Silicon Valley investor sues Brookfield for fraud, attempted bribery

A Silicon Valley investor with ties to Elon Musk is suing Brookfield, alleging impropriety as it sought to rectify commercial real estate difficulties in the wake of the pandemic.

Josh Raffaelli claims the $1 trillion asset manager engaged in fraud and attempted bribery following significant real estate losses, according to the lawsuit reported by the New York Times. Brookfield fired Raffaelli in December after he filed a whistleblower complaint with the SEC, alleging the company’s pandemic-era troubles led to improper management of investment funds. 

Brookfield Property Partners lost approximately $2 billion in 2020 during Covid-19’s devastating impact on commercial properties, according to financial disclosures. The lawsuit Raffaelli filed on Thursday alleges the financial pressure caused Brookfield to renege on pledges to invest hundreds of millions alongside outside investors in Raffaelli’s tech-focused funds, which managed $1.75 billion by 2024.

Brookfield also vetoed a potential $100 million investment from “a major foreign conglomerate,” the lawsuit claims.

Raffaelli, who previously held board observer positions at SpaceX and Tesla, had leveraged his connection with Elon Musk to secure coveted investments in the billionaire’s private companies for his Brookfield funds. The lawsuit claims he was forced to reduce investments in Musk’s company, including a planned $25 million investment in AI venture xAI to just $5 million — a missed opportunity as its value later tripled to $80 billion.

Raffaelli alleges Brookfield attempted to merge his funds into Pinegrove Capital Partners, another Brookfield-owned asset manager that he claims exaggerated its capital levels by over $100 million. He claims Brookfield offered him compensation potentially reaching $46 million to pitch investors on the merger, which he interpreted as a bribe.

“Brookfield repeatedly betrayed the trust and best interests of its investors, and then fired the employee who challenged its behavior,” said Raffaelli’s lawyer.

A spokesperson for Brookfield called the lawsuit “absolutely without merit” and stated the company would “vigorously defend against this meritless suit, which was brought by a disgruntled former employee.”

Brookfield’s opaque structure keeps curious onlookers at arm’s length regarding the happenings of its real estate business. Brookfield Asset Management, rebranded as Brookfield Corporation, privatized Brookfield Property Partners in 2021. All the moving pieces make it unclear how $2 billion in defaults affected the corporation.

— Holden Walter-Warner