Riot Blockchain Inc. is expected to be found to have breached its contract with a disgruntled investor, in the latest developments in the long-running battle over an agreement to pay legal fees.
Investor Barry C. Honig alleges that Riot Blockchain owes him indemnification for the costs incurred over the course of the legal challenge, including some $728,000 already spent on Honig’s legal fees.
According to a spokesperson for Honig, the agreements between the investor and Riot “contain robust indemnification provisions which require defendant to defend and indemnify Mr. Honig and GRQ against any subsequent lawsuits.”
In a civil case ruling on April 3 in a New York federal court, the company was found to owe Honig indemnification for the legal fees and other expenses incurred during the legal challenge.
The indemnification provisions could yet prove costly for Riot Blockchain, with Honig already having proposed a class action lawsuit in New Jersey for Riot investors, as well as five other separate shareholder derivative actions.
Attorneys for Honig have issued demands for payment to Riot, which has so far refused to pay towards his legal fees, as per the terms of the contract.
“In the contracts between the parties at issue in this action, defendant agreed that the state or federal courts in New York shall have exclusive jurisdiction over any disputes arising out of or in connection with parties’ agreements at issue in this proceeding, and expressly waived any objection to this Court serving as a convenient venue.”
Honig’s attorney Robert Weber said the language of the agreements was clear in specifying that Riot would cover Honig’s legal fees.
“The language of the agreements are black and white… Riot has an obligation to indemnify Mr. Honing for the defense fees that he incurred in the various lawsuits and hasn’t done it, and frankly, forcing us to file us to go to litigation is ultimately going to be a waste of Riot shareholders’ money.”
The developments follow a recent investigation into Riot Blockchain by the U.S. Securities and Exchange Commission (SEC), with several further actions pending against the former biotech firm.
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