July 31, 2026  ·  Complaint filed July 29, 2026  ·  nyed, No. 1:26-cv-04601

Newman News, By David Brunk

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David v. Late Stage Asks Court to Block $411M Sale of SpaceX Shares Plaintiffs Say Are Theirs

Defendants Attempt to Strip Plaintiffs of $478 Million in SpaceX Shares

The second amended complaint in Joseph Osborne David et al. v. Late Stage Management, LLC et al. alleges that defendants are attempting to strip plaintiffs of 3,917,185 pre-IPO SpaceX share equivalents worth up to $478,000,000 through fabricated records, unauthorized deductions, and an unpaid offshore transfer (Compl. ¶1). The alleged misconduct includes retroactively marking plaintiffs’ SpaceX positions as sold and diverting proceeds through a complex web of offshore entities, including a transaction where Capital Truth Holdings LLC sold 12,541 SpaceX shares to Late Stage Fund X, LLC for $3,574,185 in July 2020 (Compl. ¶50).

Fabricated Sale Notices and Alleged Fraud

The complaint alleges that defendants engaged in a scheme to defraud plaintiffs by retroactively marking their pre-IPO SpaceX positions as “sold” on September 23, 2024, at a purported sale price of $105.00 per share (pre-split), which equates to an effective post-split sale price of $21.00 per share (Compl. ¶¶66, 90, 339). This conduct forms the basis for a FOURTH CAUSE OF ACTION: Fraud (against Late Stage, Capital Truth, Follano, and Cilano) (Compl. ¶¶1, 98, 298). David’s screenshots, attached as exhibits, show an email history entry originally dated December 31, 2024, that was later changed to September 23, 2024, the date defendants now claim the sale occurred. The complaint alleges that "the fabrication and backdating of sale notices and portal records" was part of a broader pattern of misconduct, including "the creation of false emails" and "the alteration of historical holding reports in July 2026" (Compl. ¶339).

Kottu’s June 9, 2026, email to Late Stage treated the SpaceX position as active, and he denies ever receiving a sale notice. The complaint alleges that Late Stage later represented that those positions had been sold in September 2024, "even though Plaintiffs did not receive contemporaneous notice" (Compl. ¶334). Cilano’s July 27, 2026, declaration authenticated records for Capital Truth Holdings Ltd. but did not clarify whether plaintiffs’ SpaceX interests were included in the segregated account (SAC1) that is the subject of the $411 million sale. Marcello Follano invoked the Fifth Amendment in a subsequent filing, a fact the complaint cites as evidence of scienter, or intent to deceive (Compl. ¶339).

The complaint also highlights that the alleged $105.00 pre-split sale price per share for David’s SpaceX shares was significantly below the market value of SpaceX shares at the time of the company’s IPO, which occurred on June 23, 2026, when SpaceX went public at $135 per share (Compl. ¶66). The complaint further alleges that this below-market sale price was part of a broader scheme to defraud investors by undervaluing their shares and diverting proceeds through offshore entities.

Investment Details and Unauthorized Deductions

The complaint provides specific details about plaintiffs’ investments, which the defendants allegedly misappropriated. Joseph Osborne David invested $17,250 in Series SPSX-X6a, purchasing 50 pre-IPO SpaceX shares at a per-share price of $345 (Compl. ¶60). After SpaceX’s 10:1 stock split in February 2022, the average price per share for David’s holdings was adjusted to $34.50, and following the 5:1 stock split in May 2026, it was further adjusted to $6.90 (Compl. ¶¶61-62). Despite these investments, David was offered an "unapplied contribution" of $45,450.00, which the complaint alleges was part of a uniform scheme to deprive investors of their rightful proceeds at a rate of $90.90 per pre-split share.

Ravikanth Kottu invested $34,500 in Series SPSX-X5a, purchasing 100 pre-IPO SpaceX shares at a per-share price of $345 (Compl. ¶80). After the stock splits, Kottu’s position was similarly adjusted, and he was offered an "unapplied contribution" of $90,900.00, also at the uniform rate of $90.90 per pre-split share (Compl. ¶83). The complaint alleges that this uniform figure was applied across multiple investors, including Sunny Ridge Creative LLC, which was offered $75,447.00 for its 4,150 post-split shares (Compl. ¶109).

Sunny Ridge Creative LLC, a New York-based entity with members John Lifrieri and Josh Kale, invested $28,500 in Series SPSX-19A, funding the purchase with two wires of $14,250 each (Compl. ¶106). The firm acquired 82–83 pre-IPO SpaceX shares at a per-share price of $345, with Late Stage’s records reflecting 83 shares (Compl. ¶105). After the stock splits, Sunny Ridge’s position grew to 4,150 shares, but the complaint alleges that defendants retroactively marked these shares as sold and offered the firm the aforementioned "unapplied contribution."

The complaint further details that in July 2020, Capital Truth Holdings LLC sold 12,541 SpaceX shares to Late Stage Fund X, LLC for $3,574,185 at $285 per share, as documented in a Stock Purchase Agreement (Compl. ¶50). This transaction predates the investments made by plaintiffs but is cited as part of the broader scheme involving the misappropriation of SpaceX shares. The complaint also notes that the private placement memorandum promised no transfer of investments without majority consent of the Series Members, a promise that was allegedly violated when Capital Truth retroactively granted Late Stage the "sole and expressed right to sell" SpaceX positions after plaintiffs had already invested (Compl. ¶¶5-6).

The complaint alleges that the uniform $90.90 per pre-split share figure offered to plaintiffs was consistent with defendants’ practice of deducting 740,000 share equivalents—approximately $100 million at the IPO price—as "carried interest and like charges" before delivering proceeds to investors (Compl. ¶348). Plaintiffs contend they were never informed that their SpaceX interests could be reduced by such upstream charges, which the complaint describes as "hidden compensation, markup, or undisclosed profit participation" (Compl. ¶341). The complaint further alleges that these deductions "materially affected the number of shares and proceeds investors would receive" and that defendants acted with scienter, as evidenced by their own records and the fabrication of sale notices (Compl. ¶¶337-338). The complaint states that "deductions operated as hidden compensation/markup/undisclosed profit participation" and that plaintiffs were not informed of these charges (Compl. ¶341).

Causes of Action: Conversion and Fraudulent Conveyance

The complaint includes a THIRD CAUSE OF ACTION: Conversion (against all defendants), alleging that defendants exercised dominion over plaintiffs’ property after notice of their claims (Compl. ¶294). The complaint states that plaintiffs "did not authorize the sale or other disposition of their SpaceX interests" and "did not receive notice or proceeds from the alleged September 2024 sale" (Compl. ¶¶273-274). Additionally, the complaint asserts a SEVENTH CAUSE OF ACTION: Fraudulent Conveyance – NY DCL §§ 273-276 (against all defendants), alleging that defendants’ transfers and attempted transfers "were made or undertaken with actual intent to hinder, delay, or defraud creditors" (Compl. ¶348). The complaint identifies several "badges of fraud," including the fabrication and backdating of records, insider transfers, concealment, and the sale of shares at below-market prices, such as the $105.00 per share (pre-split) price cited in the fabricated notices (Compl. ¶349).

The complaint also alleges that defendants engaged in fraudulent conveyances through a series of transactions, including the 2020–2023 "redemptions" and the $105.00 per share transfer to Trendy Reach Holdings Limited as part of the SAC1 transaction (Compl. ¶348). The diversion of 740,000 share equivalents as carried interest is also cited as a fraudulent conveyance, with the complaint noting that these transfers were made with the intent to hinder, delay, or defraud plaintiffs (Compl. ¶348).

The $411 Million Transaction and Escrow Redirection

On June 23, 2026, Capital Truth Holdings Ltd. agreed to sell a segregated account (SAC1) to Trendy Reach Holdings Limited for $411,304,425. The transaction includes SpaceX share equivalents that plaintiffs allege were purchased with their funds through Late Stage. The complaint states that the effective price per delivered share, after deductions, is $129.54—still below the $156.11 IPO price at which SpaceX closed on June 23, 2026 (Compl. ¶¶79, 104). The complaint further alleges that the SAC1 transaction threatens to "transfer, monetize, release, encumber, or dissipate SpaceX share equivalents" before plaintiffs’ rights can be adjudicated (Compl. ¶354).

The CEO of Triller and Trendy Reach, Ng Wing Fai, declared on July 26, 2026, that no funds had been delivered for the transaction due to armed conflict disrupting financing. The complaint notes that the materials submitted lacked financing commitments or documentary proof of the funding delays, which were attributed to lenders and investors in Abu Dhabi and Singapore, as well as Middle East instability (Compl. ¶¶234-235). On July 26, 2026, an extension notice was issued for the SAC1 transaction, redirecting escrowed funds to the IOLA account of Gusrae Kaplan Nusbaum PLLC, counsel for Cilano and Capital Truth entities (Compl. ¶239). The new closing deadline was set for August 26, 2026. The complaint highlights that the escrow agent, Royal Escrow Services, LLC, was formed just 11 weeks prior to the transaction and shares a manager and address with entities controlled by Cilano (Compl. ¶349).

On June 25, 2026, Triller announced the $411 million acquisition of SAC1 from Capital Truth, with a press release stating that the transaction was expected to close "in the coming days." The announcement coincided with a dramatic increase in Triller’s share price, which opened at $5.13 per share on June 26, 2026—a nearly 600% increase from its closing price of $0.77 per share on June 24, 2026 (Compl. ¶¶120, 121). Despite this surge, Triller’s market capitalization on July 20, 2026, was only $28.66 million, raising questions about the sustainability of the stock price increase and the true value of the SAC1 transaction (Compl. ¶122).

Altered Monthly Holdings Reports and Portal Inaccessibility

The complaint alleges that Late Stage Asset Management, LLC’s Delaware certificate was cancelled in 2018, two years before plaintiffs’ investments, a fact that was not disclosed to investors (Compl. ¶3). On December 15, 2020, Capital Truth granted Late Stage the "sole and expressed right to sell" SpaceX positions, a retroactive grant that contradicted the private placement memorandum’s promise that no transfer of investments would occur without majority consent of the Series Members (Compl. ¶¶5-6). The complaint quotes the memorandum as stating that "no transfer of any investment interest in the Series shall be made without the prior written consent of a majority of the Series Members" (Compl. ¶5).

Between June 18 and June 23, 2026, the defendant’s investor portal became inaccessible. When it was restored, plaintiffs’ SpaceX positions were marked as sold, backdated to September 23, 2024. Sunny Ridge Creative LLC’s portal showed “Holding 4,150 / Delivered 0” on June 15, 2026, but by July 6, 2026, the position was marked sold and the firm was offered a $75,447.00 “unapplied contribution” (Compl. ¶109). In July 2026, while the related case Evangelista v. Late Stage Asset Management, LLC was before Judge Kiyo A. Matsumoto, plaintiffs allege that defendants altered monthly holdings reports to reflect both active SpaceX positions and unapplied contributions for the period September 2024–May 2026. The complaint states that these alterations were made to conceal the retroactive sale and to create a false record of plaintiffs’ holdings (Compl. ¶110). The complaint describes these actions as part of a "scheme to defraud" and cites the alterations as evidence of defendants' intent to mislead (Compl. ¶339).

Exchange Act Violations and Control Person Liability

The complaint includes a FIFTH CAUSE OF ACTION: Violation of Section 10(b) of the Exchange Act and SEC Rule 10b-5 (against Late Stage, Capital Truth, Follano, and Cilano), alleging that defendants made untrue statements of material fact, omitted material facts necessary to make statements not misleading, and engaged in a scheme to defraud (Compl. ¶331). The complaint states that "made untrue statements of material fact, omitted material facts necessary to make statements not misleading, and engaged in a scheme to defraud" (Compl. ¶331). The complaint further asserts that "Late Stage later represented that those positions had been sold in September 2024, even though Plaintiffs did not receive contemporaneous notice" and that these representations were part of a broader pattern of deception (Compl. ¶334).

Declaratory Relief and Constructive Trust

The complaint includes a FIRST CAUSE OF ACTION: Declaratory Relief (rights in SpaceX block and proceeds; against all defendants), asserting that an actual controversy exists over the ownership and control of the disputed SpaceX shares (Compl. ¶256). Plaintiffs allege that Capital Truth claims the right to sell SAC1, which includes 3,917,185 SpaceX share equivalents, and that the SAC1 transaction includes shares purchased with plaintiffs’ funds through Late Stage (Compl. ¶¶258, 261). The complaint also seeks a SECOND CAUSE OF ACTION: Constructive Trust (over shares, share equivalents, and traceable proceeds; against all defendants), arguing that defendants hold or control SpaceX share equivalents traceable to plaintiffs’ investments and that Triller is attempting to acquire these shares after notice of plaintiffs’ claims (Compl. ¶¶277-278). The complaint states that "Capital Truth, SAC1, or related entities hold or control SpaceX share equivalents traceable to Plaintiffs’ investments" and that "Triller attempting to acquire SpaceX share equivalents through SAC1 after notice of Plaintiffs’ claims" demonstrates the need for a constructive trust (Compl. ¶¶277-278).

Plaintiffs’ Demands and Request for Injunctive Relief

The complaint requests a constructive trust over the 3,917,185 SpaceX share equivalents and their traceable proceeds. Plaintiffs demand that defendants be enjoined from a variety of actions, including closing, funding, or consummating the SAC1 transaction; transferring, encumbering, or disposing of the shares or proceeds; releasing or dissipating escrowed funds; destroying, altering, or concealing records; or impairing the court’s ability to determine ownership and traceability (Compl. ¶360). The complaint also includes a Request for Injunctive Relief: Preserve status quo, prevent deductions, deposit proceeds with Clerk of Court (against all defendants), seeking to maintain the status quo and prevent defendants from making further deductions or dissipating proceeds before the court can adjudicate plaintiffs’ rights.

In addition to injunctive relief, plaintiffs seek actual damages, rescissory relief, restitution, disgorgement, punitive damages, and an accounting. The complaint alleges that plaintiffs "lost access to their SpaceX interests, did not receive the shares or proceeds to which they were entitled, and now face an imminent risk of dissipation via the SAC1 transaction" (Compl. ¶326). The complaint further states that the "unauthorized disposition of securities in 2024–2026 via fabricated and backdated records and false liquidation notices" demonstrates the need for immediate judicial intervention (Compl. ¶329). The allegations remain unproven, and no defendant has yet filed a response in the case.

The allegations described here are taken from the filing and remain unproven; no responsive pleading is reflected in the source document.

David Brunk is a civil litigation attorney. He can be reached at david@newmanbrunk.com.