UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IN RE EASTERLY ROCMUNI HIGH
INCOME MUNICIPAL BOND FUND
25-cv-6028 (DLC)
CLASS ACTION
JURY TRIAL DEMANDED
CONSOLIDATED COMPLAINT
FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
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TABLE OF CONTENTS
Page(s)
I. Summary of the Action ....................................................................................................... 1
II. Summary of Defendants’ Violations of the Securities Laws .............................................. 6
III. Jurisdiction and Venue ........................................................................................................ 8
IV. The Parties .......................................................................................................................... 8
A. Trust Defendants ..................................................................................................... 8
B. Investment Advisor Defendants .............................................................................. 9
C. Portfolio Manager Defendants .............................................................................. 10
D. MPS Trust Officer and Trustee Defendants .......................................................... 11
E. Easterly Trust Officer and Trustee Defendants .................................................... 12
F. Underwriter Defendants ........................................................................................ 12
V. Background and Facts ....................................................................................................... 13
A. Background on the Fund ....................................................................................... 13
B. The Municipal Bond Market ................................................................................. 14
C. Disclosure Requirements for Open-End Mutual Funds ........................................ 17
D. SEC Rules Limit Open-End Mutual Funds to No More Than 15% in
Illiquid Assets ....................................................................................................... 18
E. Factors Affecting the Liquidity of Municipal Bonds ............................................ 19
F. The Fund’s Valuation Standards ........................................................................... 21
G. A Significant Portion of the Fund’s Portfolio Was Invested in Illiquid
Bonds .................................................................................................................... 22
H. The Fund Materially Overstated the Value of its Assets and the
Fund’s NAV .......................................................................................................... 27
I. The Fund Materially Overstated the Value of the Fund’s Level 3
Assets .................................................................................................................... 35
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J. The Fund’s Investment in Defaulted Bonds Was an Undisclosed
Significant Investment Strategy of the Fund ........................................................ 37
K. A Significant Portion of the Fund’s Portfolio Was Invested in the
Same or Related Businesses .................................................................................. 41
VI. The Fund’s Registration Statements and Prospectuses Contained Materially False
and Misleading Statements ............................................................................................... 45
A. The Registration Statements and Prospectuses Misrepresented the
Fund’s Compliance with the SEC’s and the Fund’s Limitation on
Illiquid Investments .............................................................................................. 45
B. The Registration Statements and Prospectuses’ Misstatements
Concerning Valuation ........................................................................................... 47
C. The Registration Statements and Prospectuses Misrepresented the
Fund’s Investment Strategy Regarding Defaulted Securities ............................... 49
D. The Registration Statements and Prospectuses Misrepresented the
Fund’s Significant Investment in the Same or Related Businesses ...................... 50
VII. Class Action Allegations................................................................................................... 51
VIII. Causes of Action ............................................................................................................... 53
Count I
Violations of Section 11 of the Securities Act (Against Defendants the MPS
Trust, the Easterly Trust, Eirich, Wiedmeyer, Kern, Massart, Swanson, Rush,
Crate, Montague, Medugno, Spencer, Quasar Distributors and Easterly Securities) ....... 53
Count II
Violations of Section 12(a)(2) of the Securities Act (Against Defendants the MPS
Trust, the Easterly Trust, Quasar Distributors and Easterly Securities) ........................... 54
Count III
Violations of Section 15 of the Securities Act (Against Defendants Eirich,
Wiedmeyer, Kern, Massart, Swanson, Rush, Crate, Montague, Medugno,
Spencer, the Portfolio Manager Defendants, Principal Street Partners and Easterly
Investment Partners) ......................................................................................................... 56
Count IV
Violation of Section 14(a) of the Exchange Act and SEC Rule 14a-9 (Against
Defendants the Easterly Trust, Crate, Montague, Medugno and Spencer) ....................... 57
Count V
Violation of Section 20(a) of the Exchange Act (Against Defendants Crate,
Montague, Medugno, Spencer and the Portfolio Manager Defendants) .......................... 59
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IX. Prayer for Relief ................................................................................................................ 60
X. Jury Trial Demanded......................................................................................................... 60
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Lead Plaintiff Richard Fulford (“Plaintiff”), by and through his undersigned counsel,
alleges the following based upon personal knowledge as to Plaintiff’s own acts, and upon
information and belief as to all other matters based on the investigation conducted by and through
Plaintiff’s attorneys, which included, among other things: (i) a review of U.S. Securities and
Exchange Commission (“SEC”) filings by the James Alpha Funds Trust d/b/a Easterly Funds Trust
(the “Easterly Trust”) and the Managed Portfolio Series Trust (the “MPS Trust”); (ii) a review and
analysis of other publicly available information, news articles, shareholder communications, and
sales and marketing materials concerning the Easterly ROCMuni High Income Municipal Bond
Fund (f/k/a the Principal Street High Income Municipal Fund) (the “Fund”); (iii) a review and
analysis of other available materials relating to the Fund and the municipal bond market; and (iv)
consultation with experts concerning economic loss and municipal bonds. Plaintiff believes that
substantial additional evidentiary support will exist for the allegations set forth herein, after a
reasonable opportunity for discovery.
I. Summary of the Action
This is a class action on behalf of all persons or entities who (i) during the period
July 29, 2022 through June 12, 2025 (the “Class Period”) purchased or otherwise acquired Class
A, Investor Class or Institutional Class shares of the Fund (tickers: RMJAX, RMHVX, RMHIX,
GSTFX, GSTEX, GSTAX), pursuant to or traceable to the Fund’s registration statements and
prospectuses and sustained damages; or (ii) held shares of the Fund as of September 30, 2024 and
were entitled to vote on the reorganization of the Fund from a series of the MPS Trust into a series
of the Easterly Trust.
Defendants are (i) the Easterly Trust and the MPS Trust, which issued shares of the
Fund on a continuous basis throughout the Class Period and are the registrants; (ii) Easterly
Investment Partners LLC (“Easterly Investment Partners”) and Principal Street Partners, LLC
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(“Principal Street Partners”), the Fund’s current or former investment advisors; (iii) Troy E. Willis
(“Willis”) and Charlie S. Pulire (“Pulire”), the Fund’s portfolio managers at all relevant times (the
“Portfolio Manager Defendants”); (iv) Benjamin J. Eirich (“Eirich”), Treasurer of the MPS Trust,
Brian R. Wiedmeyer (“Wiedmeyer”), President of the MPS Trust, and Robert J. Kern (“Kern”),
David A. Massart (“Massart”), David M. Swanson (“Swanson”), and Leonard M. Rush (“Rush”),
each a Trustee of the MPS Trust; (v) Darrell Crate (“Crate”), President and Chairperson of the
Easterly Trust, Michael J. Montague (“Montague”), the Treasurer and principal financial officer
of the Easterly Trust, and Neil Medugno (“Medugno”) and A. Clayton Spencer (“Spencer”), each
a Trustee of the Easterly Trust; and (vi) Quasar Distributors, LLC (“Quasar Distributors”) and
Easterly Securities LLC (“Easterly Securities”), the Fund’s current or former underwriters,
(collectively, the “Defendants”).
Lead Plaintiff alleges (i) strict liability and negligence claims under Sections 11,
12(a)(2) and 15 of the Securities Act of 1933 (“Securities Act”) against Defendants for the
registering, offering and selling shares of the Fund pursuant to materially false and misleading
registration statements and prospectuses (defined below); and (ii) negligence claims under Section
14 and Rule 14a-9, and Section 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”)
against Defendants Crate, Montague, Medugno, Spencer and the Easterly Trust.
The Fund is an open-end mutual fund registered under the Investment Company
Act of 1940 (“1940 Act”) and the Securities Act. Throughout the Class Period, the Fund’s primary
investment objective was to provide current income exempt from regular federal income tax. The
Fund invested at least 80% of its net assets in tax exempt debt securities. The Fund’s secondary
investment objective was to seek total return.
According to the Fund’s “Fact Sheet,” it seeks to provide “long-term, yield-driven
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total return relying mostly on fundamental credit analysis by building a diversified high-yield
portfolio focusing on overlooked and under-appreciated sectors of the high-yield municipal bond
market.” The Fund compared its returns to the Bloomberg High Yield Municipal Bond Index.
As a mutual fund the Fund is subject to an extensive regulatory framework designed
to safeguard the investing public. A mutual fund must register as an investment company under
the 1940 Act and a fund’s shares offered and sold to the public must be registered under the
Securities Act. Mutual funds must file periodic reports with the SEC, provide enhanced disclosures
to mutual fund investors concerning the Fund’s principal investment strategies and risks, act in the
best interests of investors, and implement risk management and operational controls and
procedures. A mutual fund’s shares must be priced daily based on the fund’s net asset value
(“NAV”), and under SEC rules and regulations, an open-end mutual fund may not hold more than
15% of its assets in illiquid securities in order to ensure investor redemption requests can be
satisfied.
In its registration statements and prospectuses filed with the SEC, the Fund
misstated and inaccurately described its principal investment strategies, as well as the allocation
and nature of its investment portfolio. These misrepresentations concealed the Fund’s exposure to
significant risks arising from a portfolio in which a substantial portion of its assets were illiquid
securities and defaulted securities, and were materially overvalued.
When these risks were ultimately disclosed, the Fund’s NAV and the value of its
portfolio of securities declined dramatically. The consequences for investors were severe: the
Fund’s shares lost more than 50% of their value.
On June 13, 2025, fund investors were shocked when the Fund’s NAV collapsed to
$4.33 per share, a decline of over 30% from the reported NAV on June 12, 2025 of $6.15 per
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share.
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In sharp contrast to the Fund’s performance on June 13, 2025, the Fund’s benchmark, the
Bloomberg High Yield Municipal Bond Index was flat, indicating that the massive NAV decline
was unique to the Fund rather than attributable to general market conditions.
On June 17, 2025, Bloomberg published a story titled “Easterly High Yield Muni
Fund Plunges Nearly 50% in Sales Dump” that stated the following:
Easterly Funds’ high-yield municipal-bond fund has dropped almost 50% since
Friday as the portfolio unloaded illiquid securities from the riskiest part of the muni
market, according to people familiar with the matter.
The Easterly RocMuni High Income Municipal Bond Fund net-asset value fell to
$3.16 on Monday from $6.15 on Friday morning. Its assets have declined to about
$67 million from about $245 million at the end of February. . . .
Easterly’s high-yield muni portfolio is stuffed with debt issued for biofuel projects,
recycling facilities and retirement homes, according to data compiled by
Bloomberg. Those kinds of credits rarely trade, making price discovery spotty.
Birch Creek Capital, in its weekly muni commentary, referred to a spate of selling
from a fund that included a large portion of distressed securities, limiting the buyer
pool. . .
On June 18, 2025, The Bond Buyer published a story titled “Easterly HY muni fund
sells off, distressed credit trades for pennies” that stated the following:
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On or around June 17, 2025, the Fund revised the June 13, 2025 redemption price per share of
the Fund to $3.99 per share.
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The Easterly RocMuni High Income Municipal Bond Fund’s total net assets
dropped to $49.9 million as of Tuesday down from $232 million as of March 31,
as the fund floated large bid lists to potential buyers across the market.
The NAV was at $6.36 at the start of the month, falling to $6.15 by Thursday and
then tumbling downward to $3.10 on Tuesday. The fund’s performance year-to-
date is negative 54.08%. . .
The large selloff is a rare occurrence in the high-yield market, and the rock-bottom
prices show the risks of a high-yield market where liquidity is famously limited,
market participants said. . .
Some of the credits represent high-profile defaults and distress across the market:
Legacy Cares, the Proton International Alabama, LLC, and Ohio’s Purecycle
Technologies.
On Friday, an investor paid two cents for $800,000 of the Alabama proton center
bonds with a 6.85% coupon and 2047 maturity, according to Electronic Municipal
Market Access. The most recent trade before that was in 2021, for 114.
A buyer on Monday bought $2.6 million of Purecycle bonds with a 7% coupon due
in 2042 for 50 cents on the dollar. The bonds traded in February 2024 for 102.
A $3.2 million chunk of bonds issued for borrower Gladieux Metals Recycling LLC
sold Monday for 4 cents. The paper carries a 9% coupon. It last traded for 102 in
April 2023. The Gladieux paper, which has been in default for years, was listed as
the fund’s top position at the end of the first quarter.
The credit information on many muni-financed project finance deals like Gladieux
is hidden behind data rooms, accessible only to holders, so it’s difficult to know
what is happening with the credits. Recoveries on such projects are typically
minimal.
The rock-bottom prices show the risks of the high-yield muni market, where
liquidity is limited, said Chad Farrington, co-head of municipal bond strategy at
DWS Asset Management. That’s especially true for small pieces. . .
As of July 24, 2025, the date upon which this action was filed, the Fund’s reported
NAV was $2.94 per share, a decline in NAV per share of over 52% since June 12, 2025.
As of December 4, 2025, the Fund’s reported NAV was $2.94 per share, and the
Fund reported approximately $12.4 million in net assets, a decline of approximately $167 million,
or over 92%, since the end of the Class Period.
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II. Summary of Defendants’ Violations of the Securities Laws
During the Class Period, the Fund offered and sold shares to investors on a
continuous basis through the following registration statements and prospectuses:
i. the Registration Statement filed by the MPS Trust with the SEC on Forms
N-1A and 485BPOS on February 8, 2022, and the Prospectus and Summary Prospectus filed with
the SEC on Form 497K on February 16, 2022 (“2/16/2022 Registration Statement”);
ii. the Registration Statement and Prospectus filed by the MPS Trust with the
SEC on Forms N-1A and 485BPOS on December 28, 2022, and Summary Prospectus filed with
the SEC on Form 497K on December 29, 2022 (with Prospectus and Summary Prospectus dated
December 29, 2022), the Prospectus, as supplemented on January 19, 2023, filed with the SEC on
Form 497 on January 19, 2023, and May 19, 2023 Statement of Additional Information
supplement, filed with the SEC on Form 497 on May 19, 2023 (“12/28/2022 Registration
Statement”);
iii. the Registration Statement and Prospectus filed by the MPS Trust with the
SEC on Forms N-1A and 485BPOS on December 28, 2023, and Summary Prospectus filed with
the SEC on Form 497K on January 1, 2024 (with Prospectus and Summary Prospectus dated
December 29, 2023) (“12/28/2023 Registration Statement”);
iv. the Registration Statement and Prospectus filed by the Easterly Trust with
the SEC on Forms N-1A and 485BPOS on August 29, 2024 (“8/29/2024 Registration Statement”);
v. the Registration Statement and Joint Proxy Statement/Prospectus filed by
the Easterly Trust with the SEC on Form N-14 on July 1, 2024, as amended by Form N-14/A filed
with the SEC on September 5, 2024, which incorporated by reference the 12/28/2023 Registration
Statement and 8/29/2024 Registration Statement (“9/5/2024 Registration Statement and Joint
Proxy Statement/Prospectus”);
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vi. the Registration Statement and Prospectus filed by the Easterly Trust with
the SEC on Forms N-1A and 485BPOS on October 4, 2024, and Summary Prospectus filed with
the SEC on Form 497K on October 11, 2024 (with Prospectus and Summary Prospectus dated
October 7, 2024) (“10/4/2024 Registration Statement”); and
vii. the Registration Statement and Prospectus filed by the Easterly Trust with
the SEC on Forms N-1A and 485BPOS on December 30, 2024 and Summary Prospectus filed
with the SEC on Form 497K on January 8, 2025 (with Prospectus and Summary Prospectus dated
December 31, 2024) (“12/30/2024 Registration Statement”).
Furthermore, Defendants issued and distributed the following documents in
connection with the continuous offering of shares of the Fund: (i) the semi-annual and annual
reports of the Fund filed with the SEC on Form N-CSRS and N-CSR; (ii) monthly portfolio
investment reports filed with the SEC on Forms NPORT-P and NPORT-P/A; (ii) the Fund’s
holdings reports available on the Fund’s website; and (iii) the Fund’s Fact Sheet, Tailored
Shareholder Reports and other sales and marketing materials available on the Fund’s website.
The registration statements and prospectuses delineated above contained untrue
statements of material fact, omitted to disclose material facts required to be stated in a registration
statement, and omitted to disclose material facts necessary to make the statements, in the light of
the circumstances under which they were made, not misleading, summarized as follows: (i)
unknown to investors, the Fund failed to disclose that throughout the Class Period the Fund’s
illiquid investments were greater than 15% of its net assets; (ii) the Fund had materially overstated
the value of the Fund’s assets; (iii) the Fund’s investment in defaulted securities was an
undisclosed significant investment strategy; and (d) unknown to investors, the Fund had invested
nearly 19% of the Fund’s net assets in the environmental companies of a single developer.
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At the end of the Class Period, investors in the Fund experienced a significant
decline in the NAV of their shares—a decline that was foreseeable and directly caused by the
Fund’s excessive overallocation to illiquid securities, defaulted securities, securities within the
same or related businesses, and the material overvaluation of its holdings. This occurred when the
Fund disclosed the concealed risks associated with these investments, causing the Fund’s asset
values to materially decline and, in turn, dramatically driving down the Fund’s NAV.
III. Jurisdiction and Venue
The claims asserted herein arise under Sections 11, 12(a)(2) and 15 of the Securities
Act, 15 U.S.C. §§ 77k, 77i, 77o and Sections 14(a) and 20(a) of the Exchange Act, 15 U.S.C. §§
78n(a), 78t(a). This Court has jurisdiction over the subject matter of this action under Section 22
of the Securities Act, 15 U.S.C. § 77v, and under 28 U.S.C. § 1331.
Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) because several
defendants maintain an office in this District and many of the practices complained of herein
occurred in substantial part in this District.
In connection with the acts, conduct, and other wrongs alleged in this complaint,
Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
including, but not limited to, the U.S. mails, and interstate telephone and internet communications.
IV. The Parties
Plaintiff purchased shares of the Fund during the Class Period as set forth in the
certification filed in Fulford v. James Alpha Fund Trust d/b/a Easterly Funds Trust, et al., No. 25-
cv-6102 (DLC) (S.D.N.Y.), and was damaged thereby.
A. Trust Defendants
The MPS Trust offered and sold shares of the Fund during the Class Period through
the 2/16/2022 Registration Statement, 12/28/2022 Registration Statement, and 12/28/2023
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Registration Statement. The MPS Trust was organized as a Delaware statutory trust on January
27, 2011 and is registered with the SEC as an open-end management investment company. MPS
Trust has its principal executive offices at 615 East Michigan Street, Milwaukee, WI 53202. The
MPS Trust was the registrant for shares of the Principal Street High Income Municipal Fund and
the issuer of Class A (GSTFX), Investor Class (GSTEX), and Institutional Class (GSTAX) shares,
each a series of the MPS Trust.
The Easterly Trust offered and sold shares of the Fund or solicited shareholder votes
through (1) the 8/29/2024 Registration Statement: (2) the 9/5/2024 Registration Statement and
Joint Proxy Statement/Prospectus; (3) the 10/4/2024 Registration Statement; and (4) the
12/30/2024 Registration Statement. The Easterly Trust is a Delaware statutory trust and is
registered under the 1940 Act as an open-end management investment company. Easterly Trust
maintains its principal executive offices at 515 Madison Avenue, New York, NY 10022. The
Easterly Trust is the registrant for shares of the Easterly ROCMuni High Income Municipal Bond
Fund and the issuer of Class A (RMJAX), Investor Class (RMHVX) and Class I (RMHIX) shares,
each a series of the Easterly Trust.
B. Investment Advisor Defendants
Defendant Principal Street Partners, a Delaware limited liability company, is the
former investment advisor to the Fund. Principal Street Partners registered with the SEC as an
investment adviser on or about September 30, 2016. Effective May 23, 2025, Principal Street
Partners changed the name of the firm from Principal Street Partners, LLC to Calydon Capital,
LLC and it maintains an office at 999 S. Shady Grove Road, Suite 106, Memphis, TN 38120. The
MPS Trust entered into an investment advisory agreement with Principal Street Partners on behalf
of the Fund. Principal Street Partners had overall supervisory responsibility for the general
management and investment of the Fund’s securities portfolio, was responsible for valuation of
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the Fund’s assets and managing liquidity under SEC rules and regulations, furnished the Fund with
office space and certain administrative services, and provided most of the personnel needed to
fulfill its obligations under the advisory agreement. For its services, the Fund paid Principal Street
Partners a monthly management fee.
Defendant Easterly Investment Partners, a Delaware limited liability company, is
the current investment advisor to the Fund. Easterly Investment Partners, subject to the general
supervision of the board of trustees of the Easterly Trust, is responsible for managing the Fund in
accordance with its investment objective and policies, maintaining related records for the Fund,
investing the Fund’s assets in securities and other instruments, rendering investment advice and
related services with respect to the assets of the Fund, valuing the Fund’s assets, and managing
liquidity under SEC rules and regulations. Easterly Investment Partners receives advisory fees for
its management of the Fund. Easterly Investment Partners maintains its principal executive office
at 138 Conant Street, Beverly, MA 01915. Easterly Investment Partners is registered with the SEC
as an investment adviser. Easterly Investment Partners was founded in 2019 and is wholly owned
by LE Partners Holdings LLC, a Delaware limited liability company, which is principally owned
and controlled by Defendant Crate and is an indirect subsidiary of Easterly Asset Management
L.P. The Easterly Trust entered into an investment advisory agreement with Easterly Investment
Partners on behalf of the Fund.
C. Portfolio Manager Defendants
Defendant Willis was at all relevant times the portfolio manager for the Fund and
is a resident of Boca Raton, Florida. Defendant Willis was the Chief Investment Officer of
Municipal Bond Strategies and a Senior Portfolio Manager for Defendant Principal Street Partners
and serves in the same role at Defendant Easterly Investment Partners. Defendant Willis is
responsible for the day-to-day management of the Fund and has been the portfolio manager of the
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Fund since January 2021. Defendant Willis was previously a Vice President and Senior Portfolio
Manager of municipal bond funds offered and sold by Oppenheimer Funds, Inc. and was named
as a defendant in In re: Oppenheimer Rochester Funds Group Securities Litigation, MDL No. 230
(D. Colo.), a litigation that involved allegations of misstatements relating to the value of certain
funds’ assets and limitations on illiquid assets.
Defendant Pulire was at all relevant times the portfolio manager for the Fund and
is a resident of Honeoye, New York. Defendant Pulire was a Senior Portfolio Manager for
Municipal Bond Strategies for Defendant Principal Street Partners and serves in the same role at
Defendant Easterly Investment Partners. Defendant Pulire is responsible for the day-to-day
management of the Fund and has been the portfolio manager of the Fund since March 2022.
D. MPS Trust Officer and Trustee Defendants
Defendant Eirich maintains an office at 615 E. Michigan St., Milwaukee, WI 53202
and he signed the 2/16/2022 Registration Statement, 12/28/2022 Registration Statement and
12/28/2023 Registration Statement.
Defendant Wiedmeyer maintains an office at 615 E. Michigan St., Milwaukee, WI
53202 and he signed the 2/16/2022 Registration Statement, 12/28/2022 Registration Statement and
12/28/2023 Registration Statement.
Defendant Kern maintains an office at 615 E. Michigan St., Milwaukee, WI 53202
and he signed the 2/16/2022 Registration Statement, 12/28/2022 Registration Statement and
12/28/2023 Registration Statement.
Defendant Massart maintains an office at 615 E. Michigan St., Milwaukee, WI
53202 and he signed the 2/16/2022 Registration Statement, 12/28/2022 Registration Statement and
12/28/2023 Registration Statement.
Defendant Swanson maintains an office at 615 E. Michigan St., Milwaukee, WI
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53202 and he signed the 2/16/2022 Registration Statement, 12/28/2022 Registration Statement and
12/28/2023 Registration Statement.
Defendant Rush maintains an office at 615 E. Michigan St., Milwaukee, WI 53202
and he signed the 2/16/2022 Registration Statement, 12/28/2022 Registration Statement and
12/28/2023 Registration Statement.
E. Easterly Trust Officer and Trustee Defendants
Defendant Crate maintains an office at 515 Madison Avenue, 24th Floor, New
York, NY 10022 and he signed the 8/29/2024 Registration Statement, 9/5/2024 Registration
Statement and Joint Proxy Statement/Prospectus, the 10/4/2024 Registration Statement and
12/30/2024 Registration Statement.
Defendant Montague maintains an office at 515 Madison Avenue, 24th Floor, New
York, NY 10022 and he signed the 8/29/2024 Registration Statement, 9/5/2024 Registration
Statement and Joint Proxy Statement/Prospectus, 10/4/2024 Registration Statement and
12/30/2024 Registration Statement.
Defendant Medugno maintains an office at 515 Madison Avenue, 24th Floor, New
York, NY 10022 and he signed the 8/29/2024 Registration Statement, 9/5/2024 Registration
Statement and Joint Proxy Statement/Prospectus, 10/4/2024 Registration Statement and
12/30/2024 Registration Statement.
Defendant Spencer maintains an office at 515 Madison Avenue, 24th Floor, New
York, NY 10022 and she signed the 8/29/2024 Registration Statement, 9/5/2024 Registration
Statement and Joint Proxy Statement/Prospectus, 10/4/2024 Registration Statement and
12/30/2024 Registration Statement.
F. Underwriter Defendants
Defendant Quasar Distributors maintains an office at 111 East Kilbourn Avenue,
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Suite 2200, Milwaukee, WI 53202 and was the underwriter and distributor of the Fund shares
offered or sold by the MPS Trust on a continuous basis. Defendant Quasar Distributors engaged
in sales and marketing of the Fund. Quasar Distributors is an affiliate of Defendant Principal Street
Partners.
Defendant Easterly Securities maintains an office at 138 Conant Street, Beverly,
MA 01915, and is the principal underwriter and distributor for the shares of the Fund offered or
sold by the Easterly Trust on a continuous basis. Easterly Securities engaged in sales and marketing
of the Fund. Easterly Securities is a registered broker-dealer and member of the Financial Industry
Regulatory Authority, Inc. Easterly Securities is an affiliate of Defendant Easterly Investment
Partners.
V. Background and Facts
A. Background on the Fund
The Fund is an open-end mutual fund that is registered with the SEC under the
Securities Act and 1940 Act. The Fund purportedly invested in tax exempt municipal securities
including assets in debt securities that are rated below investment grade (or “junk bonds”) or
unrated securities issued by or on behalf of states and local governmental authorities throughout
the U.S. and its territories.
From 2017 through October 2024, the MPS Trust offered Class A (GSTFX),
Investor Class (GSTEX), and Institutional Class (GSTAX) shares of the Fund.
In or around September 5, 2024, Defendant Principal Street Partners proposed an
agreement and plan of reorganization (the “Reorganization”) through which the assets and
liabilities of the Principal Street High Income Municipal Fund would be transferred into a
corresponding newly-created series of the Easterly Trust, the Easterly ROCMuni High Income
Municipal Bond Fund.
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The Reorganization was approved by shareholders, and on or around October 4,
2024, the Reorganization closed. Immediately after the closing of the Reorganization, investors
owned shares of the Easterly ROCMuni High Income Municipal Bond Fund that were equal in
total value to the total value of the shares of the Principal Street High Income Municipal Fund held
immediately prior to the closing of the Reorganization.
After the Reorganization, the Easterly Trust offered and sold Class A (RMJAX),
Investor Class (RMHVX) and Class I (RMHIX) shares of the Fund. In conjunction with the
Reorganization, Easterly Investment Partners became the new investment advisor to the Fund,
replacing Principal Street Partners.
According to a March 2025 Easterly Investment Partners Firm Brochure, in
connection with the Reorganization “Easterly entered an agreement to lift out the Municipal Bond
team, formerly of Invesco and Oppenheimer Funds Rochester, from Principal Street Partners.” The
“Municipal Bond team” included Defendants Willis and Pulire, the Fund’s portfolio managers.
B. The Municipal Bond Market
The U.S. municipal bond market plays an important role in financing states and
municipalities. The market is highly fragmented with more than 50,000 municipal bond issuers
and approximately one million municipal securities outstanding, compared to approximately
30,000 U.S. corporate bonds.
The municipal bond market is also less liquid than the corporate and U.S. Treasury
markets. Many municipal bonds trade infrequently. As of October 2025, the daily average trading
volume of municipal bonds was $14.91 billion, in contrast to $58.6 billion for U.S. corporate
bonds.
Municipal securities are classified by sectors, with each sector having its own risk,
supply, and demand characteristics. High-level sectors include general obligation bonds, which
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are supported by the full faith and credit of the issuer, and revenue bonds, which are supported by
specific revenue pledges.
Subcategories of revenue bonds, each with unique risk characteristics, include
water and sewer, housing, healthcare, and conduit financing. Further segmentation and more
defined subsectors are required for healthcare (hospital, nursing, assisted living, drug
rehabilitation) and conduit financings (airline, hospitality, recycling, waste-to-energy).
A conduit financing occurs when a government entity issues tax-exempt bonds on
behalf of a private entity to fund a specific project. The government acts as a “conduit” for the
financing, but does not assume repayment responsibility. The private borrower and developer is
fully responsible for paying back the debt. Municipal bonds issued in connection with conduit
financing carry a greater risk than general obligation municipal bonds because they are backed by
the private borrower’s credit, not the government’s taxing power, and therefore investors in these
bonds take on the risk of the borrower and developer’s financial health, not the issuer’s.
Secondary market trading in municipal bonds is limited, as the market is dominated
by investors who tend to buy and hold. While all the coupons from a municipal bond are tax-free,
the capital gains from trading a municipal bond are not. Hence, holding municipal bonds over a
longer period can help reduce capital gains taxes.
Historically, municipal bonds have had very low default rates. For example, as of
November 2002, the 1, 5, and 10-year cumulative default rates for all Moody’s-rated municipal
bond issuers have been 0.0043%, 0.0233%, and 0.0420%, respectively.
Secondary market trading of these buy-and-hold assets generally occurs in the over-
the-counter (“OTC”) market, rather than on a securities exchange.
As of mid-2025, the total market size (par value) of municipal bonds was over $4
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trillion in outstanding debt, compared to the U.S. corporate bond market, which was approximately
$11.1 trillion in outstanding debt.
There are significant differences between municipal bonds compared to other fixed
income assets, such as U.S. government, corporate, and asset-backed securities. In general, bonds
in the secondary municipal bond market are less liquid than their U.S. government and corporate
bond counterparts. This is due to the municipal bond market having over 50,000 different issuers,
and over one million different municipal bonds outstanding. These bonds have various term
structures and quality. Many states, counties, cities, local governments and districts issue
municipal bonds.
In addition, for economic and community benefit, entities have been created at the
state and local level, so-called “authorities,” to issue bonds on behalf of corporate entities with
goals of creating employment and or bolstering tax rolls. In general, frequent issuers of municipal
bonds, such as states, large cities and counties, like New York City, Los Angeles, Miami, Chicago,
Nassau County, NY, and Orange County, CA, enjoy deeper secondary market liquidity than
smaller, infrequent issuers, such as some school districts, towns and cities.
Unlike other fixed income markets, the municipal bond market has traditionally
been dominated by retail investors due to tax exemption benefits of municipal bonds and their
relative safety given historically low default rates. As of 2024, retail investors held nearly 66% of
outstanding municipal bonds, 45% directly and approximately 21% through mutual funds.
Trade volume for a new issue municipal bond typically is highest in the time period
after the new issue has sold in primary market and decreases over time, reflective of the buy-and-
hold nature of municipal bonds.
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C. Disclosure Requirements for Open-End Mutual Funds
SEC Form N-1A is used for the registration of securities under the Securities Act
and 1940 Act for open-end management investment companies, like the Fund. 17 C.F.R. §
239.15A. Registered investment companies must amend their Form N-1A registration statement
annually. 17 C.F.R. § 270.8b-16. Form N-1A sets forth the information required to be disclosed in
a prospectus.
According to the SEC, the disclosures required by SEC Form N-1A are intended to
help prospective investors by requiring clear, easy-to-understand disclosure of a fund’s
characteristics and risks, with information presented to help investors evaluate them through a
prospectus, and statement of additional information (“SAI”), which is part of the prospectus.
The SEC requires a fund’s prospectus to clearly disclose the fundamental
characteristics and investment risks of the fund. The prospectus disclosure requirements are
intended to elicit information for an average or typical investor who may not be sophisticated in
legal or financial matters.
The prospectus should help investors to evaluate the risks of an investment and to
decide whether to invest in a fund by providing a balanced disclosure of positive and negative
factors. Disclosure in the prospectus should provide information necessary to enable an average or
typical investor to understand the particular characteristics of the fund, and to assist an investor in
comparing and contrasting the fund with other funds. The prospectus should avoid simply restating
legal or regulatory requirements to which funds generally are subject.
The SEC requires a prospectus to disclose a fund’s principal investment strategies.
A strategy includes any policy, practice, or technique used by the fund to achieve its investment
objectives. Whether a particular strategy is a principal investment strategy depends on the
strategy’s anticipated importance in achieving a fund’s investment objectives, and how the strategy
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 21 of 65
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affects the fund’s potential risks and returns. A principal investment strategy is determined by
considering the amount of a fund’s assets expected to be committed to the strategy, the amount of
a fund’s assets expected to be placed at risk by the strategy, and the likelihood of the fund losing
some or all of those assets from implementing the strategy. Furthermore, the SEC requires
disclosure of any policy that is a principal investment strategy of a fund.
The SEC further requires disclosure of the principal risks of investing in a fund,
including the risks to which a fund’s particular portfolio as a whole is expected to be subject and
the circumstances reasonably likely to affect adversely a fund’s NAV, yield, or total return.
D. SEC Rules Limit Open-End Mutual Funds to No More Than 15% in
Illiquid Assets
A hallmark of open-end mutual funds, like the Fund, is that they must be able to
convert some portion of their portfolio holdings into cash on a frequent basis because they issue
redeemable securities.
Unlike publicly traded stocks, whose price is determined through trading on an
exchange, mutual fund shares must be priced daily based on the fund’s NAV. Investors purchase
shares from the fund and generally must be able to freely redeem their shares with the fund.
Investors in mutual funds can redeem their shares on each business day and by law must receive
approximately their pro rata share of the fund’s net assets or its cash value within seven calendar
days after receipt of a redemption request.
Accordingly, because open-end funds hold themselves out at all times as being
prepared to meet these redemption requirements, they have a responsibility to manage the liquidity
of their investment portfolios in a manner consistent with those obligations and are subject to
various investment restrictions. Fund liquidity and liquidity management are important to reducing
the risk that a fund will be unable to meet its obligations to redeeming shareholders while
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 22 of 65
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minimizing the impact of those redemptions on the Fund, i.e., mitigating investor dilution.
There can be significant adverse consequences to remaining investors in a fund that
does not adequately manage liquidity. A fund with significant holdings of illiquid securities may
have to engage in sales on short notice to meet redemption obligations which could result in a fund
receiving less than the carrying value of the illiquid securities. That would, in turn, result in a
preference in favor of the redeeming shareholder, and a material negative affect on the fund’s NAV
and a diminution of the NAV per share for shareholders who have not redeemed.
Thus, SEC regulations contain a liquidity standard that limits an open-end fund’s
aggregate holdings of “illiquid assets” to no more than 15% of the fund’s net assets. 17 C.F.R. §
270.22e-4.
Under the SEC’s rule, a portfolio security or other asset is considered illiquid if it
cannot be sold or disposed of in the ordinary course of business within seven days at approximately
the value at which the fund has valued the investment.
E. Factors Affecting the Liquidity of Municipal Bonds
Various factors and attributes of a municipal bond affect its liquidity.
High Value Denominations Limit Liquidity. The vast majority of municipal bonds
are denominated with a face value in the $5,000-$25,000 range, reflecting that this market
substantially involves retail investors. Certain municipal bonds are issued with face value of
$100,000 or higher, which significantly limits the universe of potential buyers to sophisticated
institutional investors which limits trading, and therefore has a negative effect on liquidity.
Unrated Bonds Are Less Liquid. Municipal bonds that are rated by a Nationally
Recognized Statistical Ratings Organization (NRSRO), such as Moody’s, S&P, and Fitch, enjoy
deeper demand, and therefore, liquidity. Many municipal bonds are not rated by any NRSRO. A
municipal bond issuer that has a good credit profile may nevertheless abstain from paying for a
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 23 of 65
20
rating to avoid the cost. As a result, many investors will not buy a non-rated bond because they
cannot or do not have the ability to assess the credit risk. Also, many investment grade municipal
bond funds cannot buy non-rated bonds. Therefore, non-rated bonds do not have the depth of
liquidity of rated bonds.
Securities with Restrictions on Resale Limit Liquidity. Securities issued in
unregistered, private offerings cannot be freely resold without registration with the SEC or an
exemption. Restricted securities include securities sold under Rule 144A of the Securities Act,
which provides a safe harbor from Securities Act registration requirements for qualifying sales to
institutional investors. In general, municipal bonds issued only for qualified investors under Rule
144A are non-rated. Securities under Rule 144A are issued in minimum denominations of
$100,000, which is appropriate only for high net-worth and institutional investors. Given these
limitations, the market for 144A securities is limited compared to registered and rated bonds, and
therefore, they are less liquid.
Restricted Access to Offering Information and Bond Performance Limits Liquidity.
The degree of access to information concerning the offering documents and performance of a
municipal bond affects its liquidity. Information about a municipal bond is critical, especially
where the bond is non-performing, or defaulted. When researching a potential non-rated bond to
buy, potential buyers require access to secondary market disclosure, i.e., information about the
ability of the credit to repay what it owes. When this data is restricted to only the existing
bondholder group, such as behind a confidential data room accessible only to current bond holders,
it has the effect of limiting the number of willing participants to purchase that security because
potential investors are unable to assess credit risk. Therefore, limitations on access to information
needed to assess the creditworthiness of a bond negatively impacts its liquidity.
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Market Makers Avoid Municipal Bonds Held by Mutual Funds Which Reduces
Liquidity. Since the Covid-19 pandemic, bond dealers—who broker over-the-counter sales of
municipal bonds—have been reluctant to hold inventory in bonds held by mutual funds due to
increased risk and difficulty of finding buyers in a retail-dominated market during times of heavy
redemptions. The reduction in dealer inventory of bonds held by mutual funds lessens their ability
to make a market in these securities and decreases a municipal bond fund’s ability to buy or sell
bonds, which negatively impacts liquidity.
Accordingly, if a fund needs to sell bonds with some or all of these attributes of
illiquidity, a fund will be faced with a scarcity of potential buyers and the absence of a deep,
orderly market.
F. The Fund’s Valuation Standards
The Fund’s board of trustees designated Defendants Principal Street Partners or
Easterly Investment Partners to perform all of the Fund’s fair value determinations.
The Fund adopted fair value accounting standards and the hierarchy for measuring
fair value under three levels:
Level 1 – Unadjusted quoted prices in active markets for identical assets or
liabilities that the Funds have the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly. These inputs may
include quoted prices for the identical instrument on an inactive market, prices for
similar instruments, interest rates, prepayment speeds, credit risk, yield curves,
default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant
observable inputs are not available, representing the Funds’ own assumptions about
the assumptions a market participant would use in valuing the asset or liability and
would be based on the best information available.
The Fund’s Level 2 assets are valued by a pricing service, which Defendants
Principal Street Partners and Easterly Investment Partners were responsible for overseeing under
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 25 of 65
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SEC rules and regulations.
However, determinations of the fair value of the Fund’s Level 3 assets were made
by Defendants Principal Street Partners and Easterly Investment Partners. Level 3 assets are highly
illiquid, and there generally is no readily available market data to determine their value.
G. A Significant Portion of the Fund’s Portfolio Was Invested in Illiquid
Bonds
Throughout the Class Period, the Fund’s holdings of illiquid securities exceeded
more than 15% of its net assets. The credit quality, structure and performance of the following
bonds that the Fund held throughout the Class Period embody illiquid bonds—they were unrated
securities, thinly traded or not traded, held by a small group of bondholders, restricted 144A
securities, issued in denominations of over $100,000, and information concerning their respective
performance was restricted to confidential data rooms available only to the Fund and other holders
of the bonds:
CUSIP
2
Name of Issuer/Obligor The Fund’s
Percentage
Ownership as of
May 31, 2025
(% of Face Value)
03469KAA1 Angelina and Neches River Authority Industrial
Development Corporation Solid Waste Disposal and
Wastewater Treatment Facilities Revenue Bonds
(Obligor: Jefferson Enterprise Energy, LLC Project)
Series 2020 (TX) (“Series 2020 Jefferson Enterprise
Energy, LLC Project”)
54% of $22 million
bond offering
2
CUSIP is an acronym for the Committee on Uniform Security Identification Procedures. The
CUSIP Service Bureau, operated by Standard & Poor’s, administers this system and assigns unique
numbers (CUSIP numbers) and standardized descriptions of securities. A company is required to
obtain a CUSIP number in connection with a registered offering and certain types of unregistered
offerings (such as a Rule 144A offering and a Regulation S offering). Each security issued by a
company has its own CUSIP number, which is a nine-digit identifier composed of both numbers
and letters. Typically all securities issued by the same issuer have the same first six digits; the last
three digits represent the specific type of security.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 26 of 65
23
CUSIP
2
Name of Issuer/Obligor The Fund’s
Percentage
Ownership as of
May 31, 2025
(% of Face Value)
049610AA6 Atoka City Industrial Development Authority Solid
Waste Disposal Facilities Revenue Bonds (AMT)
(Obligor: Gladieux Metals Recycling Oklahoma, LLC
Project) Series 2019 (OK) (“Series 2019 Gladieux
Metals Recycling Oklahoma, LLC Project”)
27.6% of $25 million
bond offering
049610AB4 Atoka City Industrial Development Authority Solid
Waste Disposal Facilities Revenue Bonds (Obligor:
Gladieux Metals Recycling Oklahoma, LLC Project)
Additional Series 2019A (OK) (“Series 2019A
Gladieux Metals Recycling Oklahoma, LLC Project”)
25% of $3 million
bond offering
10604PAA1 Brazoria County Industrial Development Corporation
Solid Waste Disposal Facilities Revenue Bonds
(Obligor: Gladieux Metals Recycling, LLC Project)
Series 2019 (TX) (“Series 2019 Gladieux Metals
Recycling, LLC Project”)
16.4% of $25 million
bond offering
10604PAB9 Brazoria County Industrial Development Corporation
Solid Waste Disposal Facilities Revenue Bonds
(Obligor: Gladieux Metals Recycling, LLC Project)
Additional Series 2019A (TX) (“Series 2019A
Gladieux Metals Recycling, LLC Project”)
12.9% of $25 million
bond offering
10604PAC7
Brazoria County Industrial Development Corporation
(Obligor: Gladieux Metals Recycling, LLC Project)
Texas Solid Waste Disposal Facilities Revenue Bonds
Additional Series 2019B (TX) (“Series 2019B
Gladieux Metals Recycling, LLC Project”)
2.4% of $50 million
bond offering
306767AA2 City of Falmouth, Kentucky Solid Waste Disposal
Facilities Revenue Bonds (Obligor: Texas Bluegrass
Biofuels, LLC Project) Series 2020 (KY) (“Series
2020 Texas Bluegrass Biofuels, LLC Project”)
44.4% of $20 million
bond offering
47353PAA6 Jefferson County Industrial Development Corporation
Industrial Development Revenue Bonds (Obligor:
TRP Crude Marketing, LLC Project) Series 2019 (TX)
(“Series 2019 TRP Crude Marketing, LLC Project”)
9% of $10 million
bond offering
500726AA2 Kountze Economic Development Corporation
Industrial Development Revenue Bonds (Obligor:
Allegiant Industrial, LLC Project) Series 2017 (TX)
(“Series 2017 Allegiant Industrial, LLC Project”)
50.6% of $8.6 million
bond offering
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 27 of 65
24
CUSIP
2
Name of Issuer/Obligor The Fund’s
Percentage
Ownership as of
May 31, 2025
(% of Face Value)
73360CAB0 Port of Beaumont Navigation District of Jefferson
County, Texas Dock and Wharf Facility Revenue
Bonds (Obligor: Allegiant Industrial Island Park
Project) Series 2019 (TX) (“Series 2019 Allegiant
Industrial Island Park Project”)
28% of $25 million
bond offering
95649CAA8 West Virginia Economic Development Authority
Dock And Wharf Facilities Revenue Bonds (Obligor:
Empire Trimodal Terminal, LLC Project) Series 2020
(WV) (“Series 2020 Empire Trimodal Terminal, LLC
Project”)
24.6% of $26 million
bond offering
These illiquid bonds consistently represented a significant percentage of the Fund’s
net assets throughout the Class Period:
Date 8/31/22 8/31/23 11/30/23 8/31/24 2/28/25 5/31/25
Fund NAV $293.7mm $274.0mm $268.6mm $336.4mm $244.0mm $180.3mm
Fund
Valuation of
Bonds
$52.9mm $50.2mm $50.1mm $50.5mm $41.6mm $39.3mm
% of NAV
represented
18.00% 18.32% 18.65% 15.01% 17.05% 21.80%
On or around June 13, 2025, the Fund sold these bonds at prices materially lower
than the Fund’s valuation during the Class Period, demonstrating that these bonds were illiquid:
Name of Issuer/Obligor Fund Value as of
5/31/25
Actual Value Based on
the Fund’s June 2025 sale
Series 2020 Jefferson Enterprise
Energy, LLC Project
(CUSIP: 03469KAA1)
$3,944,979, 33% of
reported face value held
$238,000, 2% of face value
held
Series 2019 Gladieux Metals
Recycling Oklahoma, LLC Project
(CUSIP: 049610AA6)
$5,520,000, 80% of
reported face value held
$207,690, 3% of face value
held
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 28 of 65
25
Name of Issuer/Obligor Fund Value as of
5/31/25
Actual Value Based on
the Fund’s June 2025 sale
Series 2019A Gladieux Metals
Recycling Oklahoma, LLC Project
(CUSIP: 049610AB4)
$600,000, 80% of
reported face value held
$22,575, 3% of face value
held
Series 2019 Gladieux Metals
Recycling, LLC Project
(CUSIP: 10604PAA1)
$3,292,000, 80% of
reported face value held
$206,162, 5% of face value
held
Series 2019A Gladieux Metals
Recycling, LLC Project
(CUSIP: 10604PAB9)
$2,572,000, 80% of
reported face value held
$128,922, 4% of face value
held
Series 2019B Gladieux Metals
Recycling, LLC Project
(CUSIP: 10604PAC7)
$968,000, 80% of
reported face value held
$48,521, 4% of face value
held
Series 2020 Texas Bluegrass
Biofuels, LLC Project
(CUSIP: 306767AA2)
$6,212,500, 70% of
reported face value held
$267,138, 3% of face value
held
Series 2019 TRP Crude Marketing,
LLC Project
(CUSIP: 47353PAA6)
$765,000, 85% of
reported face value held
$9, 0.001% of face value
held
Series 2018 Allegiant Industrial, LLC
Project
(CUSIP: 500726AA2)
$4,132,500, 95% of
reported face value held
$271,875, 6.25% of face
value held
Series 2019 Allegiant Industrial
Island Park Project
(CUSIP: 73360CAB0)
$6,309,000, 90% of
reported face value held
$438,125, 6.25% of face
value held
Series 2020 Empire Trimodal
Terminal, LLC Project
(CUSIP: 95649CAA8)
$4,954,472, 77% of
reported face value held
$624,000, 9.75% of face
value held
As of May 31, 2025, the Fund valued these securities at $39.3 million and, just two
weeks later, the Fund sold them all for approximately $2.3 million, a decline in value of over 94%.
Other illiquid bonds held by the Fund that were sold after the end of the Class Period
at prices materially lower than the Fund’s valuation include the following:
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 29 of 65
26
Name of Issuer/Obligor Fund Value as of
5/31/25
Actual Value based on
the Fund’s June 2025 sale
West Virginia Economic
Development Authority
(Obligor: Entsorga West Virginia)
(CUSIP: 95648VBD0)
$800,000, 80% of face
value held
$10, 0.01% of face value
held
South Carolina Jobs-Economic
Development Authority
(Obligor: Repower S. Berkeley)
(CUSIP: 83704DAB2)
$90,000, 9% of face
value held
$10, 0.01% of face value
held
South Carolina Jobs-Economic
Development Authority
(Obligor: Jasper Pellets)
(CUSIP: 83704DAF3)
$354,000, 23.6% of face
value held
$15, 0.01% of face value
held
Wisconsin Public Finance Authority
(Obligor: Proton International
Alabama LLC)
(CUSIP: 74442PEV3)
$40,000, 10% of face
value held
$7,000, 1.75% of face
value held
Legato Community Authority
(CUSIP: 52473TAF2)
$1,970,408, 98.52% of
face value held
$1,031,220, 51.56% of face
value held
Grandview Reserve Metropolitan
District No. 3
(CUSIP: 386810AA3)
$1,416,678, 94.45% of
face value held
$1,046,250, 69.75% of face
value held
Grandview Reserve Metropolitan
District No. 3
(CUSIP: 386810AB1)
$1,003,943, 100.39% of
face value held
$497,500, 49.75% of face
value held
Sierra Vista Industrial Development
Authority
(Obligor: Georgetown Community
Development Authority)
(CUSIP: 82652PAB9)
$1,256,541, 83.77% of
face value held
$791,250, 52.75% of face
value held
South Carolina Jobs-Economic
Development Authority
(Obligor: AAC East)
(CUSIP: 837031YR8)
$2,882,492, 82.36% of
face value held
$345,625, 9.88% of face
value held
Children’s Trust Fund
(CUSIP: 16876QBM0)
$6,776,388, 5.65% of
face value held
$2,850,000, 2.38% of face
value held
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 30 of 65
27
Name of Issuer/Obligor Fund Value as of
5/31/25
Actual Value based on
the Fund’s June 2025 sale
New York Counties Tobacco
Trust IV
(CUSIP: 62947YAK7)
$2,816,795, 5.63% of
face value held
$1,187,500, 2.38% of face
value held
The Fund’s sale on or around June 13, 2025 of a substantial amount of its securities
at prices significantly lower than the Fund’s valuation is the realization of the undisclosed
illiquidity risk, and revealed that liquidity for more than 15% of the Fund’s securities was scarce
and that a readily available market of buyers did not exist for these securities.
In addition to the illiquid bonds delineated above, the Fund’s reported Level 3
assets, which are illiquid, as a percentage of net assets was as high as 16%:
Date 8/31/22 8/31/23 11/30/23 8/31/24 2/28/25 5/31/25
Fund NAV $293.7mm $274.0mm $268.6mm $336.4mm $244.0mm $180.3mm
Value of
Level 3
Assets
$9.5mm $33.4mm $43.2mm $18.2mm $25.0mm $23.2mm
% of NAV
Represented
3.23% 12.19% 16.08% 5.41% 10.25% 12.87%
H. The Fund Materially Overstated the Value of its Assets and the Fund’s
NAV
The price of shares of a fund is called its “net asset value” or “NAV” and is based
on the value of a fund’s investments. The NAV per share of the Fund was determined once daily
at the close of trading on the New York Stock Exchange. Proper valuation, among other things,
promotes the purchase and sale of fund shares at fair prices, and helps to avoid dilution of
shareholder interests. Improper valuation can cause investors to pay fees that are too high or to
base their investment decisions on inaccurate information.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 31 of 65
28
The Fund’s board of trustees approved the use of bond pricing services for the
valuation of each Fund’s debt securities after the close of business each trading day. However, the
designation of a pricing service is subject to the board’s oversight.
Unknown to investors, the pricing service relied upon by the Fund to determine the
valuation of its securities was materially deficient and provided valuations for a material number
of the Fund’s securities that were materially overstated.
The pricing service’s deficiencies and the Fund’s reliance on it created the risk that
the Fund could not sell the securities in the Fund at the prices established by the pricing service
and that such risk could (and, in fact, did) lead to material losses for Fund investors.
For example, the registration statement and prospectuses did not disclose the risk
that pricing services generally price municipal bonds assuming orderly transactions of an
institutional “round lot” typically over $1,000,000 in face value and ignore trades that occur in
smaller “odd lot” sizes, even though an executed market transaction is concrete and persuasive
evidence of value, i.e., what a buyer is willing to pay for the security.
Evidence of this material deficiency is reflected by the stark contrast between the
Fund’s valuation of its assets compared to market transactions at prices significantly lower than
the Fund’s valuations.
3
i. Series 2020 Jefferson Enterprise Energy, LLC Project (CUSIP:
03469KAA1)
On December 10, 2024, the Series 2020 Jefferson Enterprise Energy, LLC Project
bond reported a monetary default.
3
The market data is reported through the Electronic Municipal Market Access (“EMMA”).
EMMA is funded and operated by the MSRB, the self-regulatory organization charged by
Congress with promoting a fair and efficient municipal securities market. EMMA is designated by
the SEC as the official source for municipal securities data and disclosure documents.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 32 of 65
29
On April 2, 2025, there were four trades in this bond with a total face value of
$1,150,000, three trades of $350,000 in face value at $7.50 per $100 of face value, and one trade
of $100,000 at $7.65 per $100 of face value, indicating the market valued these bonds at 7.5-7.65
cents on the dollar.
In the Fund’s Monthly Portfolio Investment Report for the period ended May 31,
2025, the Fund valued its $11,900,000 position at $3,994,979, or $33.15 per $100 face value, a
valuation over 333% higher than the April 2, 2025 market transactions.
On June 13, 2025, two weeks after the Fund’s May 31, 2025 Monthly Portfolio
Investment Report, the Fund sold its position for 2 cents on the dollar.
ii. Series 2019 and 2019A Gladieux Metals Recycling Oklahoma,
LLC Project (CUSIPs: 049610AA6, 049610AB4)
On November 7, 2024, the Series 2019 Gladieux Metals Recycling Oklahoma, LLC
Project and Series 2019A Gladieux Metals Recycling Oklahoma, LLC Project bonds reported a
monetary default. These bond issuers share the same obligor, Gladieux Metals Recycling
Oklahoma, LLC Project.
On April 2, 2025, there were four trades in CUSIP 049610AA6, one trade of
$100,000 in face value traded for $8.70 per $100 face value, and three trades of $375,000 in face
value traded at $8.50 per $100 in face value, indicating the market valued these bonds at 8.5-8.7
cents on the dollar.
In the Fund’s Monthly Portfolio Investment Report for the period ended May 31,
2025, the Fund valued its total position in these bonds of $7,650,000 at $6,120,000, or $80 per
$100 face value, a valuation over 819% higher than the April 2, 2025 market transactions.
On June 13, 2025, two weeks after the Fund’s May 31, 2025 Monthly Portfolio
Investment Report, the Fund sold its position for 3 cents on the dollar.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 33 of 65
30
iii. Series 2020 Texas Bluegrass Biofuels, LLC Project (CUSIP:
306767AA2)
On December 16, 2024, the Series 2020 Texas Bluegrass Biofuels, LLC Project
bond reported monetary defaults.
On April 2, 2025, there were three trades of $290,000 in face value, traded for $8.50
per $100 face value, and one trade of $100,000 in face value traded at $8.50 per $100 in face value,
indicating the market valued these bonds at 8.5-8.7 cents on the dollar.
In the Fund’s Monthly Portfolio Investment Report for the period ended May 31,
2025, the Fund valued its total position of $8,875,000 at $6,212,000, or $70 per $100 face value,
a valuation over 704% higher than the April 2, 2025 market transactions.
On June 13, 2025, two weeks after the Fund’s May 31, 2025 Monthly Portfolio
Investment Report, the Fund sold its position for 3 cents on the dollar.
iv. Series 2019 Allegiant Industrial Island Park Project (CUSIP:
73360CAB0)
On July 26, 2024, Allegiant Industrial Island Park Project bondholders approved
and directed the trustee to waive payment of principal and interest, which has the same effect as
an event of default.
On February 18, 2025, there were three trades of $100,000 in face value traded for
$26.33 per $100 face value, indicating the market valued these bonds at 26.33 cents on the dollar.
In the Fund’s Monthly Portfolio Investment Reports for the period ended February
28, 2025 and May 31, 2025, the Fund valued its total position in this bond of $7,010,000 at
$6,309,000, or $90 per 100 face value, a valuation over 241% higher than the February 18, 2025
market transactions.
On June 13, 2025, two weeks after the Fund’s May 31, 2025 Monthly Portfolio
Investment Report, the Fund sold its position for 6.25 cents on the dollar.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 34 of 65
31
v. Series 2019, Series 2019A and Series 2019B Gladieux Metals
Recycling, LLC Project (Texas) (CUSIPs: 10604PAA1,
10604PAB9, 10604PAC7)
On September 11, 2024, Series 2019 Gladieux Metals Recycling, LLC Project,
Series 2019A Gladieux Metals Recycling, LLC Project and Series 2019B Gladieux Metals
Recycling, LLC Project bonds reported a monetary default. These bond issuers share the same
obligor, Gladieux Metals Recycling, LLC Project.
On January 14, 2025, there were two trades in Series 2019B Gladieux Metals
Recycling, LLC Project of $290,000 in face value at $39.75-40.25 per $100 face value, indicating
the market valued these bonds at approximately 40 cents on the dollar.
In the Fund’s Monthly Portfolio Investment Report for the periods ended February
28, 2025 and May 31, 2025, the Fund valued its total position in these bonds of $8,540,000 at
$6,832,000, or $80 per 100 face value, a valuation over 100% higher than the January 14, 2025
market transactions.
On June 13, 2025, two weeks after the Fund’s May 31, 2025 Monthly Portfolio
Investment Report, the Fund sold its position for 4-5 cents on the dollar.
Additional evidence of the material pricing deficiencies and the Fund materially
overstating the value of its securities as compared to market transactions for the same security is
reflected by the following examples:
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32
vi. Capital Trust Agency, Inc. (Obligor: Tallahassee NHHI)
a. CUSIP: 14052WCH8, Face value held by the Fund:
$150,000
b. CUSIP: 14052WCJ4, Face value held by the Fund:
$2,000,000
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 36 of 65
33
vii. Capital Trust Agency, Inc. (Obligor: Tapestry Senior Housing
Walden), CUSIP: 14052WCV7, Face value held by the Fund:
$2,200,000
viii. New Hope Cultural Education Facilities Finance Corp. (Obligor:
Buckingham Senior Living Obligated Group), CUSIP:
64542UFR0, Face value held by the Fund: $2.295mm-2.413mm
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 37 of 65
34
ix. Pennsylvania Economic Development Financing Authority
(Obligor: Tapestry Moon), CUSIP: 70869PLY1, Face value
held by the Fund: $2,950,000
x. Indiana Finance Authority (Obligor: Brightmark Plastics
Renewal), CUSIP: 45470DAA5, Face value held by the Fund:
$5.96mm-7.86mm
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 38 of 65
35
xi. Lake County (Obligor: Village Veranda at Lady Lake
Obligated Group), CUSIP: 50832PAB9, Face value held by the
Fund: $5,800,000
The material deficiencies of the Fund’s valuation procedures for its securities were
revealed on or around June 13, 2025 when the Fund sold a substantial amount of its assets at prices
materially below the Fund’s valuation. By materially overstating the value of certain of its
municipal bond assets, the Fund thereby materially inflated the NAV that investors paid for shares
of the Fund during the Class Period.
I. The Fund Materially Overstated the Value of the Fund’s Level 3 Assets
Whereas the Fund’s pricing service furnished values for the Fund’s Level 2 assets,
the Fund’s investment advisors, Easterly Investment Partners and Principal Street Partners valued
the Fund’s Level 3 assets. The Fund materially overstated the value of these assets and the Fund’s
valuation procedures were materially defective.
In or around April 2023, the Fund acquired shares of Next Renewable Fuels, Series
A 6% convertible preferred stock.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 39 of 65
36
The Fund’s investment was related to a transaction announced on April 14, 2023
whereby Lakeview RNG, a wholly owned subsidiary of Next Renewable Fuels, purchased the
assets of Red Rock Biofuels development in Oregon. Prior to this transaction, Red Rock Biofuels
had been foreclosed in December 2022 with the property being sold at auction to satisfy obligations
of Red Rock’s trust deed. By April 2023, Red Rock Biofuels had failed to pay over $350 million
in principal and interest on its economic development bonds.
Given Red Rock Biofuels’ financial condition, the value of the Fund’s investment
in Next Renewable Fuels, Series A 6% convertible preferred stock was dependent on Next
Renewable Fuels closing a transaction to raise additional funds through a merger with a special
purpose acquisition company (“SPAC”).
At or around the time of the Fund’s investment in Next Renewable Fuels, Series A
6% convertible preferred stock, Next Renewable Fuels was seeking to go public through a SPAC
merger in which holders of Next Renewable Fuels preferred stock would receive Series A
Preferred Stock in the SPAC, Industrial Tech Acquisitions II (“ITAQ”). ITAQ was organized in
November 2022 to purchase Next Renewable Fuels with proceeds from an IPO in which ITAQ
raised approximately $176 million, valuing Next Renewable Fuels at $667 million.
However, on April 10, 2023, approximately 92% of ITAQ’s shareholders voted to
redeem their stock in the company, causing its trust account and the cash it was expected to pay in
the planned merger with Next Renewable Fuels to decline from $176 million to $14 million.
On November 8, 2023, the merger between ITAQ and Next Renewable Fuels was
terminated and ITAQ was liquidated.
Despite these developments, the Fund continued to value its Next Renewable Fuels
preferred stock (including accrued paid-in-kind dividends) at over $5 million and represented that
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 40 of 65
37
it expected 100% recovery, as follows:
Date Number of Shares Fund Value
11/30/23 6.778 $5,083,502
2/29/24 6.778 $5,083,502
5/31/24 6.778 $5,083,502
8/31/24 7.177403 $5,383,052
11/30/24 7.3953 $5,546,475
2/28/25 7.5054 $5,629,050
5/31/25 7.618 $5,713,500
As of May 31, 2025, Next Renewable Fuels, Series A 6% convertible preferred
stock represented over 3% of the Fund’s assets.
After the Class Period, the Fund marked down the value of its shares of Next
Renewable Fuels, Series A 6% convertible preferred stock by 100%, to $0.08, disclosed that the
expected recovery was now 0%, and, in effect, admitted that these shares were worthless. In truth,
since at least November 2023, the Fund had materially overstated the value of its investment in
Next Renewable Fuels, Series A 6% convertible preferred stock.
J. The Fund’s Investment in Defaulted Bonds Was an Undisclosed
Significant Investment Strategy of the Fund
While the registration statements and prospectuses represented that the Fund’s
“Adviser does not expect” that investment in defaulted bonds would be “a significant investment
strategy of the Fund[],” in fact, throughout the Class Period, a significant number of the Fund’s
securities were defaulted, and the Fund’s investment in defaulted securities represented a
significant portion of the Fund’s assets, representing up to 35% of the Fund’s assets and over $60
million in asset value, as depicted below:
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 41 of 65
38
Throughout the Class Period a significant number of the Fund’s securities were
defaulted and the Fund’s investment in defaulted securities was an undisclosed significant or
principal investment strategy because it represented a significant portion of the Fund’s assets,
representing up to 35% of the Fund’s total assets and over $60 million in asset value, and given
the nature and quality of these securities, there was a very high likelihood of the Fund losing some
or all of those assets from implementing this strategy.
Moreover, the Fund failed to disclose all of its defaulted securities in its financial
statements. SEC Regulation S-X sets forth the form and content of and requirements for financial
statements required to be filed as part of a registration statement under the Securities Act, and
registration statement and shareholder reports under the 1940 Act. Under Regulation S-X, the
“facts and amounts concerning any default in principal, interest, sinking fund, or redemption
provisions with respect to any issue of securities or credit agreements, or any breach of covenant
0%
5%
10%
15%
20%
25%
30%
35%
40%
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
The Fund’s Exposure to Defaulted Securities
Value of Fund’s Defaulted Securities Percentage of Fund’s Net Assets That Are Defaulted Securities
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 42 of 65
39
of a related indenture or agreement, which default or breach existed at the date of the most recent
balance sheet being filed and which has not been subsequently cured, shall be stated in the notes
to the financial statements. If a default or breach exists but acceleration of the obligation has been
waived for a stated period of time beyond the date of the most recent balance sheet being filed,
state the amount of the obligation and the period of the waiver.” 17 C.F.R. § 210.4–08 (General
notes to financial statements).
The 2024 Semi-Annual Report failed to comply with the SEC’s rule on disclosure
of defaulted securities in the Fund’s financial statements. For the following securities in the Fund’s
portfolio, there was no disclosure of default in the 2024 Semi-Annual Report’s financial
statements:
Security Description Fund Value
as of 2/29/24
Date and Nature of Default
Series B, 6.38%, 02/15/2041
(Obligor: CC Young
Memorial Home)
$302,500 February 14, 2024. Notice that interest
would not be paid and that events of
default had occurred and were continuing
since 2022.
8.75%, 02/01/2036
(Obligor: Entsorga West
Virginia)
$800,000 October 6, 2022. Events of default had
occurred and were continuing.
Lake Country, Series A1,
7.13%, 01/01/2052
(Obligor: Village Veranda at
Lady Lake Obligated
Group)
$4,350,000 September 30, 2022. Events of default
had occurred under the bond documents,
including, failure to make monthly
payments.
10.00%, 06/30/2024
(Obligor: Voans SW Florida
Healthcare)
$7,552,500 February 15, 2023. Project termination
notice. May 13, 2023. Monetary default
and project termination. Multiple notices
of failure to provide audited financial
statements.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 43 of 65
40
Security Description Fund Value
as of 2/29/24
Date and Nature of Default
Series A, 6.50%,
10/01/2032 (Obligor:
Tuscan Gardens of Palm
Coast Obligated Group)
(CUSIP: 14052WCM7)
Series A, 6.75%,
10/01/2037 (Obligor:
Tuscan Gardens of Palm
Coast Obligated Group)
(CUSIP: 14052WCN5)
Series A, 7.00%,
10/01/2040 (Obligor:
Tuscan Gardens of Palm
Coast Obligated Group)
(CUSIP: 14052WCP0)
Series A, 7.00%,
10/01/2049 (Obligor:
Tuscan Gardens of Palm
Coast Obligated Group)
(CUSIP: 14052WCT2)
$566,800
$670,800
$793,000
$884,000
April 1 and October 1, 2022. Notice of
non-payment to bondholders. January 13,
2023. Monetary defaults.
Series A, 6.50%,
06/01/2051 (Obligor: Last
Step Recycling, LLC)
$1,214,423
June 6, 2023. Unscheduled draw of debt
service reserve fund.
Maine Finance Authority,
8.00%, 12/01/2051
(Obligor: Go Lab Madison,
LLC)
$4,338,011
January 11, 2024. Notice of default
regarding construction contract and
remedies. January 31, 2024. Equipment
claim default.
Total Value of Undisclosed
Defaulted Securities
$21,472,034
The 2024 Annual Report failed to comply with the SEC’s rule on disclosure of
defaulted securities in the Fund’s financial statements. For the following securities in the Fund’s
portfolio, there was no disclosure of default in the 2024 Annual Report’s financial statements:
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 44 of 65
41
Security Description Fund Value
as of 8/31/24
Date and Nature of Default
Series B, 6.38%, 02/15/2041
(Obligor: CC Young
Memorial Home)
$302,500 August 14, 2024. Notice that interest would
not be paid and that events of default had
occurred and have been continuing since
2022.
Series A, 5.50%, 07/15/2047
(Obligor: Rockwell Charter
High School)
Series A, 5.38%, 07/15/2042
(Obligor: Rockwell Charter
High School)
Series B, 6.63%, 07/15/2047
(Obligor: Rockwell Charter
High School)
$1,285,709
$807,898
$271,162
March 4, 2024. Borrower failed to maintain
net income available for debt service equal
to at least 100% of debt service for the
fiscal year ended June 30, 2023.
8.75%, 02/01/2036 (Obligor:
Entsorga West Virginia)
$800,000 October 6, 2022. Events of default had
occurred and were continuing with respect
to the bonds, under the bond documents,
and under a forbearance agreement.
Lake Country, Series A1,
7.13%, 01/01/2052 (Obligor:
Village Veranda at Lady
Lake Obligated Group)
$4,350,000 September 30, 2022. Events of default had
occurred under the bond documents,
including, but not limited to, the obligated
group’s continued failure to make the
monthly payments.
Maine Finance Authority,
8.00%, 12/01/2051 (Obligor:
Go Lab Madison, LLC)
$3,022,678 April 5, 2024. Notice of default under loan
agreement, and need to raise additional
capital due to cost overruns and project
delays. April-June 2024. Multiple
mechanics liens that are events of default
under loan agreement.
Total Value of Undisclosed
Defaulted Securities
$10,839,947
K. A Significant Portion of the Fund’s Portfolio Was Invested in the Same
or Related Businesses
Throughout the Class Period, the Fund’s investment in the following municipal
bonds (conduit financings) in the waste to marketable products business of the Jefferson Enterprise
of companies exposed investors to undisclosed massive, correlated risks and losses:
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 45 of 65
42
Security Description
Series 2020 Jefferson Enterprise Energy, LLC Project
Series 2019 Gladieux Metals Recycling Oklahoma, LLC Project
Series 2019A Gladieux Metals Recycling Oklahoma, LLC Project
Series 2019 Gladieux Metals Recycling, LLC Project
Series 2019A Gladieux Metals Recycling, LLC Project
Series 2019B Gladieux Metals Recycling, LLC Project
Series 2020 Texas Bluegrass Biofuels, LLC Project
Series 2019 TRP Crude Marketing, LLC Project
Series 2017 Allegiant Industrial, LLC Project
Series 2019 Allegiant Industrial Island Park Project
According to the Offering Memorandum for one of the bonds (Series 2020 Texas
Bluegrass Biofuels, LLC Project), the Jefferson Enterprise of companies is a corporate
conglomerate described as “an integrated development company focused on the planning,
financing, and project management of mid-to-large scale facilities primarily dedicated to the
preservation of natural resources by converting industrial waste into marketable products.”
The Jefferson Enterprise of companies include (i) Gladieux Metals Recycling,
Freeport, Texas; (ii) Gladieux Metals Recycling, Atoka, Oklahoma; (iii) Allegiant Industrial,
Beaumont, Texas; (iv) Allegiant Industrial, Kountze, Texas; (v) Texas Bluegrass Biofuels,
Falmouth, Kentucky; and (vi) Jefferson Enterprise Energy, Texas. The Jefferson Enterprise of
companies also includes Jefferson Enterprise, LLC, and TRP Crude Marketing Holdings, which
managed TRP Crude Marketing, LLC, a development of a facility in Jefferson County, Texas for
manufacturing products such as solvents from distressed oil reserves that would otherwise be
discarded.
The Jefferson Enterprise was led by Chief Executive Officer and owner Mr.
Salazar, who has been described as the “founder and driving force behind the Jefferson Enterprise
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 46 of 65
43
group of environmental companies.”
4
Through Jefferson Enterprise Management, LLC, Mr.
Salazar, along with Chief Financial Officer, Robert Thayer, Randy Adair, Director of Facilities,
and other Jefferson Enterprise employees, developed and managed the various projects of the
Jefferson Enterprise affiliated companies. Many of these developments share the same address and
registered agent at 9595 Six Pines Drive, Suite 6370, The Woodlands, Texas 77380.
In addition to common management and oversight of the developments, the various
developments of the Jefferson Enterprise affiliates were codependent and managed together,
linking their financial prospects and increasing correlated risk. By way of example, the Jefferson
Enterprises used its Allegiant Industrial’s fabrication facilities to build and operate the
developments at the Gladieux Metals Recycling projects at both Atoka, Oklahoma and Freeport,
Texas, and the Bluegrass Biofuels soybean and used cooking oil facility in Kentucky. The revenues
from the development of Gladieux Metals Recycling, Atoka, Oklahoma were dependent on
purchases of its product from its sister facility, Gladieux Metals Recycling, Freeport, Texas, which
is described in offering documents as the Atoka facility’s “primary off-taker.”
There was a massive, undisclosed risk to Fund investors throughout the Class
Period that if one development experienced financial distress, there was a very high contagion risk
that could, and ultimately did, negatively affect all bonds in the same or related businesses.
These municipal bonds were conduit financings that were issued by municipal
authorities for the benefit of a single developer’s group of environmental companies and
consistently represented a significant percentage of the Fund’s net assets throughout the Class
Period:
4
https://www.prnewswire.com/news-releases/empire-diversified-energy-inc-appoints-al-salazar-
to-its-board-of-directors-301343669.html (last visited Nov. 28, 2025).
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 47 of 65
44
Date 8/31/22 8/31/23 11/30/23 8/31/24 2/28/25 5/31/25
Fund NAV $293.7mm $274.0mm $268.6mm $336.4mm $244.0mm $180.3mm
Fund
Valuation of
Bonds
$41.4mm $39.4mm $39.3mm $39.6mm $36.3mm $34.2mm
% of NAV
Represented
by Jefferson
Enterprise
Bonds
14.10% 14.38% 14.63% 11.77% 14.88% 18.97%
This level of exposure to a single developer in the industrial waste to marketable
products business created correlated risk that exceeds what mutual fund investors might expect
from a diversified municipal bond fund.
The persistent double-digit exposure to these bonds in a specific sector as a
percentage of the Fund’s net assets throughout the Class Period exposed investors to correlated
governance, management, and unique risks, such as the poor financial performance of the various
Jefferson Enterprise-affiliated projects, and monetary defaults.
Indeed, this set of bonds experienced poor financial performance and a cascade of
parallel monetary defaults in 2024:
CUSIP Security Description Initial Date of
Monetary Default
73360CAB0 Series 2019 Allegiant Industrial Island Park Project 8/2024
10604PAA1 Series 2019 Gladieux Metals Recycling, LLC Project 9/2024
10604PAB9 Series 2019A Gladieux Metals Recycling, LLC Project 9/2024
10604PAC7 Series 2019B Gladieux Metals Recycling, LLC Project 9/2024
47353PAA6 Series 2019 TRP Crude Marketing, LLC Project 10/2024
049610AA6 Series 2019 Gladieux Metals Recycling Oklahoma,
LLC Project
11/2024
049610AB4 Series 2019A Gladieux Metals Recycling Oklahoma,
LLC Project
11/2024
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 48 of 65
45
CUSIP Security Description Initial Date of
Monetary Default
500726AA2 Series 2017 Allegiant Industrial, LLC Project 11/2024
306767AA2 Series 2020 Texas Bluegrass Biofuels, LLC Project)
Series 2020 (KY)
12/2024
03469KAA1 Series 2020 Jefferson Enterprise Energy, LLC Project 12/2024
The correlated risks were unique to the Fund and posed an undisclosed risk to Fund
investors that could, and ultimately did, have a massive negative impact on the Fund’s assets and
on Fund investors as the value of these bonds experienced correlated defaults and declines in value.
VI. The Fund’s Registration Statements and Prospectuses Contained Materially False
and Misleading Statements
The registration statements and prospectuses delineated below contained untrue
statements of material fact, omitted to state material facts required to be stated in a registration
statement, or omitted to state facts necessary to make the statements, in the light of the
circumstances under which they were made, not misleading.
A. The Registration Statements and Prospectuses Misrepresented the
Fund’s Compliance with the SEC’s and the Fund’s Limitation on
Illiquid Investments
The 2/16/2022 Registration Statement, 12/28/2022 Registration Statement,
12/28/2023 Registration Statement, 8/29/2024 Registration Statement, 9/5/2024 Registration
Statement and Joint Proxy Statement/Prospectus and 10/4/2024 Registration Statement
represented in substantially the same form that the Fund:
may not acquire any illiquid investments if, immediately after the acquisition, [the]
Fund would have invested more than 15% of its net assets in illiquid investments
that are assets.
The 2/16/2022 Registration Statement, 12/28/2022 Registration Statement,
12/28/2023 Registration Statement and 9/5/2024 Registration Statement and Joint Proxy
Statement/Prospectus represented in substantially the same form that:
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 49 of 65
46
Except with respect to . . . investments in illiquid investments, if a percentage or
rating restriction on investment or use of assets set forth herein or in the Prospectus
is adhered to at the time a transaction is effected, later changes in percentage
resulting from any cause other than actions by a Fund will not be considered a
violation . . . If at any time [the] Fund’s illiquid investment are greater than 15% of
its net assets, [the] Fund will determine how to remediate the excess illiquid
investments in accordance with the 1940 Act and [the] Fund’s policies and
procedures.
The 12/28/2022 Registration Statement incorporated by reference the Fund’s SAI
dated December 29, 2022 (the “12/29/2022 SAI”). The 12/29/2022 SAI incorporated by reference
the Fund’s 2022 Annual Report, dated August 31, 2022, and filed with the SEC on November 7,
2022 on Form N-CSR (“2022 Annual Report”), that represented that the Fund “will not hold more
than 15% of the value of [its] net assets in illiquid securities.”
The 12/30/2024 Registration Statement represented that the Fund “will not invest
more than 15% of the value of its net assets in securities that are illiquid, including . . . securities
that are illiquid by virtue of the absence of a readily available market” and “[i]f through the
appreciation of illiquid securities or the depreciation of liquid securities, a Fund should be in a
position where more than 15% of the value of its net assets are invested in illiquid assets, including
restricted securities, the Fund will take appropriate steps to protect liquidity.”
These representations were materially false and misleading because, as alleged in
paragraphs 82-88, throughout the Class Period the Fund’s holdings of illiquid assets exceeded 15%
of the Fund’s net assets at all relevant times.
The 2/16/2022 Registration Statement, 12/28/2022 Registration Statement,
12/28/2023 Registration Statement, 8/29/2024 Registration Statement, 9/5/2024 Registration
Statement and Joint Proxy Statement/Prospectus, 10/4/2024 Registration Statement and
12/30/2024 Registration Statement represented the following concerning liquidity risk:
Liquidity Risk. Liquidity risk occurs when certain investments become difficult to
purchase or sell. Difficulty in selling less liquid securities may result in sales at
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 50 of 65
47
disadvantageous prices affecting the value of your investment in the Fund. Liquid
securities can become illiquid during periods of market stress. If a significant
amount of the Fund’s securities become illiquid, the Fund may not be able to
timely pay redemption proceeds and may need to sell securities at significantly
reduced prices.
(Emphasis added).
These representations were materially false and misleading because they presented
the risk that the Fund may have a significant amount of illiquid securities as a hypothetical, future
risk, when in fact, as alleged in paragraphs 82-88, throughout the Class Period, a significant
amount of the Fund’s securities were illiquid and exceeded 15% of the Fund’s net assets.
B. The Registration Statements and Prospectuses’ Misstatements
Concerning Valuation
The 2/16/2022 Registration Statement, 12/28/2022 Registration Statement,
12/28/2023 Registration Statement and 9/5/2024 Registration Statement and Joint Proxy
Statement/Prospectus represented that the Fund’s “assets are generally valued at their market price
on the valuation date and are based on valuations provided by independent pricing services
consistent with the Trust’s valuation procedures.”
The 8/29/2024 Registration Statement, 9/5/2024 Registration Statement and Joint
Proxy Statement/Prospectus, 10/4/2024 Registration Statement and 12/30/2024 Registration
Statement represented that:
The Trust’s Board of Trustees has approved the use of nationally recognized bond
pricing services for the valuation of each Fund’s debt securities. The services
selected create and maintain price matrices of U.S. government and other securities
from which individual holdings are valued shortly after the close of business each
trading day. Debt securities not covered by the pricing services are valued upon bid
prices obtained from dealers who maintain an active market therein or, if no readily
available market quotations are available from dealers, such securities (including
restricted securities and OTC options) are valued at fair value under the Board’s
procedures. Short-term (having a maturity of 60 days or less) debt securities may
be valued at amortized cost.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 51 of 65
48
These representations were materially false and misleading because they failed to
disclose that, as alleged in paragraphs 89-116, the Fund’s valuation procedures were materially
deficient and its pricing service had been providing materially overstated valuations for the Fund’s
assets and thereby materially overstated the Fund’s NAV, and as alleged in paragraphs 117-26, the
board of trustee’s fair value procedures were materially defective and the Fund materially
overvalued at least one of the Fund’s Level 3 assets.
The 12/28/2023 Registration Statement, 8/29/2024 Registration Statement,
9/5/2024 Registration Statement and Joint Proxy Statement/Prospectus, 10/4/2024 Registration
Statement and 12/30/2024 Registration Statement represented in substantially the same form the
following concerning valuation of its assets:
Valuation Risk. The price the Fund could receive upon the sale of any particular
portfolio investment may differ from the Fund’s valuation of the investment,
particularly for securities that trade in thin or volatile markets or that are valued
using a fair valuation methodology or a price provided by an independent pricing
service. As a result, the Fund could realize a greater than expected loss or lesser
than expected gain upon the sale of the investment. Unlike equity securities, which
are valued using market quotations, the municipal bonds in which the Fund
primarily invests are fixed income securities which are typically valued by
independent pricing services utilizing a range of market-based and security specific
inputs and assumptions, including price quotations from broker-dealers making
markets in such instruments, transactions in comparable investments and
considerations about general market conditions. The Fund’s ability to value its
investments may also be impacted by technological issues and/or errors by pricing
services or other third-party service providers.
These representations were materially false and misleading because the Fund’s
ability to value its investments had already been impacted by errors by its pricing service and had
been materially overstating the value of certain of its securities. As alleged in paragraphs 89-116,
the Fund’s pricing service was materially deficient and had been providing materially overstated
valuations for the Fund’s assets, and the Fund had materially overstated the value of its assets and
the Fund’s NAV.
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The 2/16/2022 Registration Statement and 12/28/2022 Registration Statement
failed to disclose valuation risk among the principal risks of investing in the Fund, which it was
required to do under SEC rules and regulations, including those delineated in paragraphs 59-64.
C. The Registration Statements and Prospectuses Misrepresented the
Fund’s Investment Strategy Regarding Defaulted Securities
The 12/28/2022 Registration Statement, 12/28/2023 Registration Statement,
8/29/2024 Registration Statement, 9/5/2024 Registration Statement and Joint Proxy
Statement/Prospectus, 10/4/2024 Registration Statement, 12/30/2024 Registration Statement
represented in substantially the same form the following regarding the Fund’s investment strategy
regarding defaulted securities:
[the Fund] may purchase defaulted securities if the Adviser believes that there is
potential for resumption of income payments or realization of income on the sale
of the securities or the collateral or other advantageous developments appear likely
in the near future. Notwithstanding the Adviser’s belief about the resumption of
income payments or realization of income, the purchase of defaulted securities is
highly speculative and involves a high degree of risk, including the risk of a
substantial or complete loss of the Fund[‘s] investment. Defaulted securities are
subject to the Fund[’s] limitation on holding below-investment-grade securities.
The Adviser does not expect that this will be a significant investment strategy
of the Funds.
(Emphasis added).
These representations were materially false and misleading because as delineated
in paragraphs 127-28, throughout the Class Period, a significant investment strategy of the Fund
was to invest in defaulted securities and that a substantial amount of securities that the Fund had
already purchased were defaulted. The amount of the Fund’s assets committed to defaulted
securities, the amount of the Fund’s assets placed at risk by its investment in defaulted securities,
and the likelihood of the Fund losing some or all of those assets from investing in defaulted
securities demonstrate that the Fund’s investment in defaulted securities was a principal and
significant investment strategy. Indeed, a substantial amount in terms of dollars, percentage of
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50
investments in the Fund, and as a percentage of net assets of the Fund, had been invested in
defaulted securities throughout the Class Period and ultimately were sold at significant discounts
to the Fund’s valuation.
The 9/5/2024 Registration Statement and Joint Proxy Statement/Prospectus
incorporated by reference the Fund’s financial statements in the 2024 Semi-Annual Report, and
the 10/4/2024 Registration Statement incorporated by reference the Fund’s financial statements in
the 2024 Semi-Annual Report.
The 12/30/2024 Registration Statement incorporated by reference the Fund’s
financial statements contained in 2024 Annual Report.
These representations were materially false and misleading because the Fund’s
financial statements as of February 29, 2024 set forth in the 2024 Semi-Annual Report, and the
Fund’s financial statements as of August 31, 2024 set forth in the 2024 Annual Report failed to
disclose a material amount of defaulted securities as alleged in paragraphs 129-31.
D. The Registration Statements and Prospectuses Misrepresented the
Fund’s Significant Investment in the Same or Related Businesses
The 2/16/2022 Registration Statement, 12/28/2022 Registration Statement,
12/28/2023 Registration Statement, 8/29/2024 Registration Statement, 9/5/2024 Registration
Statement and Joint Proxy Statement/Prospectus, 10/4/2024 Registration Statement, and
12/30/2024 Registration Statement represented in substantially the same form the following
concerning the Fund’s investment in the same or related businesses:
Sector Emphasis Risk. The securities of issuers in the same or related businesses
(“industry sectors”), if comprising a significant portion of the Fund’s portfolio,
may in some circumstances react negatively to market conditions, interest rates and
economic, regulatory or financial developments and adversely affect the value of
the portfolio to a greater extent than if such securities comprised a lesser portion of
the Fund’s portfolio or the Fund’s portfolio was diversified across a greater number
of industry sectors. Some industry sectors have particular risks that may not affect
other sectors.
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(Emphasis added).
These representations were materially false and misleading because the risk of the
Fund’s investments in securities in the same or related businesses was represented as a
hypothetical, future risk and that the Fund’s diverse holdings were not subject to this risk, when,
in fact, as alleged in paragraphs 132-42, throughout the Class Period the Fund already had a
material, undisclosed investment in securities that comprised a significant portion of the Fund’s
portfolio and were in the waste to marketable products business of the Jefferson Enterprise of
environmental companies.
VII. Class Action Allegations
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3), individually and on behalf of all persons or entities who during the
Class Period purchased or otherwise acquired Class A, Investor Class or Institutional Class shares
of the Fund (tickers: RMJAX, RMHVX, RMHIX, GSTFX, GSTEX, GSTAX), pursuant to or
traceable to the Fund’s registration statements and prospectuses and sustained damages; or (ii) held
shares of the Fund as of September 30, 2024 and were entitled to vote on the reorganization of the
Fund from a series of the MPS Trust into a series of the Easterly Trust (the “Class”). Excluded
from the Class are Defendants, the officers, and directors or trustees of any of the Defendants at
all relevant times, members of their immediate families and their legal representatives, heirs,
successors or assigns and any entity in which Defendants have or had a controlling interest.
The members of the Class are so numerous that joinder of all members is
impracticable. While the exact number of class members is unknown to Plaintiff at this time and
can only be ascertained through appropriate discovery from Defendants, Plaintiff believes that
there are at least hundreds, if not thousands, of members in the proposed Class.
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52
Class members may be identified from records maintained by or on behalf of the
Fund or its transfer agent and may be notified of the pendency of this action by mail using a form
of notice customarily used in securities class actions. Ultimus Fund Solutions, LLC, located at 225
Pictoria Drive, Suite 450, Cincinnati, Ohio 45246, serves as the Easterly Trust’s transfer agent and
shareholder servicing agent.
Plaintiff’s claims are typical of all other Class members’ claims, as all Class
members are similarly affected by Defendants’ wrongful conduct in violation of the federal
securities laws complained of herein.
Plaintiff has and will continue to fairly and adequately protect the interests of the
Class members and has retained counsel competent and experienced in class and securities
litigation.
Common questions of law and fact exist as to all Class members and predominate
over any questions solely affecting individual class members. Among the questions of law and fact
common to the Class are: (i) whether Defendants’ acts and omissions, as alleged herein, violated
the Securities Act and the Exchange Act; (ii) whether Defendants’ statements delineated above in
the registration statements and prospectuses distributed to the investing public during the Class
Period misrepresented or omitted material facts about the Fund’s operations, business, and
management of the Fund and were negligently prepared; (iii) to what extent the Class members
have sustained damages; and (iv) the proper measure of such damages.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy because joinder of all Class members is impracticable.
Furthermore, as the damages suffered by individual Class members may be relatively small, the
expense and burden of individual litigation make it impossible for Class members to redress
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53
individually the wrongs done to them. There will be no difficulty in the management of this action
as a class action.
VIII. Causes of Action
Count I
Violations of Section 11 of the Securities Act
(Against Defendants the MPS Trust, the Easterly Trust, Eirich, Wiedmeyer,
Kern, Massart, Swanson, Rush, Crate, Montague, Medugno, Spencer,
Quasar Distributors and Easterly Securities)
Plaintiff repeats and realleges each and every allegation above as if set forth fully
herein.
This Count is brought under Section 11 of the Securities Act, 15 U.S.C. § 77k,
against Defendants Eirich, Wiedmeyer, Kern, Massart, Swanson, Rush, Crate, Montague,
Medugno, and Spencer who served as trustees and/or officers during the Class Period of the MPS
Trust or Easterly Trust and signed one or more of the registration statements delineated above.
This Count is also brought against the MPS Trust and the Easterly Trust, which issued shares of
the Fund and are strictly liable, and against Quasar Distributors and Easterly Securities, which
underwrote and distributed shares of the Fund to investors.
This Count is not based on and does not sound in fraud.
The registration statements and prospectuses for the Fund and the documents
incorporated therein, contained untrue statements of material facts, omitted to state other facts
necessary to make the statements made not misleading, and/or omitted to state material facts
required to be stated therein.
Plaintiff and the Class acquired the Fund’s shares pursuant to materially false and
misleading registration statements and prospectuses.
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54
Plaintiff and the Class have sustained damages in that the value of the Fund’s shares
has declined substantially from the prices at which they were purchased.
At the time of their purchases of the Fund’s shares, Plaintiff and other members of
the Class were without knowledge of the facts concerning the untrue statements or omissions
herein and could not have reasonably discovered those facts prior to the date of the filing of this
action.
Less than one year has elapsed from the time that Plaintiff discovered or reasonably
could have discovered the facts upon which this complaint is based. Less than three years have
elapsed from the time that Plaintiff purchased the Fund shares upon which this Count is brought
to the time this action was filed.
Count II
Violations of Section 12(a)(2) of the Securities Act
(Against Defendants the MPS Trust, the Easterly Trust, Quasar Distributors
and Easterly Securities)
Plaintiff repeats and realleges each and every allegation above as if set forth fully
herein.
This Count is brought pursuant to Section 12(a)(2) of the Securities Act, 15 U.S.C.§
77l(a)(2), on behalf of Plaintiff and other members of the Class who were offered or sold shares
of the Fund against the MPS Trust, the Easterly Trust, Quasar Distributors and Easterly Securities.
The Section 12(a)(2) Defendants were sellers and offerors and/or solicitors of purchasers of shares
of the Fund offered under the registration statement and prospectuses for the Fund.
This Count is not based on and does not sound in fraud.
Defendants the MPS Trust, the Easterly Trust, Quasar Distributors and Easterly
Securities offered and sold a security, namely shares of the Fund, by means of the registration
statements, prospectuses and summary prospectuses. The prospectuses and summary prospectuses
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55
contained untrue and/or misleading statements of material fact, contained material omissions, or
omitted material facts necessary in order to make the statements, in light of the circumstances
under which they were made, not misleading.
Defendants MPS Trust, the Easterly Trust, Quasar Distributors and Easterly
Securities actively solicited the sale of the Fund’s shares through the prospectuses and summary
prospectuses, advertising, and other marketing efforts on the Fund’s website and through
wholesalers to serve their own financial interests and are liable to Plaintiff and Class members
under Section 12(a)(2) of the Securities Act, as sellers of the shares of the Fund.
At the time they purchased the Fund’s shares from Defendants MPS Trust, the
Easterly Trust, Quasar Distributors and Easterly Securities, Plaintiff and other members of the
Class did not know that the representations made to them by Defendants MPS Trust, the Easterly
Trust, Quasar Distributors and Easterly Securities in connection with the offer and sale of shares
and the matters described above were untrue, did not know the above described omitted material
facts were not disclosed, and could not have reasonably discovered those facts.
Less than one year has elapsed from the time that Plaintiff discovered or reasonably
could have discovered the facts upon which this complaint is based to the time that this action was
filed. Less than three years have elapsed from the time that Plaintiff purchased the Fund shares
upon which this Count is brought to the time this action was filed.
Under Section 12(a)(2) of the Securities Act, Plaintiff and Class members are
entitled to recover, upon tender of the Fund shares they purchased, the consideration paid for the
shares with interest thereon, less the amount of any income received thereon, or damages resulting
from Defendants the MPS Trust, the Easterly Trust, Quasar Distributors and Easterly Securities’
wrongful conduct.
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Putative Class members who still hold shares of the Fund and were damaged by
Defendants’ violation of Section 12(a)(2) of the Securities Act hereby tender those shares in the
Fund.
Count III
Violations of Section 15 of the Securities Act
(Against Defendants Eirich, Wiedmeyer, Kern, Massart, Swanson, Rush, Crate,
Montague, Medugno, Spencer, the Portfolio Manager Defendants,
Principal Street Partners and Easterly Investment Partners)
Plaintiff repeats and realleges each and every allegation contained above as if fully
set forth herein.
This Count is brought pursuant to Section 15 of the Securities Act, 15 U.S.C. § 78o,
against Defendants Eirich, Wiedmeyer, Kern, Massart, Swanson, Rush, Crate, Montague,
Medugno, Spencer, the Portfolio Manager Defendants, Principal Street Partners and Easterly
Investment Partners as control persons of the MPS Trust or the Easterly Trust who violated
Sections 11 and Section 12, as alleged in Counts I and II.
Defendants Eirich, Wiedmeyer, Kern, Massart, Swanson, Rush, Crate, Montague,
Medugno, Spencer were each a control person by virtue of their position as a trustee and/or senior
officer of the MPS Trust or the Easterly Trust. They were in a position to, and did, control the
Fund’s operations and disclosures made in the registration statements and prospectuses issued
during the Class Period and possessed authority to determine which securities and the amounts of
securities that were bought or sold by the Fund and their valuations, and the Fund’s disclosures to
investors.
The Portfolio Manager Defendants were each a control person by virtue of their
positions as the portfolio manager of the Fund who were responsible for, among other things,
choosing the Fund’s investments and handling its day-to-day business.
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 60 of 65
57
Defendants Principal Street Partners and Easterly Investment Partners, as
investment advisors to the Fund, were assigned responsibility for managing the Fund in accordance
with its investment objectives and policies by the MPS Trust and the Easterly Trust and SEC rules
and regulations.
Defendants Eirich, Wiedmeyer, Kern, Massart, Swanson, Rush, Crate, Montague,
Medugno, Spencer, the Portfolio Manager Defendants, Principal Street Partners and Easterly
Investment Partners are liable, as control persons, for damages caused by the violations of Section
11 and Section 12.
This claim was brought within one year after the discovery of the untrue statements
and omissions in the registration statements and prospectuses and within three years after the
Fund’s shares were sold to the Class.
Because of the misconduct alleged herein, Defendants Eirich, Wiedmeyer, Kern,
Massart, Swanson, Rush, Crate, Montague, Medugno, Spencer, the Portfolio Manager Defendants,
Principal Street Partners and Easterly Investment Partners are jointly and severally liable with and
to the same extent as defendants named under Counts I and II.
Count IV
Violation of Section 14(a) of the Exchange Act and SEC Rule 14a-9
(Against Defendants the Easterly Trust, Crate, Montague, Medugno and Spencer)
Plaintiff repeats and realleges each and every allegation contained above as if fully
set forth herein.
Section 14(a) of the Exchange Act, 15 U.S.C. § 78n(a), and SEC Rule 14a-9, 17
C.F.R. § 240.14a-9, prohibit the solicitation of proxies by means of a proxy statement that contains
any statement which, at the time and in light of the circumstances under which it is made, is false
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 61 of 65
58
or misleading with respect to any material fact, or which omits to state any material fact necessary
to make the statements therein not false or misleading.
This Count is not based on and does not sound in fraud.
Defendants Crate, Montague, Medugno, Spencer and the Easterly Trust solicited
proxies from Plaintiff and other shareholders through the 9/5/2024 Registration Statement and
Joint Proxy Statement/Prospectus filed with the SEC in connection with the Reorganization.
Defendants Crate, Montague, Medugno, Spencer signed the 9/5/2024 Registration Statement and
Joint Proxy Statement/Prospectus.
The 9/5/2024 Registration Statement and Joint Proxy Statement/Prospectus
contained materially false and misleading statements and omissions, as delineated above.
These misstatements and omissions were material because a reasonable shareholder
would consider them important in deciding how to vote on the Reorganization.
Defendants Crate, Montague, Medugno, Spencer and the Easterly Trust acted at
least negligently in causing the 9/5/2024 Registration Statement and Joint Proxy
Statement/Prospectus to contain these misstatements and omissions.
The proxy solicitation was an essential link in the accomplishment of the
transaction because shareholder approval was required for the transaction to proceed.
As a direct and proximate result of Defendants Crate, Montague, Medugno,
Spencer and the Easterly Trust’s violations of Section 14(a) and Rule 14a-9, Plaintiff and the Class
have suffered damages, including loss of the fair value of their shares and being deprived of an
informed vote.
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Count V
Violation of Section 20(a) of the Exchange Act
(Against Defendants Crate, Montague, Medugno, Spencer
and the Portfolio Manager Defendants)
Plaintiff repeats and realleges each and every allegation contained above as if fully
set forth herein.
Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), provides that any person
who, directly or indirectly, controls any person liable under any provision of the Exchange Act or
any rule or regulation thereunder shall also be liable jointly and severally with and to the same
extent as the controlled person.
Defendants Crate, Montague, Medugno, Spencer and the Portfolio Manager
Defendants by virtue of their positions as officers and/or trustees of the Easterly Trust or portfolio
managers of the Fund, had the power and authority to control and did control, directly or indirectly,
the content and dissemination of the 9/5/2024 Registration Statement and Joint Proxy
Statement/Prospectus and other statements issued by the Easterly Trust in connection with the
solicitation of shareholder approval for the Reorganization and negligently prepared the 9/5/2024
Registration Statement and Joint Proxy Statement/Prospectus. Defendants Crate, Montague,
Medugno and Spencer signed the 9/5/2024 Registration Statement and Joint Proxy
Statement/Prospectus. The Portfolio Manager Defendants served as proxies on behalf of
shareholders in connection with the Joint Special Meeting of Shareholders held on September 30,
2024.
As a result of the foregoing, Defendants Crate, Montague, Medugno, Spencer and
the Portfolio Manager Defendants are liable under Section 20(a) of the Exchange Act for the
primary violations of Section 14(a) and Rule 14a-9.
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IX. Prayer for Relief
WHEREFORE, Plaintiff, on behalf of himself and the other members of the Class, prays
for judgment as follows:
A. Declaring this action to be a class action properly maintained pursuant to the Federal
Rules of Civil Procedure, certifying the Class with Plaintiff as Class Representative
and certifying Plaintiff’s counsel as Class Counsel;
B. Awarding Plaintiff and the other members of the Class damages against Defendants,
jointly and severally, together with interest thereon;
C. Awarding Plaintiff and the other members of the Class rescission on Count II, to the
extent they still hold shares of the Fund that were damaged by Defendants’ violations
of Section 12(a)(2) of the Securities Act;
D. Awarding Plaintiff and the other members of the Class their costs and expenses of this
action, including reasonable attorneys’ fees, experts’ fees and other costs and
disbursements; and
E. Awarding Plaintiff and the other members of the Class such other and further relief as
the Court deems appropriate under the circumstances.
X. Jury Trial Demanded
Plaintiff hereby demands a trial by jury.
Dated: December 5, 2025 Respectfull
y
submitted,
KAPLAN FOX & KILSHEIMER LLP
/s/ Je
ff
re
y
P. Campisi
Frederic S. Fox
Donald R. Hall
Jeffre
y
P. Campisi
Brandon Fox
Clara Abramson
800 Third Avenue, 38th Floo
r
Case 1:25-cv-06028-DLC Document 75 Filed 12/05/25 Page 64 of 65
61
New York, NY 10022
T: (212) 687-1980
F: (212) 687-7714
jcampisi@kaplanfox.com
ffox@kaplanfox.com
dhall@kaplanfox.com
bfox@kaplanfox.com
cabramson
@
kaplanfox.com
Lead Counsel for Lead Plaintiff Richard
Ful
f
ord and the Proposed Class
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