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NEW YORK, Jan 23 (Reuters) - The billionaire hedge fund manager Louis Bacon has filed a $50 million defamation lawsuit against the Canadian fashion designer Peter Nygård, escalating a long-running battle between the owners of neighboring properties in an exclusive gated community in the Bahamas.
A spokeswoman for Nygård called the latest allegations "completely without merit."
In a complaint made public on Friday, Bacon accused Nygård of orchestrating an "obsessive and malicious" smear campaign against him for 4-1/2 years.
Bacon, the founder of Moore Capital Management LP in New York, said the campaign has included the use of doctored YouTube videos and organization of street rallies, and falsely linked him to arson, bribery, drug smuggling, the Ku Klux Klan and murder.
Nygård "caused these brazen lies to be published with actual malice and reckless disregard for the truth," Bacon said in the complaint, which is dated Jan. 14 and filed with a New York state court in Manhattan.
Bacon opposes Nygård's effort to expand his property in Lyford Cay community on the west side of New Providence Island in the Bahamas.
Some environmental groups and residents have said the expansion may damage the surrounding ecosystem and beaches.
Nygård, a son of Finnish immigrants, is chairman of Winnipeg-based Nygård International.
"This action is simply the latest attempt by Mr. Bacon to deflect media attention away from his real agenda, which is to unseat the ruling political party in the Bahamas so that his own candidate can take power and block reconstruction of Mr. Nygård's residence," the designer's spokeswoman said.
"This lawsuit is nothing more than yet another abuse of the judicial system by Mr. Bacon," she added.
Both men are also battling in a federal court in Manhattan, where Bacon has sought video evidence from a whistleblower to help him in pending environmental and defamation lawsuits in the Bahamas.
Bacon founded Moore Capital in 1989. He is worth $1.6 billion, according to Forbes magazine.
The cases are Bacon v Nygård et al, New York State Supreme Court, New York County, No. 150400/2015; and In re: Application of the Coalition to Protect Clifton Bay and Louis Bacon, U.S. District Court, Southern District of New York, No. 14-mc-00258. (Reporting by Jonathan Stempel in New York; Editing by Marguerita Choy)