US securities fraud litigation against low-profile Kalani Investments and three Greek shipowners is showing little progress, eight months after the first lawsuits were filed.
Virtually nothing of substance has been decided in four suits brought against owners DryShips, Top Ships and Diana Containerships over their dealings with Kalani.
Instead, plaintiffs and law firms in each case have skirmished over which investors should be allowed to lead the class-action litigation against each company in the US District Court for the Eastern District of New York.
Probably the most important ruling has come in the proceedings against Top Ships, the owner of MR product tankers led by chief executive Evangelos Pistiolis.
Judge Joan Azrack denied a request by plaintiff shareholders to consolidate that case with litigation brought against DryShips, premised largely on the notion that both shipowners raised money through share sales to Kalani.
As TradeWinds was first to report last year, Kalani is registered in the British Virgin Islands but run by Toronto-based hedge fund executive Marc Bistricer. Sources have indicated that Bistricer and his Murchinson Ltd outfit reached out to several Greek shipowners with the financing scheme.
Plaintiffs brought charges that the management of the two owners destroyed millions of dollars in share capital through a series of dilutive stock sales and reverse stock splits.
There is no record in the court file of Azrack’s reasoning for declining to merge the cases.
“At their factual core, both cases centre on the same concerted strategy by Marc Bistricer, Murchinson Ltd and Kalani Investments Ltd to conspire with company insiders to manipulate and artificially inflate the price of securities in the Greek shipping market by massively diluting shareholders through share issuances and then raising the price of securities through a series of reverse stock splits,” argued lawyers for Christopher Brady, the plaintiff in the Top Ships complaint.
Lawyers for Top Ships argued against combining the cases, saying the rationale was legally flawed. So did Peter White, a Washington-based lawyer in the firm Schulte Roth & Zabel, who represents Bistricer.
“Plaintiff suggests that the court should relate the two cases by noting that DryShips and Top Ships both are based in Greece and are in the shipping business,” White wrote.
“As a practical matter, it is not persuasive. For example, both Apple Inc and Seagate Technologies Public Ltd Co are publicly traded technology companies based in Cupertino, California, and incorporated in Ireland, but that alone would not be a basis for relatedness if plaintiffs filed separate putative class actions against them.”
There has been no further action in the Top Ships litigation since last December.
Similarly, there have been no filings in the Diana Containerships lawsuit since February as plaintiffs continue to sort who will lead the litigation.
While the docket has been busier in litigation against DryShips and principal George Economou, who made the first and greatest use of Kalani-related trades, it too has centred on disputes over which parties should be recognised as lead plaintiffs.
Meanwhile, the court has granted DryShips and Kalani repeated time extensions to answer the complaint. The latest deadline has been set for late May.
As one source close to the litigation observes, the extensions should not be surprising: until plaintiffs are able to get their house in order, there is little to which defendants are able to form a response.
