throbber
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`
`RAMCO ASSET MANAGEMENT,
`LLC, US TRADING COMPANY
`METALS RE, LLC, and DINSHA
`DYNASTY TRUST,
`
`
`
`
`Plaintiffs,
`
`v.
`
`
`USA RARE EARTH, LLC, MORZEV
`PTY LTD., MORDECHAI GUTNICK
`ATF THE MORZEV TRUST,
`MORDECHAI GUTNICK, and PINI
`ALTHAUS,
`
`
`
`
`Defendants.
`
`
`
`C.A. No.
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`
`
`
`
`
`
`
`
`
`
`
`
`
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`
`
`
`VERIFIED COMPLAINT
`
`Plaintiffs Ramco Asset Management, LLC (“Ramco”), US Trading Company
`
`
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` 
`
`
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`Metals RE, LLC (“US Trading Company”) and the DinSha Dynasty Trust
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`(“DinSha”) (together, “Plaintiffs”), by and through their undersigned attorneys, as
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`and for a Complaint against Defendants USA Rare Earth, LLC (“USARE”), the
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`Mordechai Gutnick ATF the Morzev Trust (“ATF Morzev Trust”), Morzev PTY
`
`Ltd. (“Morzev”), Mordechai Gutnick (“Gutnick”), and Pini Althaus (“Althaus”)
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`(collectively, “Defendants”), hereby allege as follows:
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`
`
`
`
`EFiled: Jul 29 2022 02:47PM EDT
`Transaction ID 67882412
`Case No. 2022-0665-
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`
`
`INTRODUCTION
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`1.
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`Plaintiffs were early investors in Morzev, an Australian rare earth
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`mining company. In 2019, Gutnick, the founder and majority shareholder of Morzev,
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`and Althaus, the CEO of Morzev, informed Plaintiffs that they were transferring the
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`assets of Morzev to a U.S. company, USARE. Each of the Plaintiffs was invited to
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`exchange their interests in Morzev on a “1:1” basis for interests in USARE. Each of
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`the Plaintiffs agreed to surrender their interests in Morzev in exchange for equivalent
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`interests in USARE. However, none of the Plaintiffs received such “equivalent
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`interests” in USARE. Rather each of Plaintiffs’ “Day One” equity in USARE was
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`between 14% and 20% less than their previous equity stakes in Morzev.
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`2.
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`In addition, just weeks before the transfers of the Plaintiffs’ interests
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`from Morzev to USARE, Gutnick and Althaus caused USARE to issue
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`approximately 7.8 million Class A shares to Down Under, LLC, an entity owned and
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`controlled by Gutnick, for no consideration. Around that time, Gutnick and Althaus
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`also transferred approximately $6 million from Morzev to themselves or their
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`nominees. Gutnick and Althaus never informed any of the Plaintiffs of the issuance
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`of these shares or transfer of assets from Morzev, which further reduced the value of
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`each of their respective stakes in USARE. Further, these were material omissions by
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`Gutnick and Althaus in that, had Plaintiffs known of these self-dealing transactions,
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`they would have bargained for different terms for the transfers of their interests from
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`2
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`Morzev to USARE. These omissions made the statements in the contracts that
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`Gutnick and Althaus executed on behalf of ATF Morzev Trust, Morzev, and USARE
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`regarding the “1:1” exchanges materially misleading, as Gutnick and Althaus both
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`knew they would.
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`3.
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`Finally, by furthering these transactions under false pretenses that
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`directly damaged Plaintiffs’ equity interests as shareholders of USARE, both
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`Gutnick and Althaus violated the fiduciary duties that they owed Plaintiffs, as
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`officers and directors, and upon information and belief, as majority owners and
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`controlling owners, of both Morzev and USARE.
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`4.
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`As described in more detail below, these events give rise to causes of
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`action for breach of contract, breach of the duty of good faith and fair dealing, breach
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`of fiduciary duty and fraud.
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`PARTIES
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`5.
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`6.
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`Plaintiff Ramco is a New Jersey limited liability company.
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`Plaintiff US Trading Company is a Delaware limited liability company,
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`with its headquarters in New York.
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`7.
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`8.
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`Plaintiff DinSha is a trust organized under the laws of New Jersey.
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`Defendant USARE is a limited liability company organized under the
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`laws of the State of Delaware. At all relevant times, Gutnick was a Manager of
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`USARE, expressly authorized to act on behalf of USARE. At all relevant times,
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`3
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`Althaus was, upon information and belief, also chief executive officer or president
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`of Morzev, as well as a director.
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`9. Morzev is an Australian limited liability company and a current or
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`former Member of USARE. At all relevant times, Gutnick was a director of Morzev,
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`expressly authorized to act on behalf of Morzev.
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`10. ATF Morzev Trust is a trust organized under the laws of Australia and
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`a current or former Member of USARE. At all relevant times, Gutnick was
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`authorized to act on behalf of ATF Morzev Trust.
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`11. Defendant Gutnick is, and was at all relevant times, a Manager of
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`USARE, and is the largest current holder of USARE Class A shares. Gutnick is a
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`resident of the State of New York.
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`12. Defendant Althaus was the chief executive officer of USARE through
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`2019-2021 and is a former Manager of the company. Concurrently, Althaus was also
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`chief executive officer or president of Morzev, as well as a director. Althaus is a
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`current member of Cove Capital, LLC, a large shareholder of USARE. Althaus is a
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`resident of the State of New York.
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`JURISDICTION
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`13.
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`Jurisdiction is proper in this Court because USARE’s Third Amended
`
`and Restated Company Agreement dated March 3, 2021 (attached hereto as Exhibit
`
`A), provides that any proceeding arising out of or relating to the Agreement or the
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`USARE’s activities or properties may be brought only in the Delaware Court of
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` 
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`
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`Chancery, in the state courts of the county where the USARE’s principal office is
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`located, or, if jurisdiction can be acquired, in the United States District Court for the
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`district in which the USARE’s principal office is located. Id. at §15.3. The provision
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`also states that the laws of the State of Delaware govern all matters arising out of or
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`relating to the agreement. Id. Each Member of USARE irrevocably consented to
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`such jurisdiction as a condition of their investment in USARE.1
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`14. Further, this Court has jurisdiction over USARE and internal disputes
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`among its members and managers pursuant to 6 Del. C. § 18-111.
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`FACTUAL BACKGROUND
`
`The Entities and Investments
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`15. Morzev is an Australian company founded by Gutnick on March 6,
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`2015. Morzev’s primary asset was the option (the “Round Top Option”) to acquire
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`up to 80% of the Round Top heavy rare earth and critical minerals project in
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`Hudspeth County, Texas owned by Texas Mineral Resources Corp. (“TMRC”).
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`16. Ramco invested in Morzev by purchasing convertible notes.
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`17. DinSha invested in Morzev by purchasing shares.
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` 
`1 Identical jurisdiction and choice of law provisions are contained in original
`Operating Agreement dated August 27, 2019, the First Amended Operating
`Agreement dated April 22, 2020, and the Second Amended Operating Agreement
`dated October 15, 2020.
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`18. US Trading Company invested in Morzev by purchasing shares.
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`19.
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`In 2019, Gutnick decided to transfer the assets and liabilities of Morzev
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`to a US-based entity, upon information and belief, to increase the availability of US-
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`based capital to exploit its primary asset, the Round Top Option.
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`20. USARE was formed by Althaus on May 6, 2019, as a Delaware limited
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`liability company.
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`21. Rather than have USARE acquire Morzev or merge the two entities,
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`Gutnick effected a series of transactions whereby the assets and liabilities of Morzev
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`were transferred to USARE. However, before transferring the assets from Morzev
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`to USARE, and, upon information and belief, before Plaintiffs transferred their
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`interests from Morzev to USARE, Gutnick and Althaus caused Morzev to transfer
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`approximately $6 million in cash from Morzev to themselves or their nominees,
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`without any benefit to Morzev or USARE.
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`22. On August 23, 2019, the primary asset of Morzev was transferred when
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`USARE entered into the Amended and Restated Round Top Option Agreement with
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`TMRC, giving USARE the option rights on the same terms as Morzev to acquire
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`interests in the Round Top heavy rare earth and critical minerals project.
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`6
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`Plaintiffs Do Not Receive “1:1” Conversion of their Morzev Shares That Was
`Agreed Upon
`23.
`In separate transactions in July 2019 Ramco, DinSha, and US Trading
`
`
`
`Company transferred their interests in Morzev to “Mordechai Gutnick ATF The
`
`Morzev Trust” in exchange for equivalent interests in USARE.
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`24. Ramco, DinSha, and US Trading Company entered these transactions
`
`with the understanding that in exchange for their interests in Morzev, they would
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`obtain interests in USARE that were equal to their previous interests in Morzev.
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`25.
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` However, despite statements by Gutnick on behalf of Morzev and ATF
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`Morzev Trust affirming that understanding, none of the Plaintiffs received interests
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`in USARE that were equivalent to the interests in Morzev that they surrendered.
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`The Ramco Exchange
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`26.
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` Ramco agreed to exchange its interest in Morzev for an equivalent
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`interest in USARE through an agreement with USARE and Morzev dated July 29,
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`2019 (“Ramco Conversion Agreement”) (attached as Exhibit B). Under the Ramco
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`Conversion Agreement, USARE agreed to adopt and endorse the term sheets for
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`convertible that Ramco had entered into with Morzev as if USARE had entered into
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`those agreements itself and Ramco agreed to immediately convert those notes into
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`21,123,677 shares of USARE.
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`27. Ramco agreed to enter into the Ramco Conversion Agreement based on
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`the representations made by Gutnick in, among other places, a 2019 memo (the
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`“2019 Memo”) (attached as Exhibit C) signed by Gutnick on behalf of Morzev.
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`28.
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`In the 2019 Memo, Gutnick represented that Ramco would, post-
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`conversion, own 1/7th, or 14.29% of the outstanding shares of USARE. Id. at 1.
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`While the 2019 Memo does contain a handwritten note, presumably by Gutnick that
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`he was “not sure of exact percentages, will finalize over coming days,” Gutnick
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`never informed Ramco of any different percentage and Ramco relied on the
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`representations in the 2019 Memo in executing the Ramco Conversion Agreement.
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`29. However, notwithstanding the representations made in 2019 Memo, the
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`“Day One” cap table for USARE shows that instead of having 14.29% of the total
`
`shares of USARE, Ramco had 12.58%.
`
`The DinSha Exchange
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`30. DinSha agreed to exchange its interest in Morzev for an equivalent
`
`interest in USARE through an agreement with the ATF Morzev Trust and Morzev
`
`dated July 25, 2019 (“DinSha Conversion Agreement”) (attached as Exhibit D).
`
`31. Under the terms of the DinSha Conversion Agreement, DinSha agreed
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`to surrender all the shares it owed in Morzev to the ATF Morzev Trust in exchange
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`for shares in USARE. Specifically, “[i]n consideration for the transfer of Shares to
`
`Mordechai Gutnick ATF The Morzev Trust, the DinSha Dynasty Trust (U/A Dtd
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`06-18-2013) will be issued fully paid ordinary shares in the capital of USA Rare
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`
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`Earth on a one for one (1:1) basis.” Id. at 1.
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`32. The 2019 Memo also addressed the conversion of the DinSha shares.
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`Specifically, it noted that DinSha’s 3,000,000 shares would represent 2.143% of
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`USARE’s equity. As had been the case with Ramco, a handwritten note on the 2019
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`Memo (presumably by Gutnick) indicated that he was “not sure exact percentage.”
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`However, Gutnick never informed DinSha of a different percentage and DinSha
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`relied on this representation at the time it entered into the DinSha Conversion
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`Agreement.
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`33. By the time DinSha entered into the DinSha Conversion Agreement, it
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`had acquired more shares of Morzev, bringing its total holdings to 3,562,898. Based
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`on the representations in the 2019 Memo, DinSha should have received, post-
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`conversion, 2.41% of the outstanding shares of USARE. DinSha, however, received
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`instead 2.12%.
`
`The US Trading Company Exchange
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`34. US Trading Company agreed to exchange its interest in Morzev for an
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`equivalent interest in USARE through an agreement with the ATF Morzev Trust and
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`Morzev dated July 22, 2019 (“US Trading Company Conversion Agreement”)
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`(attached as Exhibit E).
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`35. As was the case with the DinSha Conversion Agreement, the US
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`Trading Company Conversion Agreement provided that “the agreement between the
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`parties [provides] for the transfer of your Shares to Mordechai Gutnick ATF The
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`Morzev Trust (director, secretary and original sole shareholder of the Company
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`[Morzev]). In consideration for the transfer of Shares, you will be issued fully paid
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`ordinary shares in the capital of USA Rare Earth on a one for one (1:1) basis
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`(Consideration Shares).”
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`36. Based on US Trading Company’s interest in Morzev, it should have
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`received shares equal to 15.68% of the equity of USARE. Instead, the “Day One”
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`cap table provided US Trading Company with 13.805% of the equity of USARE.
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`Gutnick and Althaus Omit to inform Plaintiffs of the Material Facts That They
`Had Caused USARE To Issue 7.8 million USARE Class A Shares to Down
`Under and That They Had Transferred from Morzev to Themselves or Their
`Nominees Approximately $6 Million Shortly Before the Transfers of Plaintiffs’
`Interests from Morzev to USARE
`37. On or about July 3, 2019, Gutnick and Althaus caused USARE to issue
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`7,857,143 Class A shares to Down Under, an LLC owned and controlled by Gutnick.
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`38. USARE’s audited financial statements show that USARE received no
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`funds in exchange for the issuance of Class A shares to Down Under in 2019.
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`39. Gutnick and Althaus omitted to inform Plaintiffs of this issuance of
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`shares, which materially diminished (by about 5%) each of the Plaintiffs’
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`investments in USARE with no corresponding benefit to them as Down Under paid
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`no money or any other form of consideration in exchange for these shares.
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`40. This information was certainly material to the Plaintiffs given the
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`immediate, substantial, and negative effect that it had on each of their investments.
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`41. Gutnick and Althaus knowingly omitted this information from their
`
`communications with Plaintiffs, knowing that it would be material to Plaintiffs and
`
`knowing that it would have caused them to change the terms and conditions of their
`
`transfer of interests from Morzev to USARE. Gutnick and Althaus also had a duty
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`to disclose this information as fiduciaries of Plaintiffs and/or as a result of the
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`proscriptions against self-dealing and non-disclosure under the Corporations Act
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`(Australia).
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`42. By deliberately omitting this information from Plaintiffs, Gutnick and
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`Althaus defrauded Plaintiffs.
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`43. Sometime in 2019, before the transfer of assets from Morzev to USARE
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`was affected, Gutnick and Althaus transferred approximately $6 million in Morzev
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`assets to themselves or their nominees.
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`44. Gutnick and Althaus omitted to inform Plaintiffs of these transfers,
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`which materially diminished the value of Plaintiffs’ investments in USARE with no
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`corresponding benefit to them.
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`11
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`45. This information was certainly material to the Plaintiffs given the
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`immediate, substantial, and negative effect that it had on each of their investments.
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`46. Gutnick and Althaus knowingly omitted this information from their
`
`communications with Plaintiffs, knowing that it would be material to them and
`
`knowing that it would have caused them to change the terms and conditions of their
`
`transfer of interests from Morzev to USARE. Gutnick and Althaus also had a duty
`
`to disclose this information as fiduciaries of Plaintiffs and/or as a result of the
`
`proscriptions against self-dealing and non-disclosure under the Corporations Act
`
`(Australia).
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`47. By deliberately omitting this information from Plaintiffs, Gutnick and
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`Althaus defrauded Plaintiffs.
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`48. Plaintiffs had no independent way in which to learn this information.
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`Plaintiffs had every reason to believe that Gutnick and Althaus would not issue Class
`
`A Shares at that time given the representations made by them in agreements that
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`Gutnick and Althaus had signed as officers of the involved companies of a “1:1”
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`exchange of their Morzev shares for USARE shares. For the same reason, Plaintiffs
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`had no reason to believe that Gutnick and Althaus would transfer assets out of
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`Morzev in self-dealing transactions with no benefits to Morzev or USARE before
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`the transfer of assets from Morzev to USARE.
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`12
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`49. By omitting the material facts that 7.8 million USARE Class A shares
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`had been issued to Down Under, and that $6 million had been transferred out of
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`Morzev before its assets were transferred to USARE, Althaus and Gutnick rendered
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`the statements in the contracts described above materially misleading.
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`50.
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`In addition, because Gutnick and Morzev had fiduciary duties to
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`Plaintiffs as officers and/or directors of USARE and/or Morzev, they were obligated
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`to share this information about the issuance of shares to Down Under by USARE
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`and the transfer of assets out of Morzev in self-dealing transactions.
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`51. Gutnick and Morzev breached those fiduciary duties by failing to share
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`information about these self-dealing transactions with Plaintiffs, resulting in injury
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`to Plaintiffs.
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`CAUSES OF ACTION
`
`FIRST CAUSE OF ACTION
`Breach of Contract – Ramco Conversion Agreement
`(Against ATF Morzev Trust, USARE, and Morzev)
`
`52. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
`
`53. Ramco and Defendants entered into a binding and enforceable
`
`agreement to transfer over Ramco’s interest in Morzev to USARE, the Ramco
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`Conversion Agreement.
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`54. ATF Morzev Trust, USARE and Morzev breached that agreement by
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`failing to deliver to Ramco the equity interest in USARE that they had agreed to
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`provide.
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`55. By reason of the foregoing, Ramco has been damaged in an amount to
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`be determined at trial.
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`SECOND CAUSE OF ACTION
`Breach of Duty of Good Faith and Fair Dealing – Ramco Conversion Agreement
`(Against ATF Morzev Trust, USARE, and Morzev)
`
`56. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
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`57. Ramco and ATF Morzev Trust, USARE, and Morzev entered into a
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`binding and enforceable agreement to transfer over Ramco’s interest in Morzev to
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`USARE, the Ramco Conversion Agreement.
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`58. The duty of good faith and fair dealing inheres in every contract under
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`New Jersey law. By failing to deliver an equity interest in USARE equivalent to
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`Ramco’s interest in Morzev, ATF Morzev Trust, USARE, and Morzev breached the
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`duty of good faith and fair dealing.
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`59. By reason of the foregoing, Ramco has been damaged in an amount to
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`be determined at trial.
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`THIRD CAUSE OF ACTION
`Breach of Contract – DinSha Conversion Agreement
`(Against ATF Morzev Trust and Morzev)
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`60. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
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`61. DinSha and ATF Morzev Trust and Morzev entered into a binding and
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`enforceable agreement to transfer over DinSha’s interest in Morzev to USARE, the
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`DinSha Conversion Agreement.
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`62. ATF Morzev Trust and Morzev breached that agreement by failing to
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`deliver to DinSha the equity interest in USARE that they had promised.
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`63. By reason of the foregoing, DinSha has been damaged in an amount to
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`be determined at trial.
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`FOURTH CAUSE OF ACTION
`Breach of Duty of Good Faith – DinSha Conversion Agreement
`(Against ATF Morzev Trust and Morzev)
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`64. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
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`65. DinSha and ATF Morzev Trust and Morzev entered into a binding and
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`enforceable agreement to transfer over DinSha’s interest in Morzev to USARE, the
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`DinSha Conversion Agreement.
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`66. The duty of good faith inheres in every contract under the law of
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`Western Australia. By failing to deliver an equity interest in USARE equivalent to
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`DinSha’s interest in Morzev, ATF Morzev Trust and Morzev breached the duty of
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`good faith and fair dealing.
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`67. By reason of the foregoing, DinSha has been damaged in an amount to
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`be determined at trial.
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`FIFTH CAUSE OF ACTION
`Breach of Contract – US Trading Company Conversion Agreement
`(Against ATF Morzev Trust and Morzev)
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`68. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
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`69. US Trading Company and ATF Morzev Trust and Morzev entered into
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`a binding and enforceable agreement to transfer over US Trading Company’s
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`interest in Morzev to USARE, the US Trading Company Conversion Agreement.
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`70. ATF Morzev Trust and Morzev breached that agreement by failing to
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`deliver to US Trading Company the equity interest in USARE that they had
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`promised.
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`71. By reason of the foregoing, US Trading Company has been damaged
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`in an amount to be determined at trial.
`
`SIXTH CAUSE OF ACTION
`Breach of Duty of Good Faith – US Trading Company Conversion Agreement
`(Against ATF Morzev Trust and Morzev)
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`72. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
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`73. US Trading Company and ATF Morzev Trust and Morzev entered into
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`a binding and enforceable agreement to transfer over US Trading Company’s
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`interest in Morzev to USARE, the US Trading Company Conversion Agreement.
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`74. The duty of good faith inheres in every contract under the law of
`
`Western Australia. By failing to deliver an equity interest in USARE equivalent to
`
`US Trading Company’s interest in Morzev, ATF Morzev Trust and Morzev
`
`breached the duty of good faith and fair dealing.
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`75. By reason of the foregoing, US Trading Company has been damaged
`
`in an amount to be determined at trial.
`
`SEVENTH CAUSE OF ACTION
`Breach of Fiduciary Duty - USARE
`(Against Gutnick and Althaus)
`
` Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`76.
`
`forth herein.
`
`77.
`
`In the period between the dates the Plaintiffs executed the conversion
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`agreements in July and August 26, 2019, both Althaus and Gutnick owed fiduciary
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`duties to the Plaintiffs as chief executive officer and manager of USARE
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`respectively. Both Althaus and Gutnick had fiduciary obligations to the Plaintiffs to
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`ensure that they received their equity interests in USARE as set out in the respective
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`conversion agreements.
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`78.
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` Both Althaus and Gutnick had the ability to ensure that Plaintiffs
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`received their equity interests in USARE as required in the written agreements
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`described above that each of the Plaintiffs had entered into in July 2019.
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`79. Both Althaus and Gutnick knew Plaintiffs the proper amounts of equity
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`that Plaintiffs were to receive under their respective written agreements.
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`80.
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`In the period between the dates the Plaintiffs executed the conversion
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`agreements in July and August 26, 2019, both Althaus and Gutnick took steps in
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`their capacities as chief executive officer and manager to ensure that the Plaintiffs
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`would not receive their proper amounts of equity in USARE but instead receiving
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`meaningfully less, notwithstanding their personal knowledge of the relevant
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`agreements and in violation of their fiduciary duties to the Plaintiffs.
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`81. Both Althaus and Gutnick during this period had an obligation to
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`inform Plaintiffs of the issuance of approximately 7.8 million USARE Class A
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`shares to Down Under in July 2019 without consideration because of the fiduciary
`
`duties they owed Plaintiffs.
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`82. Both Althaus and Gutnick violated those fiduciary duties by failing to
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`inform Plaintiffs of the July 2019 transfer of USARE Class A shares to Down Under
`
`without consideration.
`
`83.
`
`In the period the dates the Plaintiffs executed the conversion
`
`agreements in July and August 26, 2019, both Althaus and Gutnick took steps in
`
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` 
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`their capacities as chief executive officer and manager to ensure that the Plaintiffs
`
` 
`
`
`
`would not receive the full value of their investments in Morzev in violation of their
`
`fiduciary duties to the Plaintiffs.
`
`84. Both Althaus and Gutnick during this period had an obligation to
`
`inform Plaintiffs of the issuance of approximately $6 million from Morzev to
`
`themselves or their nominees prior to the final transfer of assets from Morzev to
`
`USARE.
`
`85. Both Althaus and Gutnick violated those fiduciary duties by failing to
`
`inform Plaintiffs of the $6 million transfers from Morzev to themselves or their
`
`nominees prior to the Plaintiffs’ execution of the transfer agreements described
`
`above.
`
`86.
`
` Through the foregoing, Althaus and Gutnick failed in their fiduciary
`
`duties to be honest with Plaintiffs and to protect the interests the Plaintiffs had in
`
`USARE, and in fact knowingly took steps to reduce Plaintiffs’ interests in USARE,
`
`resulting in injury to Plaintiffs, in an amount to be determined at trial.
`
`EIGHTH CAUSE OF ACTION
`Breach of Fiduciary Duty/Corporations Act (Australia) – Morzev
`(Gutnick and Althaus)
`
`87. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
`
`
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`19
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`88.
`
`In the period between January 1 and the dates the Plaintiffs executed
`
`the conversion agreements in July, 2019, both Althaus and Gutnick owed fiduciary
`
`duties to the Plaintiffs and/or had duties or obligations under the Corporations Act
`
`(Australia) as controlling owners, managing owners, officers and/or directors of
`
`Morzev. Both Althaus and Gutnick had duties andobligations to the Plaintiffs to
`
`ensure that they received their equity interests in USARE as set out in the respective
`
`conversion agreements.
`
`89.
`
` Both Althaus and Gutnick had the ability to ensure that Plaintiffs
`
`received their equity interests in USARE as required in the written agreements
`
`described above that each of the Plaintiffs had entered into in July 2019.
`
`90. Both Althaus and Gutnick knew Plaintiffs the proper amounts of equity
`
`that Plaintiffs were to receive under their respective written agreements.
`
`91.
`
`In the period between January 1 and July 31, 2019, both Althaus and
`
`Gutnick took steps in their capacities as controlling owners, managing owners,
`
`officers and/or directors of Morzev to ensure that the Plaintiffs would not receive
`
`their proper amounts of equity in USARE but instead receiving meaningfully less,
`
`notwithstanding their personal knowledge of the relevant agreements and in
`
`violation of their duties and obligations to the Plaintiffs.
`
`92. Both Althaus and Gutnick during this period had an obligation to
`
`inform Plaintiffs of the issuance of approximately 7.8 million USARE Class A
`
`
`
`20
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`

`

` 
`
`shares to Down Under in July 2019 without consideration because of the duties and
`
` 
`
`
`
`obligations they owed Plaintiffs.
`
`93. Both Althaus and Gutnick violated those fiduciary duties by failing to
`
`inform Plaintiffs of the July 2019 transfer of USARE Class A shares to Down Under
`
`without consideration.
`
`94. Both Althaus and Gutnick during this period had an obligation to
`
`inform Plaintiffs of the issuance of approximately $6 million from Morzev to
`
`themselves or their nominees prior to the final transfer of assets from Morzev to
`
`USARE.
`
`95. Both Althaus and Gutnick violated those duties and obligations by
`
`failing to inform Plaintiffs of the $6 million transfers from Morzev to themselves or
`
`their nominees prior to the Plaintiffs’ execution of the transfer agreements described
`
`above.
`
`96.
`
` Through the foregoing, Althaus and Gutnick failed in their duties and
`
`obligations to be honest with Plaintiffs and to protect the interests the Plaintiffs had
`
`in USARE, and in fact knowingly took steps to reduce Plaintiffs’ interests in
`
`USARE, resulting in injury to Plaintiffs, in an amount to be determined at trial.
`
`
`
`
`
`
`
`
`
`21
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` 
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`
`
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`NINTH CAUSE OF ACTION
`Fraud & Misrepresentation
`(Gutnick and Althaus)
`
`97. Plaintiffs repeat and reallege the foregoing allegations as if fully set
`
`forth herein.
`
`98.
`
`In July 2019, Gutnick and Althaus executed agreements on behalf of
`
`Morzev, ATF Morzev Trust, and USARE with the Plaintiffs as described above,
`
`each of which represented that Plaintiffs would receive “1:1” exchanges of their
`
`shares in Morzev for shares in USARE
`
`99. However, at the same time that they were making those representations
`
`to the Plaintiffs in those agreements, Gutnick and Althaus knew, and intentionally
`
`failed to mention to Plaintiffs, that 7.8 million Class A shares of USARE had been
`
`issued to Down Under earlier that same month. This intentional omission was
`
`material, in that it diminished the value of Plaintiffs’ investment in USARE by
`
`approximately 5%. The omission rendered the statements in the agreements
`
`regarding the “1:1 transfers” signed by Gutnick and Althaus on behalf of Morzev,
`
`ATF Morzev Trust, and USARE, materially misleading.
`
`100. Further, at the same time, Althaus and Gutnick knew that they had
`
`transferred or were about to transfer $6 million from Morzev to themselves or their
`
`nominees prior to the final transfer of assets from Morzev to USARE. Althaus and
`
`Gutnick knew that Plaintiffs reasonably believed that the assets of Morzev would
`
`
`
`22
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`

`

` 
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`transferred to USARE. Gutnick and Althaus omitted this information knowing that
`
` 
`
`
`
`it would result in the deception of the Plaintiffs concerning the value of the
`
`investments that the Plaintiffs would be receiving in USARE after they had
`
`transferred their interests from Morzev to USARE.
`
`101. By reasons of the foregoing, Plaintiffs have been damaged in an amount
`
`to be determined at trial.
`
`PRAYER FOR RELIEF
`
`WHEREFORE, Plaintiffs respectfully pray for the following relief:
`
`(a) An order declaring that Defendants USARE, ATF Morzev Trust, and
`
`Morzev breached the contracts identified herein and/or breached the duty of good
`
`faith and fair dealing;
`
`(b) An order declaring that Gutnick and Althaus defrauded Plaintiffs;
`
`(c) An order declaring that Gutnick and Althaus breached the fiduciary
`
`duties that they owed Plaintiffs as officers and/or directors of USARE;
`
`(d) An order declaring that Gutnick and Althaus breached the fiduciary
`
`duties that they owed Plaintiffs as officers and/or directors of Morzev;
`
`(e) An award of compensatory damages in an amount to be determined at
`
`trial;
`
`(f) A curative amount of equity in USARE to compensate for Plaintiffs’
`
`injuries in an amount to be determined at trial;
`
`
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`23
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`(g) An order directing Defendants to pay reasonable attorneys’ fees and
`
`expenses in connection with this action, including but not limited to, costs and pre-
`
`judgment and post-judgment interest at the maximum rate allowed by law; and
`
`(h) Granting any such further relief as this Court deems just and proper.
`
`Dated: July 29, 2022
`
`Of Counsel:
`Andrew St. Laurent
`Harris St. Laurent & Wechsler LLP
`40 Wall Street, 53rd Floor
`New York, NY 10005
`Telephone: (212) 397-3370
`Email: andrew@hs-law.com
`
`
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`
` /s/ David A. Felice
`David A. Felice (#4090)
`Bailey & Glasser, LLP
`Red Clay Center at Little Falls
`2961 Centerville Road, Suite 302
`Wilmington, Delaware 19808
`Telephone: (302) 504-6333
`Email: dfelice@baileyglasser.com
`
` Attorney for Plaintiffs
`
`
`
`
`
`24
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`

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