As I have noted in prior posts (most recently here), many of the SPACs that completed IPOs during the SPAC frenzy in 2020 and 2021 are nearing the end of their two-year search period. Many of these SPACs have not identified suitable merger partners and the SPACs are liquidating. One question I have been asking as these SPACs liquidate is whether there might be litigation. One the one hand, in the liquidation, the investors get their money back. On the other hand, in our litigious society litigation is always possible when plans don’t work out. In the latest example of how litigation might arise in the SPAC liquidation context, investors in SPAC which has announced its plan to liquidate have brought an action against the SPAC, its directors and officers, and the SPAC sponsor, in a fight about how assets the SPAC holds beyond the IPO trust funds are to be distributed.


VPC Impact Acquisition Holdings II (VCPB) is a special purpose acquisition company (SPAC). VCPM was formed by Victory Park Capital Advisors, LLC (Victory Park). The SPAC was operating by its sponsor, an entity created and owned by Victory Park. The SPACs directors and officers are all directors or officers (or both) of Victory Park. The SPAC completed an IPO on March 4, 2021. The SPAC officers and directors hold Founders Shares in the SPAC.

The SPAC was structured so that the holders of the Founders Shares would lose the entire value of their investment if the SPAC failed to complete a business combination during the two-year search period. If the SPAC failed to identify a target in the two-year search period, the IPO funds held in the SPAC’s trust account would be liquidated and returned to investors. The SPAC’s sponsor agreement provided that in the event of a liquidation, the holders of the Founders Shares would have “no right, title, interest or claim of any kind or to any monies held in the trust account or any other asset of the [SPAC] as a result of any liquidation.”

On August 2, 2021, the SPAC announced that it had reached an agreement to complete a business combination with FinAccel Pte. Ltd. (dba Kredivo), which operated a buy now, pay later credit platform in Indonesia. However, as the subsequently filed complaint alleges, by early 2022, it appears, “Kredivo’s appetite for entering the U.S. markets was dwindling and it was regretting the deal.”

On March 14, 2022, the SPAC announced that it had agreed with Kredivo to a “mutual termination of the previously announced business combination agreement.” The SPAC agreed to terminate the transaction in exchange for three forms of consideration. First, Victory Park arranged for a $145 million private structured investment in Kredivo for itself and other institutional investors. Second, Kredivo agree to pay expense reimbursement to the SPAC of $4 million. Third, Kredivo agreed that if the SPAC failed to complete an alternative transaction it would issue warrants permitting the SPAC to “acquire a stake equal to 3.5% of the fully diluted equity securities of Kredivo.” The complaint alleges that the present value of the warrants for the equity stake at the time the complaint was filed was $50.4 million. The expense reimbursement amount and the warrants are collectively referred to in the complaint as the “Break-Up Fee.”

On March 3, 2023, the SPAC announced that it will not be completing a business combination, that it will wind-up its business operations, and that it will redeem the public shares. The press release announcing the liquidation said that the shareholder redemption will “completely extinguish public shareholders’ rights as shareholders (including the right to receive further distributions, if any.”

The Complaint

On March 8, 2023, a plaintiff shareholder filed a lawsuit in the Southern District of New York against the SPAC; its directors and officers; and against the SPAC as nominal defendant with respect to the plaintiff’s shareholder derivative claims.  A copy of the plaintiff’s complaint can be found here. The complaint purports be filed on behalf of a class of investors who held the SPAC’s public shared as of January 13, 2023 or otherwise on the date of the SPAC’s redemption of its public shares.

The complaint alleges that, while the defendants owe duties to fairly distribute the SPAC’s assets to all owners in a dissolution, the defendants have instead determined to retain the value of the Break-Up Fee for themselves. The complaint alleges that the defendants have no legal or equitable basis to deprive stockholders of the value of all of the SPAC’s assets. The complaint alleges that the defendants have put their own interests and those of Victory Park ahead of the interests of the public shareholders.

The complaint seeks a judicial declaration that the defendants have no entitlement to the Break-Up Fee and that the Break-Up Fee must be distributed equitably to the public shareholders. The complaint also seeks to hold the defendants liable for breach of the sponsor agreement (of which the plaintiff claims the public shareholders are third-party beneficiaries). The complaint also asserts that the defendants “breached their fiduciary duties by intentionally negotiating the Termination, and waiving the SPAC’s rights and claims with respect to the Transaction, in exchange for the Break-Up Fee which Defendants plan to appropriate for themselves as the holders” of the Founders Shares.

The complaint also contains two additional counts asserted as derivative claims on behalf of the SPAC for breach of contract and breach of fiduciary duty. These two additional derivative claims assert the same allegations as the direct claims for breach of contract and breach of fiduciary duty.


This SPAC completed its IPO in March 2021, at the peak of the 2020-2021 SPAC frenzy. According to SPACInsider (here), there were 613 SPAC IPOs in 2021. SPACInsider also reports that of the 2021 SPACs, 134 have been liquidated. Many of the class of 2021 SPACs are now reaching the end of their search period; with merger prospect scarce, it seems likely that many more of these SPACs will reach the end of the search period empty-handed, and will liquidate.

Several months ago, as it became apparent that many of the SPACs would reach the end of their search period and liquidate, I began asking whether the likely coming wave of SPAC liquidations would result in liquidation. On the one hand, the possibility of liquidation arguably should be remote; in a liquidation, the public shareholders would get their money back, so where’s the harm? On the other hand, in our litigious society, any time plans don’t work out, litigation can and often does result. And indeed, there have now been three instances (inclusive of this latest lawsuit) where SPACs that have announced their plans to liquidate have been caught up in litigation about the planned liquidation.

As discussed here, in August 2022, investors in FAST Acquisition Company, a SPAC that had announced its plans to liquidate, filed a pre-liquidation lawsuit against the SPAC, its sponsors, and its directors and officers, disputing the way that the SPAC’s directors and officers intended to deal with a financial asset of the SPAC in connection with the liquidation (the financial asset in question in the FAST case was a termination fee associated with a prior unsuccessful attempt to merge).

In addition, as discussed here, In January 2023, investors in Pioneer Merger Corp., a SPAC that also announced a planned liquidation, filed a lawsuit against the SPAC, its sponsor, and the SPAC’s directors and officers, alleging that the defendants planned a “misappropriation” of an asset the SPAC held, beyond just the funds held in the trust account. As was the case in the instant lawsuit and in the FAST lawsuit, the asset was a termination fee the SPAC had obtained as a result of the termination of a merger plan.

At a minimum, these three lawsuits together do illustrate how, at least in certain circumstances, litigation can arise in the context of a planned SPAC liquidation. However, the circumstances involved in all three cases are somewhat unusual; in each case, the liquidating SPAC had assets beyond just the amount of funds held in the SPAC trust account. The lawsuits do at least show that problems can arise, and lawsuits can follow, in the SPAC liquidation context, and that liquidation is not always going to be a risk-free exercise. That said, it is noteworthy that out of the now hundreds of SPACs that have liquidated in recent months, apparently only three have resulted in litigation.

According to SPACInsider, as of March 8, 2023, there were still 241 SPACs from the SPAC IPO class of 2021 still seeking merger partners (and indeed another 13 from the SPAC IPO class of 2020). In some cases – for example with respect to the still-searching SPACs from the class of 2020 – the SPAC search period may have been extended. Perhaps many of these searching SPACs will identify a suitable merger target. However, given the current state of the financial marketplace, it seems likely that many of these SPAC searches will end in liquidation. In most cases, the liquidations will unfold uneventfully. But as this case, and the Pioneer and FAST cases discussed above illustrate, problems can arise and litigation can result.

One final note. All of the individual defendants in this lawsuit are sued in their capacities as directors or officers of the SPAC. They are also sued in their capacities of Victory Park, for whom the individuals also served as directors and officers. In other words, the individuals have been sued in their dual capacities, potentially triggering the D&O insurance policies for both the SPAC and Victory Park. Further complicating things is the fact that, given that this SPAC completed its IPO at the peak of the SPAC frenzy, when the D&O insurance market for SPACs was quite restricted, the SPAC’s D&O policy likely has a significant self-insured retention (likely as much as $10 million or even $15 million). While the presence of the two policies and claims against individuals in dual capacities would in most circumstances militate in favor of an allocation of the defense fees between the two policies, the practical reality here is that the defense fee allocation would be between the SPAC itself (for the individuals fees incurred in their capacities as directors and officers of the SPAC) and Victory Park’s D&O insurance policy. I think you can see difficulties involved in trying to measure out the allocation under those circumstances.