NEW YORK, Oct. 27, 2021 /PRNewswire/ — ACP Investment Group, LLC (ACP), a wholly-owned subsidiary of NYPPEX Holdings, one of the world’s leading providers of secondary private equity liquidity, today announced its intent to appeal to the New York State Court of Appeals in its dispute with the Office of the New York Attorney General regarding a recent decision by the New York Supreme Court, Appellate Division, First Department.
"We disagree with the decision on multiple grounds and will therefore be moving immediately to appeal", stated Jeremy Kim, General Counsel with NYPPEX. "ACP X, LP (the Fund), a private equity fund advised by ACP Investment Group, takes its regulatory responsibilities extremely seriously. ACP continues to focus on the best interests of its clients, and in particular, on maximizing the return on their investments. Our appeal submission will point to the many material omissions and errors that render the decision flawed, unreliable and misleading."
"The false allegations that the corporate defendants, including Laurence Allen, Managing Principal with ACP, misappropriated any funds, made any misrepresentations to investors, or used a device, scheme or artifice to defraud are completely unfounded. ACP is a top performing fund, and Laurence Allen has a 36 year track record of exemplary regulatory compliance."
The ongoing dispute will now move into the appeals process with the New York State Court of Appeals, to reach a final resolution. It is believed the case began due to a single corporate limited partner, with a stated and documented liquidity problem, harassing the general partner of ACP over several years, to force the Fund to buy out their entire original commitment at approximately 1.8x their original investment – the then current market value. When the general partner refused to meet this unusual demand, as it would not be in the best interests of the Fund and would put the capital of the other 75 limited partners at risk, this limited partner made several baseless allegations and a direct appeal to the current New York Attorney General, Letitia James.
As a result, Attorney General Letitia James, proceeded to implement an aspect of New York’s highly controversial Martin Act, not considering this limited partner’s true motive or reasons for the request. It came as a surprise to many, that the Attorney General took this action, considering the general partner was acting in the fiduciary interest of the other 75 limited partners, rather than just conceding to the cash demands of a single limited partner.
It is suspected that the political visibility and aspirations of AG Letitia James seeking higher office, may have influenced the rash decision for the NYAG to move forward with this proceeding. In rapid fire succession, the New York Attorney General has made several highly visible moves recently to elevate her press appearances, and relevancy – actions against Cuomo, NYPPEX, sudden public Donations to the Opioid crisis, and most recently, the highly watched actions against Cryptocurrency and its regulation. These efforts and the timing of such grandstanding in the press does not necessarily reflect the needs and wants of the people of New York; the scattershot nature of the many random, unfocused, yet highly press worthy actions may not be the most effective way to actually achieve any lasting results.
The Impact of the NYAG Complaint and the Repercussions of this Case to the NY Financial Services Industry
Unless reversed, this decision will have serious repercussions for financial services firms operating in the State of New York, as it (a) allows a single New York trial court to arbitrarily set the time period for the statute of limitations and (b) allows New York State to pre-empt federal SEC securities rules (which were followed by ACP X, LP). As an example, a beneficiary may now bring a lawsuit against a financial services firm in New York for an event that occurred 20+ years ago, and the fact that the firm relied upon legal advice and then followed established SEC federal securities rules, may be moot and the financial firm may be considered at fault regardless.
This decision would upend the statute of limitations for Martin Act claims under New York law by completely extinguishing the statutory period within which a party must assert a claim in order for it to be timely, resulting in a constitutional due process violation.
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SOURCE NYPPEX Holdings