Fancurve CEO Chris Chaney Seeks Dismissal of NFT Investment Lawsuit Filed by Investors
On Friday, September 6, 2024, defendant Chris Chaney and nominal defendant 1Zer0 Labs Inc. filed an opening brief in support of their motion to dismiss a lawsuit brought by several plaintiffs, including Greenfield One III GmbH & Co. KG and FAFA Sports GmbH, in the Delaware Court of Chancery. The case revolves around claims related to investments made in 1Zer0 Labs, which operates under the name Fancurve.
The plaintiffs, a group of investors, allege that Chaney mismanaged Fancurve, leading to significant financial losses. They argue that their investments were made based on promises regarding the company’s potential within the emerging Non-Fungible Token (NFT) market, which has since experienced a substantial decline. The plaintiffs assert that their investments were funneled through Simple Agreements for Future Equity (SAFEs) that acknowledged the risk of total loss, and they claim that Chaney failed to fulfill his fiduciary duties as a director.
In their brief, the defendants contend that the plaintiffs have not established derivative standing necessary to support their claims. They state that the plaintiffs were never stockholders of Fancurve and, therefore, lack the necessary legal standing to bring a derivative lawsuit on behalf of the corporation. The SAFEs, according to the defendants, did not confer stockholder rights, which is a requirement under Delaware law for derivative claims.
The defendants further argue that the plaintiffs’ claims of breach of fiduciary duty are duplicative of their breach of contract claims. They assert that under Delaware law, claims for breach of fiduciary duty cannot proceed alongside breach of contract claims unless there is an independent basis for the fiduciary duty claim. The defendants maintain that the allegations made by the plaintiffs regarding Chaney’s actions are merely a rephrasing of their contractual grievances.
In addressing the claim of fraudulent transfer under the Delaware Uniform Fraudulent Transfer Act (DUFTA), the defendants assert that the plaintiffs do not qualify as creditors of Chaney. The brief points out that the plaintiffs have not established a right to payment from Chaney and argue that their status as SAFE holders does not equate to being creditors.
The legal filings highlight the timeline of events leading to the current legal situation. Chaney sought investment from the plaintiffs in late 2021, intending to raise $3 million to develop Fancurve, which aimed to integrate digital fashion with sports fandom. Although initial investments exceeded this goal, the NFT market faced a downturn in mid-2022, causing Fancurve to cease operations and prioritize its remaining funds for contractual obligations over paying SAFE holders.
The defendants emphasize that the plaintiffs voluntarily accepted the risks associated with their investments and that Chaney acted in good faith to advance the company’s interests during its operational phase. The brief details the efforts made by Chaney and the management team to fulfill business objectives before the market collapse, and notes that the plaintiffs’ claims arise from their disappointment with the investment outcomes rather than any alleged wrongdoing by Chaney.
In conclusion, the defendants request that the court dismiss the plaintiffs’ claims, arguing that they fail to meet the necessary legal criteria for derivative standing and do not present valid claims for breach of fiduciary duty or fraudulent transfer. The motion to dismiss aims to eliminate the case before it progresses to further litigation.
Please contact BlockTribune for access to a copy of this filing.
