Delaware court greenlights lawsuit over Hatteras fund's disastrous $305M asset sale

A Delaware court just gave the green light to an investor lawsuit over a $305 million fund deal that destroyed nearly all value. 

On March 31, 2026, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery denied a motion to dismiss filed by the defendants in the Hatteras fund complex case, clearing the way for the lawsuit to move forward. The plaintiff, the Young Women's Christian Association of Rochester and Monroe County, is a nonprofit that has been invested in one of the Hatteras feeder funds since 2012. It is suing on behalf of the Hatteras Master Fund. 

Here is what happened. The Hatteras Master Fund was once a $624 million fund-of-funds vehicle offering investors access to diversified alternative investments. By 2020, years of investor withdrawals had cut assets under management by more than half, and the investment manager's fees had fallen to around $3.9 million a year. David B. Perkins, who cofounded the fund complex and controlled the investment manager, decided it was time to shut things down and start over. 

Rather than wind down the fund in an orderly way, Perkins struck a deal with Beneficient, a startup that provided liquidity solutions for alternative investments. In December 2021, the Master Fund handed over its entire portfolio of roughly 125 investments, valued at approximately $305 million, to Beneficient. In return, the fund received illiquid preferred units in a single company that was not yet profitable, had no expectation of generating positive cash flow, and carried $2.36 billion in goodwill on a $2.82 billion balance sheet. Beneficient's CFO had resigned over concerns that the CEO was using related-party transactions to misappropriate funds. Two audit firms had walked away. Four independent directors had quit. The SEC was investigating the accounting practices of Beneficient's former parent, GWG Holdings, including the consolidation of financials with Beneficient and the legitimacy of its goodwill valuation. 

The fund's board approved the transaction the same day it was presented, with no fairness opinion and no outside advisors. The deal violated the fund's own diversification policy, which capped exposure to any single issuer at 25 percent. The board did not seek investor approval for the policy override. It also cancelled all pending tender requests, locking investors in. 

The letter sent to investors afterward was not much better. According to the court, it implied that a blue-chip institution was buying the assets for cash and that the fund would dissolve and return money to investors. It said nothing about the illiquid preferred units. It also failed to mention that Beneficient had agreed to financially support the investment manager's future funds, effectively letting Perkins recycle the Master Fund's assets into his next venture. 

For eighteen months, no one did anything. The board did not pursue dissolution, did not diversify, and did not address the risk of holding a concentrated position in a company surrounded by red flags. 

When Beneficient went public through a de-SPAC transaction in June 2023, the preferred units converted into common stock valued at $8 per share. The fund now had a liquid, tradeable security. Still, no action was taken. 

Beneficient then wrote off nearly all of its goodwill within seven months. The stock went from $8 to under $0.60 by October 2023 and below $0.05 by April 2024. After a 1-for-80 reverse stock split, it was trading at $0.83 by December 2024 – a 99.88 percent loss. The Master Fund never sold a single share. 

Meanwhile, the investment manager kept collecting its annual fee of 1 percent of assets under management. Before the deal, that fee covered oversight of roughly 125 investments and periodic tender offers. After the deal, the fund held one security. The board never renegotiated. The total payout to the investment manager exceeded $10 million. 

The defendants tried to get the case thrown out on procedural grounds, arguing that the YWCA's feeder fund only held a 48 percent interest in the Master Fund and therefore lacked standing to sue. They also argued that the YWCA should have first asked the board for permission to bring the claims. Vice Chancellor Laster rejected both arguments, finding that the YWCA had adequately shown that asking the board would have been pointless because the directors themselves face a real risk of liability. 

This is not the final word. The case will now proceed further. But for anyone managing money, sitting on a fund board, or advising institutional investors, the message from Delaware is hard to miss: approve a conflicted deal without doing your homework, ignore your own policies, mislead your investors, and keep collecting fees while the value collapses – and you can expect to answer for it in court.