Marshall Wace has taken legal action to prevent crypto data provider Lukka Inc from proceeding with a new financing round that the hedge fund says would disadvantage its investments, according to a report by Bloomberg.
Delaware Chancery Court Judge Lori Will has granted Marshall Wace a temporary pause on the proposed funding while the case is considered on an expedited basis. The firm’s XO Digital Finance Fund and flagship Eureka Fund, which together invested $50m in Lukka during a 2022 Series E round, claim the company is breaching consent rights tied to its preferred equity.
According to the lawsuit, Lukka is pursuing a “pay-to-play” round that would benefit crypto-focused venture firm Liberty City Ventures, moving Marshall Wace from first in line for repayment to a lower position behind new series of senior preferred stock. The hedge fund argued this would make it “extremely unlikely” to recover its investment in a liquidation scenario.
Marshall Wace offered to consent and participate if the terms were revised, but Lukka reportedly refused. The funds initially requested a temporary restraining order on 12 September, after learning Liberty City had already sent $2.5m of the proposed investment.
Marshall Wace, part-owned by KKR, manages approximately $79bn across hedge fund strategies. The XO Digital Finance Fund, primarily backed by the $24bn Eureka Fund, focuses on illiquid investments in late-stage private companies in digital payments, blockchain, and stablecoins, typically participating at Series E rounds ahead of IPOs.
