The allegations in the Trident case are that the defendants, “aided and abetted by each other and Chardan [Capital Markets, LLC], granted themselves financial interests in the SPAC that diverged from those of public stockholders and allowed their financial interests to override their fiduciary duties and responsibilities as controlling stockholders, directors, and officers of a Delaware corporation by forcing through a value-destroying merger with AutoLotto… and accomplishing the Merger on the basis of false and misleading disclosures.” The complaint further alleges that those “false and misleading disclosures induced Trident’s public stockholders to invest in the Merger… rather than redeem their shares.” That investment allegedly proved to be a bad one for the plaintiffs.
Interestingly, the complaint in this instance is not limited to the directors and officers of the SPAC. It extends to the SPAC’s sponsor, which is not unusual, but also, for aiding and abetting breaches of fiduciary duty, to Chardan Capital Markets, the financial adviser in the merger.
The extension of the complaint to the financial adviser is rather unusual. Outside of the SPAC’s directors and officers, the typical parties implicated in SPAC-related complaints are the SPAC itself, the SPAC’s sponsor, the directors and officers of the target company, and possibly the target company itself. It is uncommon to see the bankers or other SPAC advisers pulled into a complaint. In 2022, the SEC did settle an enforcement action against Perceptive Advisors (the SEC’s first SPAC-related enforcement action against an investment adviser) for failing to disclose SPAC-related conflicts of interest. But lawsuits against SPAC advisers have not been the norm. Whether more will follow is anyone’s guess, but it is safe to say that we will likely see more direct breach of fiduciary duty lawsuits filed in Delaware if their motions to dismiss continue to be denied.