SAN FRANCISCO--(BUSINESS WIRE)--Silicon Valley venture capital firm 1955 Capital and its solo managing partner Andrew Chung is facing another new legal challenge by its sole investor which seeks to enforce the investment terms in its deal with the Los Altos, Calif., venture investment company.
Global Industrial Investment Limited (GIIL), the sole investor in the two funds managed by Andrew Chung and 1955 Capital, filed the arbitration on October 29, 2019 to enforce the investment terms requiring Mr. Chung to make investments only in specified areas. The arbitration demand was filed with the International Centre of Dispute Resolution.
GIIL is a wholly-owned subsidiary of China Fortune Land Development, a publicly-traded real estate company and leading developer and operator of industrial mixed-use projects in China.
“None of the investments made by Mr. Chung is within the specific areas of our deal and he has flaunted his violation by continuing to target companies not within the investment mandate,” said Yan Zhang of Baker Botts LLP, counsel to GIIL.
This is the second arbitration between GIIL and 1955 Capital. While the first arbitration decision continues to be disputed and casts doubt over the validity of the investment agreements themselves, GIIL has brought this new arbitration because 1955 Capital’s continued investments outside its mandate will cause GIIL irreparable harm, Zhang said of the company’s arbitration demand.
Mr. Chung and 1955 Capital have made investments with GIIL’s funds in Crop Enhancement and Sustainable Bioproducts, two of the three disclosed investments made by Mr. Chung, which are in the agriculture technology area that is not within investment mandate.
Gridtential, the third company in which Mr. Chung has invested is in battery technology, also outside the investment mandate, according to GIIL’s arbitration claim.
Mr. Chung has promised GIIL to use 1955 Capital’s venture investments to attract US businesses and technologies to China and 1955 Capital is required to set up a rigorous process to evaluate startup companies’ potential relocation to China. “Right after receiving GIIL’s investment money, 1955 Capital promptly disregarded its duties and promises and has never attracted businesses to China.” Zhang stated, “It has never set up the proper process to evaluate companies, including the three investments he has made, and has never followed the investment mandate.”
In addition, both Andrew Chung and his wife Coral Chung, CEO of Senreve, a luxury goods purse company, have been sued for fraud in China by GIIL in connection with how the couple has made fraudulent promises in procuring GIIL’s interests in investing money into the funds to be managed by them, according to Zhang. Mrs. Chung worked for her husband at 1955 Capital, drawing a substantial salary while simultaneously launching her startup, Senreve, a luxury handbag company, facts which play a role in current and additional litigation against the couple.
GIIL also brought a California lawsuit on Nov. 18 in Santa Clara County Superior Court against Andrew Chung for violation of fiduciary duties. “There is ample evidence that Chung recklessly breached his fiduciary duty to GIIL by secretly changing the deal terms in a scheme to keep all the initial $80 million investment for himself,” said Zhang. That lawsuit seeks the return of the money, additional compensatory damages, punitive damages, and injunctive relief.
Zhang said additional action by GIIL against Mr. Chung, Mrs. Chung, and others is anticipated.