokesperson at Better told HousingWire that this is a “personal matter” predating its foundation and has no bearing on its operations.

Garg will continue to lead the company. In the first three months of 2024, Better Home & Finance Holding Co., the parent of digital lender Better, improved its mortgage production and revenues. However, expenses continued to increase, and the company remains unprofitable.

Recently, the company changed its leadership structure by hiring mortgage veteran Chad Smith, who was the CEO at Mission Loans, as president and chief operating officer.

James Kleimann contributed reporting

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