Ex-Polychain Partner Harry Greenhouse Sues Company Over Disagreement
On March 26, 2018, Los Angeles-area investor Harry Greenhouse sued Polychain in Delaware court, requesting information about the valuation procedures it had used to determine how much money he was owed when cashing out from the fund in January. Greenhouse claimed that certain assets may have been improperly valued, reducing the amount he received.
The official filings claim:
“Plaintiff purportedly seeks to inspect Polychain’s books and records for the purpose of investigating the value of his capital account and the amount paid to him upon his withdrawal from the partnership. At first glance, the demand and its purpose appear proper enough. But the Plaintiff has a standing problem. When he withdrew from Polychain, he ceased being a limited partner and lost standing to demand inspection of Polychain’s books and records.”
Harry resists the premise of lost standing by pointing to the fact that Polychain withheld 5% of his redemption upon withdrawal as an audit holdback and then later provided him with an additional cash distribution based on assets that could not be valued at the time of his investment. Neither the holdback nor the cash the distribution reflects equity in the firm, however, because they do not reflect an interest that rises or falls with the value of the Fund. They are, instead, discrete obligations and rights unique to Harry in his capacity as a redeemed member.
The Block Crypto reports,
“Deciding a case on the pleadings, that is the allegations in the complaint, is generally possible when the court takes the facts in the complaint as true and view them in a light favorable to the nonmoving party. Here that means taking the facts as true and favorable to Greenhouse. In doing that the court still found that Polychain was entitled to a judgment in their favor on the standing question.”
Although the arbitration process is still on the way and nothing is set to stone. We will have to wait for a final hearing to settle the dispute.