Alta Partners Sues Crypto Firm BitFuFu for Breach of Contract Over Public Warrants
On Wednesday, November 27, 2024, venture capital firm Alta Partners filed an amended complaint in the US District Court for the Southern District of New York against BitFuFu, a cryptocurrency cloud mining services provider, alleging breach of contract related to public warrants.
The case centers on accusations that BitFuFu failed to honor its obligations under an agreement concerning public warrants issued by Arisz Acquisition Corp. (Arisz), a special purpose acquisition company (SPAC). Alta Partners claims that it is entitled to exercise its public warrants, which were originally issued by Arisz and later assumed by BitFuFu following a business combination that concluded on February 29, 2024.
According to the complaint, Alta Partners, which held 295,595 public warrants, sought to exercise these warrants on March 4, 2024, after all conditions for exercise had been met. The conditions stipulated that Arisz must have completed its business combination, the underlying shares must have been registered under the Securities Act, and a current prospectus must be available.
The complaint details that on the specified date, Alta had submitted multiple notices of exercise to Continental Stock Transfer & Trust Company, the transfer agent responsible for processing such warrants. However, BitFuFu allegedly prevented these exercises by failing to provide the necessary legal authorization to Continental, thereby blocking Alta’s attempts to acquire shares at the predetermined exercise price of $11.50.
BitFuFu eventually acknowledged that the warrants were exercisable, but this acknowledgment came after the shares had begun trading below the exercise price, rendering the warrants “out of the money.” The complaint asserts that BitFuFu’s inaction caused Alta to miss the opportunity to profit from exercising the warrants when BitFuFu’s shares were trading at a higher price.
Furthermore, the complaint states that Alta’s assignor, who held 800,000 public warrants, was also prepared to exercise these warrants at the time of the business combination. The assignor faced similar barriers in exercising the warrants due to BitFuFu’s alleged failures.
The legal filing highlights that the Warrant Agreement, which governs the public warrants, contains explicit provisions that were not honored by BitFuFu. Alta Partners argues that under the terms of this agreement, it was entitled to exercise the public warrants once the business combination was complete and the shares were registered.
The complaint outlines the jurisdictional basis for the case, noting that there is complete diversity of citizenship between Alta and BitFuFu, which is incorporated in the Cayman Islands and has its principal place of business in Singapore. The amount in controversy exceeds $75,000, satisfying the requirements for federal jurisdiction.
In its claims, Alta Partners outlines several counts against BitFuFu, including breach of contract for failing to allow timely exercise of the public warrants, as well as alternative claims regarding the lack of an effective registration statement and the failure to maintain a current prospectus. Each of these counts alleges that BitFuFu’s actions directly caused damages to both Alta Partners and its assignor.
The complaint also invokes the implied covenant of good faith and fair dealing, asserting that BitFuFu’s actions, such as delaying responses to Alta’s exercise notices and failing to provide necessary documentation, were contrary to the spirit of the agreement.
Alta Partners seeks compensatory damages, costs, and attorney’s fees, as well as interest on the damages awarded. The firm has demanded a jury trial on all triable issues.
Please contact BlockTribune for access to a copy of this filing.
