Crypto

Crypto platform investors sue SPAC execs over accounting

A street sign for Wall Street is seen in the financial district in New York, U.S., November 8, 2021. REUTERS/Brendan McDermid

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  • Lawsuit takes aim at accounting treatments for shares
  • SEC cracked down on SPAC accounting last year

(Reuters) – Shareholders in cryptocurrency platform Bakkt Holdings Inc sued the investment managers who took the company public via a blank check company, alleging they misled investors by improperly classifying shares.

An investor filed the lawsuit in Brooklyn on Thursday against Bakkt and five individuals associated with Chicago-based Victory Park Capital Advisors. The Chicago-based investment manager sponsored the special purpose acquisition company (SPAC) that took the company public last year in a deal that valued Bakkt at $2.1 billion.

A Bakkt spokesperson said the company intends to vigorously defend itself. A spokesperson for Victory Park Capital declined to comment.

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SPACs are shell companies that raise funds through a public offering and seek to merge with a private target within two years. Shareholders have the option to cash out before the merger which takes the company public.

The lawsuit alleges directors and officers at the SPAC, VPC Impact Acquisition Holdings, concealed defective financial controls that caused shares to be misclassified and resulted in Bakkt restating its financials in November.

The restatements came after Reuters reported the U.S. Securities and Exchange Commission had tightened SPAC accounting standards, directing auditors to count redeemable shares as temporary, rather than permanent, equity.

Bakkt said in public filings last year that its restatement came after its auditor talked with the SEC about the regulator’s “evolving positions” on SPAC accounting.

The SPAC market reached a high watermark last year, when 613 listings raised a total of $145 billion, according to Nasdaq. The frenzy led to a boom in lawsuits by SPAC investors.

Victory Park Capital has sponsored three fintech-focused SPACs. One combined with Dave Inc, a banking app backed by billionaire Mark Cuban, last year. Another scrapped its proposed merger with buy now, pay later platform Kredivo last month, citing unfavorable market conditions.

The case is Poirier v. Bakkt Holdings Inc, No. 1:22-cv-02283, U.S. District Court, Eastern District of New York.

For investors: Jeremy Lieberman of Pomerantz

Read more:

Crypto exchange Bakkt to go public via $2.1-bln deal with blank-check firm

EXCLUSIVE U.S. SEC cracks down a second time on SPAC equity accounting treatment – sources

SPACs under the microscope as lawsuits mount

Mark Cuban-backed banking app Dave to go public in $4 bln SPAC merger

Lending platform Kredivo scraps $2.5 billion SPAC deal

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Thomson Reuters

Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com

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