Three class-action lawsuits alleging securities fraud on the part of Greek shipowners in conjunction with financial firm Kalani Investments are proceeding ever so slowly in the US federal court system, with deadlines now stretching into 2019.
All plaintiffs complain that the owners — DryShips, Top Ships and Diana Containerships — conspired with Kalani to destroy shareholder value through a scheme of stock sales in which the investment firm improperly acted as an underwriter.
All told, the alleged scheme brought the owners hundreds of millions of dollars and enriched Kalani, while in some cases extinguished more than 99% of public equity value in the companies, complaints state.
All three New York-listed owners have denied the allegations and pledged to defend their actions in the US District Court system. None have yet filed formal replies to the complaints.
Kalani is registered in the British Virgin Islands and, as first reported by TradeWinds, is controlled by Toronto-based hedge fund manager Marc Bistricer and his Murchinson Ltd.
Sources have indicated that Murchinson reached out to a number of Greek owners with the financing scheme, which involved a series of dilutive share sales and reverse stock splits.
Shareholder lawsuits like those brought against DryShips, Top Ships and Diana Containerships carry a high burden of proof, and more often are decided in favour of the companies, or with a token settlement award.
However, the US Securities and Exchange Commission is also investigating DryShips. No update has been provided since the George Economou-led company said it was complying with a subpoena for documents.
In one recent development that typifies the sort of skirmishing that happens among shareholders in such cases, US District Court Judge Sandra J Feuerstein of the Eastern District of New York has reversed her earlier ruling to appoint Jeffrey Mamera as lead plaintiff against DryShips.
The court found that while Mamera had purchased the largest number of shares, a rival group had suffered a greater total financial loss and so it and its chosen law firm should now lead the litigation.
With that settled, discovery deadlines now stretch into February 2019 and a pre-trial conference has been set for May next year.
Likewise in the Top Ships matter, where Christopher Brady has been appointed as lead plaintiff, the court has set deadlines into January and February of next year for motions to dismiss the complaint and responses by plaintiffs.
And in the Diana Containerships litigation, the court has likewise appointed a group of investors as lead plaintiffs and set a January 2019 date for a status conference.
