Akazoo, the Luxembourg-based streaming music service propelled onto the U.S. radio industry’s radar last year via a high profile merger, says its special committee completed an internal investigation and found multiple ways former members of its management team defrauded the company’s investors. Among those swindled is one exec well known in radio circles – former Cumulus Media CEO Lew Dickey.

In September 2019 Dickey's Modern Media Acquisition Corp. (MMAC) closed its merger with Akazoo with great promise, more than two years after his so-called blank check company sought to buy a media, entertainment or marketing company. Now, in the latest chapter of a deal gone bad, Akazoo says it will “take all available steps to maximize recovery for defrauded investors,” including plans to unwind the original merger with Dickey’s company.

Allegations of fraud first surfaced in a damming report from Quintessential Capital Management. The New York hedge fund accused Akazoo of vastly inflating its subscriber numbers and faking revenue. After the report’s release, Akazoo, under Dickey’s direction as board chair, formed a special committee on April 22 to investigate the charges.

Now the special committee, made up of independent directors, said the former managers “materially” misrepresented Akazoo's business, operations, and financial results as part of “a multi-year fraud.” That includes issuing years of “materially false and misleading” financial statements. The company says its investigation found Akazoo had “negligible actual revenue and subscribers for years” and that former Akazoo managers and associates participated in “a sophisticated scheme” to cook Akazoo's books and records, including the due diligence materials provided to Dickey as his company considered the merger.

The damaging Quintessential Capital report prompted multiple class action lawsuits against the company, which fired CEO and founder Apostolos Zervos for cause in late April. The board appointed Michael Knott as interim CEO.

After getting axed by Cumulus in September 2015, Dickey formed what was known as a SPAC or Special Acquisition Company to buy a company. He was eventually approached by Akazoo, which was owned by UK-based Martin Hughes' Toscafund. The Akazoo-MMAC merger closed last year, giving MMAC shareholders a 32% stake in the company while Toscafund retained a 58% stake.

Dickey remains Akazoo’s board chairman.

Akazoo also said it received an anticipated delisting letter from Nasdaq, a decision it has no plans to appeal. Nasdaq suspended trading of shares of “SONG” today (May 27).