Judge Rakoff of the U.S. District Court for the Southern District of New York denied the defendants’ motion to dismiss in a case alleging that a SPAC’s sponsor and management appropriated for themselves a $32.5 million cash payment to the SPAC following a failed business combination. Morris Kandinov LLP represents the plaintiff, Funicular Funds, LP, an investor in the SPAC. The complaint alleges that the sponsor and its affiliates agreed, in connection with the SPAC’s IPO, that they would lose their entire initial investment if the SPAC failed to successfully complete a business combination and would not be entitled to any assets in a liquidation. Nevertheless, when the SPAC announced this year that it had failed to complete a deal and would liquidate, the defendants opted to segregate and reserve the cash termination fee paid to the SPAC exclusively for themselves in the liquidation. The case is brought on behalf of a class of investors in the SPAC’s Class A stock and will now proceed to discovery, which is scheduled to be completed by the end of July 2023.
Please contact Aaron Morris for additional information at aaron@moka.law.
