Colorado Land Development Co., LLC and Five Trees LLLP initiated the action in the Delaware Court of Chancery, alleging the transaction valued the AI firm at roughly one-third of its recent valuations. According to the complaint, the deal converted approximately $11.2 million in insider-held promissory notes into equity, significantly diminishing the stakes of outside investors who previously poured over $6.6 million into the company during its 2024 Series B-2 round.

The lawsuit names CEO and Chairman Martin Sprinzen, co-founder Paul Butterworth, and director Alan Quasha among the defendants. Plaintiffs contend these individuals stood on both sides of the transaction as both fiduciaries and creditors. Further allegations surface regarding a lack of transparency, specifically citing Sprinzen’s failure to disclose a romantic relationship with a company executive who reportedly played a central role in drafting the terms of the restructuring. The board approved the deal without a fairness opinion or the formation of an independent committee, prompting claims of unjust enrichment and breach of fiduciary duty.