Remember the CGI 2Pac “hologram” that Digital Domain created for Coachella earlier this year. The gimmick was well received, but Digital Domain CEO John Textor (above, right), who we’ve already established isn’t the sharpest tool in the shed, somehow convinced himself that animating CG versions of dead celebrities was an actual business model.

A couple weeks ago, Textor boasted to investors that he was trying to “tie up the real estate” of virtual humans. How could anyone miss with such an obviously sure-fire business, Textor claimed, “as long as we’re the only people in the world that can do this work.” It was just a matter of “getting the contracts, securing the rights, negotiating with the families, making sure that the likeness rights line up with the music rights and the venue rights and that’s what we should be doing.”

What Textor didn’t tell investors is that there are literally hundreds of other high-end VFX/CG companies that can create computer-animated human characters nowadays. Textor’s scam unfolded when rumors began floating around of a Ronald Reagan hologram that would appear at the Republican National Convention. Textor quickly told the Wall Street Journal “that rumor isn’t true.” Except it is true. Today, businessman Tony Reynolds, confirmed to Yahoo! News that he is indeed working on a Ronald Reagan hologram, and he’s not using Digital Domain to make it.

Holograms of dead people are the least of Textor’s worries though. Since DD’s stock peaked on May 1st, the company has been in freefall. Today, Digital Domain’s stock plunged 21% to a 52-week low of $2.31. In the past four months, the company has lost $300 million in value.

It gets worse. Textor owns 24 percent of Digital Domain. He took out a $12.5 milion loan to buy the shares in the company, and now he can’t pay back the loan. But here’s where it gets Lehman Brothers-style sketchy–and downright insane, if you ask me: Textor got the loan from Digital Domain’s largest shareholder, Palm Beach Capital. The Palm Beach Post has the sordid story:

Corporate governance experts said it’s rare for a shareholder to lend money to a CEO to buy shares. “It’s just not a smart idea,” said Charles Elson, a finance professor at the University of Delaware. “If you can’t pay it back, what happens?” If Textor were to default on the loan from Palm Beach Capital, his annual interest rate would go from 12 percent to 19 percent, Digital Domain said this week. Collateral for the loan includes 8.5 million shares of Digital Domain stock owned by Textor and mansions in Stuart and Mountain Village, Colo.

Executive compensation expert Paul Hodgson of GMI Research said such arrangements are “not very usual. It’s kind of generally been frowned upon because it tends to complicate relationships and undermine situations from a governance point of view. That would raise a red flag with us.”

There are already many victims in this situation. I feel awful for the artists who are working on Digital Domain’s first (and potentially last) feature The Legend of Tembo, as well as for all the other Digital Domain employees. I feel bad for Florida citizens who handed $132 million of their taxpayer dollars to a reckless and clueless businessman. I feel outraged for the incoming students of Digital Domain Institute who may have to perform slave labor because Digital Domain doesn’t believe in federal labor laws.

But you know who I don’t feel sorry for?

John Textor.

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