A Boston firm claims that a Pleasantville financial consultant failed to protect the company’s investment and legal strategies.
Heng Ren Partners accused David Halesworth of breaches of contract in a complaint filed March 27 in U.S. District Court, White Plains.
Heng Ren is a two-member firm managed by Peter Halesworth, who’s relationship to David Halesworth is not explained.
The firm looks for underfunded “hidden gems,” according to its website, among Chinese companies that are listed on U.S. stock exchanges but ignored by Wall Street.
In 2016, Heng Ren and David Halesworth struck a deal. Halesworth, who then lived in Tarrytown, was to provide management, administrative, research and consulting services.
He was guaranteed an annual salary and a performance fee based on fees collected from investors in Heng Ren Silk Road Investments, a Cayman Islands hedge fund.
The Silk Road fund offered $70 million in shares to outside investors, according the a U.S. Securities and Exchange Commission filing, and sold $10 million.
A new consulting deal was struck in 2018. The terms were similar but the performance fee was based on profits derived from litigation against Renren Inc., a Phoenix software company.
Heng Ren invested a portion of the $10 million it had raised to buy shares of Renren Inc. Then Heng Ren and other investors sued Renren, alleging that insiders had spun off valuable assets at less than fair market value.
Heng Ren says it paid Halesworth’s guaranteed salary under both consulting agreements but no performance fees because neither deal generated sufficient revenues.
The firm terminated the consulting agreement as of January 2019, the complaint states, to “cut its losses.”
In 2022, Renren settled the investors’ lawsuit for $300 million, resulting in a profit for the Silk Road fund.
Now Halesworth wants a performance fee, according to the complaint. But Heng Ren argues he is not entitled because he had violated the consulting agreements.
Halesworth had agreed to disclose outside jobs and business interests, to not meet alone with potential investors, and to not divulge confidential investment and legal strategies.
Unbeknownst to Heng Ren, the complaint states, Halesworth was engaged in outside businesses and jobs that prevented him from devoting the time and effort required to carry out the firm’s strategies. He allegedly spoke with at least one potential investor by himself and shared the firm’s strategies with at least one potential investor or lawyer.
Heng Ren is asking the court to find that Halesworth violated both consulting agreements and declare that he is not entitled to fees related to the Renren litigation. It is also asking for unspecified damages for lost business opportunities and revenue for “failure to spend enough time and effort as required by the agreements.”
Efforts to contact Halesworth for his side of the story failed.
Heng Ren is represented by Manhattan attorneys Padmaja Chinta and Peter Fratangelo.
