Editing Digital Domain (section)

== Financial difficulties ==
In 2009, Digital Domain parent company DDMG launched Tradition Studios in Florida to develop and produce original, family-oriented CGI-animated features. The studio moved on January 3, 2012, to a new {{convert|115,000|sqft|m2|adj=on}} facility in [[Port St. Lucie, Florida|Port St. Lucie]], built with the city's incentives.<ref>{{cite news |last=Erazo |first=Christin |date=December 29, 2011 |title=Digital Domain ready to open its dazzling Tradition Studios {{!}} Photo Gallery |url=http://www.tcpalm.com/news/2011/dec/29/digital-domain-ready-to-open-its-dazzling/ |access-date=December 30, 2011 |newspaper=TCPalm}}</ref> The studio attracted a number of creators, including [[Aaron Blaise]], the director of ''[[Brother Bear]]'', and [[Brad Lewis]], co-director of ''[[Cars 2]]'', who together were developing an animated feature film ''The Legend of Tembo'' for a planned 2014 release.<ref name="Hollywood">{{cite news |last=Giardina |first=Carolyn |date=2011-06-29 |title='Cars 2' Co-Director Brad Lewis Joining Digital Domain's Animation Studio |url=https://www.hollywoodreporter.com/news/cars-2-director-brad-lewis-206886 |access-date=2011-06-29 |work=[[The Hollywood Reporter]]}}</ref><ref>{{cite news |last=Giardina |first=Carolyn |date=2011-08-10 |title=Aaron Blaise and Chuck Williams will direct the film, currently in development. |url=https://www.hollywoodreporter.com/news/legend-tembo-be-tradition-studios-221461 |access-date=2011-08-11 |work=[[The Hollywood Reporter]]}}</ref><ref name="Tcpalm">{{cite news |last=Howk |first=Alexi |date=2011-05-27 |title=Port St. Lucie's Digital Domain positioning itself to rival Disney, Pixar |url=http://www.tcpalm.com/news/2011/may/27/digital-domain-positioning-itself-to-rival-pixar/ |access-date=2011-06-29 |publisher=tcpalm.com}}</ref><ref>{{cite news |last=Howk |first=Alexi |date=August 11, 2011 |title=Digital Domain's Tradition Studios' 1st feature film to debut fall 2014 {{!}} Exclusive 1st look |url=http://www.tcpalm.com/news/2011/aug/11/digital-domains-tradition-studios-announces-film/ |access-date=August 16, 2011 |newspaper=TCPalm}}</ref>

In November 2011, DDMG completed a successful IPO capital raise for $40 million. Textor's Florida expansion plans did not overcome the continuing negative cash flow of Digital Domain's primary visual effects business. In the summer of 2011, Lydian Private Bank failed.<ref>{{Cite web |last=Ostrowski |first=Jeff |title=Palm Beach-based Lydian Private Bank fails |url=https://www.palmbeachpost.com/story/business/2011/08/19/palm-beach-based-lydian-private/7270058007/ |access-date=2024-01-24 |website=The Palm Beach Post |language=en-US}}</ref> As DDMG's principal lender and major shareholder, this had a major impact during the peak of DDMG's capital consumption. Lydian's sizable stake was sold to a [[hedge fund]] affiliated with Florida Power & Light which was then traded to hedge fund and lender Tenor Capital. Tenor Capital engaged in heavy short-selling of DDMG's publicly listed stock as a strategy to pull cash proceeds from the daily trading of DDMG stock. {{Citation needed|date=January 2024}}

Once considered critical funding for the future of DDMG, the IPO became the vehicle by which hedge funds could prevent the company from accessing capital while profiting from the decline in DDMG's stock price.<ref name="Pfahler">{{cite web |last=Pfahler |first=Eric |date=September 8, 2013 |title=One year later — how Digital Domain collapsed and how John Textor hopes to regroup |url=http://www.tcpalm.com/news/2013/sep/08/digital_domain-collapse-john-textor/ |access-date=September 8, 2013}}</ref> Tenor became a stakeholder in DDMG in early May 2012, with DDMG stock price trading at an all-time high,<ref>{{cite web |title=Digital Domain Media (OTCPK: DDMGQ) |url=http://investing.money.msn.com/investments/charts?symbol=ddmgq#"zRange":"11","startDate":"2012-4-16","endDate":"2012-5-18","frequency":"d","chartStyle":"mountain","chartCursor":"1","scaleType":"0","yaxisAlign":"right","mode":"pan" |url-status=dead |archive-url=https://web.archive.org/web/20140226143131/http://investing.money.msn.com/investments/charts/?symbol=ddmgq#"zRange":"11","startDate":"2012-4-16","endDate":"2012-5-18","frequency":"d","chartStyle":"mountain","chartCursor":"1","scaleType":"0","yaxisAlign":"right","mode":"pan" |archive-date=2014-02-26 |access-date=2017-04-25 |website=MSN Money}}</ref> but DDMG would soon be unable to access the cash needed to fund its Venice operations and its Florida studio growth.<ref>{{cite web |last=Seymour |first=Mike |date=June 17, 2013 |title=John Textor and what really happened inside Digital Domain Media Group? |url=http://www.fxguide.com/featured/john-textor-and-what-really-happened-inside-digital-domain-media-group// |access-date=June 17, 2013}}</ref> Documents and emails demonstrate that Digital Domain senior management believed they had options to put cash into the company. However, Tenor Capital had significant weight as a chief lender and, according to Palm Beach Capital and the Tenor strategy, may have been shorting DDMG stock to profit from its failure.<ref>{{cite news |last=Kitchens |first=Susan |date=October 16, 2008 |title=The Convertible Arb Irony |url=https://www.forbes.com/2008/10/15/Industry-Insights-Hedge-Fund-Convertible-Short-Panel3.html |access-date=October 16, 2008 |work=Forbes}}</ref>

When a deal to fund the company failed on July 31, Tenor Capital cited a violation of a minimum cash covenant and demanded $51 million on August 20 as repayment for its $35 million loan made four months earlier.<ref name="Pfahler" /> The lenders appointed Mike Katzenstein as interim chief operating officer of the company who acted without conferring with DDMG senior management,<ref name="Pfahler" /> deciding to close the Florida studio, causing Chairman John Textor to submit a letter of resignation "in profound disagreement" with this decision.<ref>{{cite web |date=September 7, 2013 |title=John Textor Letter of Resignation |url=http://www.documentcloud.org/documents/779104-john-textor-letter-of-resignation.html#document/p6/a117033 |access-date=2017-05-01}}</ref>

On September 7, 2012, it was announced that all of DDMG's Port St. Lucie's operations—including Tradition Studios—were to be shut down, laying off nearly 300 newly trained and recruited employees.<ref name="Channel5News">{{cite news |date=September 7, 2012 |title=Digital Domain Port St. Lucie facility closing: Nearly 300 employees laid off |url=http://www.wptv.com/dpp/news/region_st_lucie_county/port_st_lucie/reports-of-digital-domains-facility-in-port-st-lucie-closing |url-status=dead |archive-url=https://web.archive.org/web/20120910084321/http://www.wptv.com/dpp/news/region_st_lucie_county/port_st_lucie/reports-of-digital-domains-facility-in-port-st-lucie-closing |archive-date=September 10, 2012 |access-date=September 11, 2012 |work=WPTV News Channel 5 |location=Port St. Lucie, Florida|agency=WPTV}}</ref>

=== Bankruptcy, financial restructuring, and lawsuits ===
On September 11, 2012, Digital Domain Media Group Inc. filed for Chapter 11 bankruptcy protection after the company's hedge fund lenders alleged the company defaulted on a minimum cash covenant relating to a $35 million loan. DDMG's lenders proposed a deal to sell its operating businesses–Digital Domain and Mothership—to a private investment firm, [[Searchlight Capital Partners]], for $15 million. At the public auction on September 21, 2012, Digital Domain's visual effects business and its principal animation feature film properties were instead acquired by a joint venture led by a leading DDMG shareholder [[Beijing Galloping Horse Group|Beijing Galloping Horse America, LLC]] in partnership with Reliance MediaWorks (USA) The sale was approved on September 24, 2012.<ref>{{cite news |last=Szalai |first=George |date=September 24, 2012 |title=China's Galloping Horse and India's Reliance MediaWorks Win Auction for Digital Domain |url=https://www.hollywoodreporter.com/news/digital-domain-auction-galloping%20horse-reliance-china-india-400103 |access-date=September 24, 2012 |work=The Hollywood Reporter}}</ref>

In July 2013, approximately nine months after Digital Domain filed for bankruptcy, the majority ownership was acquired by Hong Kong listed public company Sun Innovation. This acquisition placed an approximate $3.5 billion valuation on Digital Domain, with Reliance MediaWorks continuing to own the minority stake. Daniel Seah was appointed CEO.<ref>{{Cite news |date=July 27, 2013 |title=Digital Domain 3.0 Becomes Part of Sun Innovation |url=http://www.businesswire.com/news/home/20130726005913/en/Digital-Domain-3.0-Part-Sun-Innovation |access-date=November 11, 2013 |work=Press release |publisher=Digital Domain}}</ref> Seah spearheaded the bankruptcy acquisition and protection of Digital Domain by DDMG shareholder Beijing Galloping Horse America, LLC.

The bankruptcy and financial restructuring of Digital Domain triggered a number of lawsuits naming John Textor, former Apple CEO John Sculley and the entire Board of Directors, the auditors and others involved in the business and in the IPO offering.<ref>{{cite web |date=20 September 2012 |title=Berman DeValerio Files Securities Class Action Lawsuit against Former Executives and Directors of Digital Domain Media Group, Inc. |url=http://www.businesswire.com/news/home/20120920006639/en/Berman-DeValerio-Files-Securities-Class-Action-Lawsuit |access-date=25 May 2013 |work=Business Wire}}</ref><ref>{{cite web |last=Howk, Scripps Treasure Coast Newspapers |first=Alexi |title=Digital Domain lawsuits: Three suits accuse Digital Domain of lying about financial status |url=http://www.wptv.com/dpp/news/region_st_lucie_county/port_st_lucie/digital-domain-lawsuits-three-suits-accuse-digital-domain-of-lying-about-financial-status |url-status=dead |archive-url=https://web.archive.org/web/20131111221738/http://www.wptv.com/dpp/news/region_st_lucie_county/port_st_lucie/digital-domain-lawsuits-three-suits-accuse-digital-domain-of-lying-about-financial-status |archive-date=11 November 2013 |access-date=25 May 2013 |publisher=WPTV.com}}</ref><ref>{{cite news |title=Securities Class Action Lawsuit Filed Against Digital Domain Media Group, Inc.; Shareholders With Large Losses Encouraged to Contact Holzer Holzer & Fistel, LLC Regarding November 19th Lead Plaintiff Deadline |url=https://finance.yahoo.com/news/securities-class-action-lawsuit-filed-170823170.html |access-date=25 May 2013 |work=Yahoo! Finance}}</ref><ref>{{cite magazine |title=Former Digital Domain CEO & Auditors Sued For Fraud By Investors |url=https://deadline.com/2013/05/digital-domain-ceo-auditors-sued-fraud-lawsuit-james-cameron-505591/ |access-date=25 May 2013 |magazine=[[Deadline Hollywood]]}}</ref>

In February 2015, the [[New York Supreme Court|Supreme Court of New York]] and the Inspector General of the State of Florida cleared Textor of any financial wrongdoing,<ref name=":0">{{cite web |author=<!--Not stated--> |date=2021-08-21 |title=Supreme Court of New York Terminates Lawsuit against John Textor |url=https://www.prweb.com/releases/supreme_court_of_new_york_terminates_lawsuit_against_john_textor/prweb12531982.htm |access-date=2021-08-11 |website=[[PRWeb]] |publisher=Cision PR Web }}</ref><ref name=":1">{{cite report |url=https://www.flgov.com/wp-content/uploads/2013/03/report.pdf |title=Review of the Economic Incentive Award to Digital Domain Media Group |author= |date= |publisher=Executive Office of the Governor |page=2 |docket=2013-11 |author-link= |access-date=2021-08-11}}</ref> and ''[[The Athletic]]'' reported that he had received a settlement from the hedge fund that caused the collapse.<ref name=":2">{{cite web |author=Matt Slater |date=2021-07-10 |title=Crystal Palace takeover: Benfica arrests cast doubt over Textor's partnership plans |url=https://theathletic.com/2699565/2021/07/10/crystal-palace-takeover-benfica-arrests-cast-doubt-over-textors-partnership-plans/ |access-date=2021-08-11 |website=theathletic.com |publisher=The Athletic}}</ref><ref>{{Cite web |last=Tiffany |first=Kaitlyn |date=2018-10-23 |title=Amy Winehouse is going on tour: The dead celebrity hologram industry, explained |url=https://www.vox.com/the-goods/2018/10/23/18010274/amy-winehouse-hologram-tour-controversy-technology |access-date=2022-04-15 |website=Vox |language=en}}</ref>

Palm Beach Capital, the largest investor in DDMG, identified hedge funds, Tenor Capital et al., as the primary cause of the company's difficulties. Palm Beach Capital cited unlawful finance penalties and possible illegal short selling strategies designed to damage the company's public stock price.<ref>{{cite web |title=Dow Jones & Co. : Digital Domain Investor Palm Beach Capital Sues Over $25M Fee |url=http://pevc.dowjones.com/Article?an=DJFLBO0020121130e8buncoit&cid=32135011&ctype=ts&pid=15&ReturnUrl=http%3a%2f%2fpevc.dowjones.com%2fArticle%3fan%3dDJFLBO0020121130e8buncoit%26cid%3d32135011%26ctype%3dts%26pid%3d15 |access-date=2013-09-27 |archive-date=2013-11-11 |archive-url=https://web.archive.org/web/20131111222528/http://pevc.dowjones.com/Article?an=DJFLBO0020121130e8buncoit&cid=32135011&ctype=ts&pid=15&ReturnUrl=http%3a%2f%2fpevc.dowjones.com%2fArticle%3fan%3dDJFLBO0020121130e8buncoit%26cid%3d32135011%26ctype%3dts%26pid%3d15 |url-status=dead }}</ref><ref>{{cite news |date=2012-10-30 |title=Motion seeks to limit how much Digital Domain lenders should be paid back |url=http://www.tcpalm.com/news/2012/oct/30/no-headline---tc_sl_ddmg/ |publisher=[[The Stuart News and TC Palm]]}}</ref> Ultimately, the hedge fund lenders agreed to settle outstanding claims by the DDMG parties through a May 2016 settlement agreement awarding $8.5 million to former CEO John Textor and $3 million each to the city of Port Saint Lucie and the state of Florida.<ref>{{Cite web|url=https://www.tcpalm.com/story/news/local/shaping-our-future/property-values/2016/05/24/port-st-lucie-state-each-gets-3-million-in-digital-domain-settlement-textor-to-get-85-million/89393494/|title=Port St. Lucie, state each gets $3 million in Digital Domain settlement; Textor to get $8.5 million|first=Nicole|last=Rodriguez|website=Treasure Coast}}</ref> The settlement also assigned all technology assets of Digital Domain's Florida studio.