Shares of Genius Group (NYSEMKT:GNS) stock are up by more than 80% today after the company announced a lawsuit against Alto Opportunity Master Fund, SPC — Segregated Master Portfolio B, Ayrton Capital, and Waqas Khatri. Warshaw Burstein and Christian Levine Law Group will represent Genius in the lawsuit. Furthermore, the lawsuit will be held in the U.S. District Court for the Southern District of New York.
The complaint seeks an order that would declare Genius’s financing agreement with Ayrton to be null and void. For example, Ayrton argues that it should receive around 49 million ordinary shares worth $200 million in exchange for providing Genius with a $18 million loan.
“This suit follows multiple claims that the SEC has commenced against toxic lenders who are unregistered brokers and offer ‘death-spiral’ financings to undercapitalized small and mid-cap companies,” said Genius in a press release.
GNS Stock: Genius Files Financing Agreement Lawsuit
Genius has argued that Ayrton participated in an unlawful scheme as an unregistered dealer. The scheme allegedly involved Ayrton receiving millions of ordinary shares of GNS at discounted prices to turn around and sell them for a profit. As a result, the company believes that Ayrton violated multiple sections of the Securities Exchange Act of 1934.
A ruling in favor of Genius would benefit shareholders, as it would mean less dilution of shares. Ayrton did not respond to the lawsuit as of March 1. Meanwhile, Genius added that it is “premature at this time to opine or predict the final outcome of this litigation.” At the time of writing, it does not appear that a hearing has been scheduled yet.
Shares of GNS are now up by more than 1,000% year to date. These gains have been primarily driven by the board’s approval of an “Illegal Trading Task Force.” The task force was formed due to claims of illegal naked short selling. Genius noted that it may explore the possibility of a dual listing in order to reduce market manipulation.
Shareholders also voted to approve a share consolidation and share repurchase mandate at the extraordinary general meeting on Feb. 16. Genius’s board now has the authorization to enact these measures within 12 months of the approval.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.