Securities Regulation Daily Wrap Up, BLOCKCHAIN—Del. Ch.: Court rules board rejection of Empery Digital’s nomination notice was improper, (Sep 1, 2026)

By Suzanne Cosgrove

It is the fundamental right of the stockholders, not the directors, to select the individuals who will determine the strategic direction of the company, the court stated.

Empery Digital, Inc., a publicly traded Delaware corporation headquartered in Texas, adopted a digital asset treasury (DAT) strategy to acquire and hold bitcoin in July 2025. Also in July 2025, Empery announced the closing of a $500 million private investment in public equity (PIPE), led by defendant Ryan Lane and his hedge fund, Empery Asset Management (ATG Capital Opportunities Fund v. Lane, No. 2026-0447-LWW (Del. Ch. Aug. 28, 2026)).

The PIPE closed at $10 per share and Lane was appointed co-chief executive officer alongside legacy CEO, defendant John Kim. Empery’s reconstituted board of directors (the Board) included Chairman Lane, Kim, and Jonathan Foster, Adrian Solgaard, Örn Ólason, Ian Read, Rohan Chauhan, and Matthew Homer.

Tice Brown, a self-described “fundamental value investor,” was one of Empery’s PIPE investors, investing $2 million along with Jacob Ma-Weaver.

However, by the end of 2025 its stock price had fallen to $4.57 amid a general decline in cryptocurrency prices, and the company anticipated activist pressure from shareholders, court filings show.

Background. As expected, investor activism surfaced as prices declined. When one investor sought to nominate a full slate of director candidates to the board, the board rejected the nomination citing suspicions that the investor was coordinating with another stockholder who had plans to take control of Empery and liquidate its bitcoin assets.

Gabi Gliksberg—an activist investor—had also noticed Empery’s significant discount to its net asset value, according to court filings. Gliksberg had recently launched plaintiff ATG Capital Opportunities Fund LP, which advertised ATG’s willingness to use litigation and pursue “liquidations” to force value realization.

ATG carried its burden of demonstrating that its nomination notice complied with the bylaws with respect to the specific deficiencies the board invoked, the court stated. Brown did not meet the definition of a “participant” incorporated into the bylaws, therefore ATG’s nomination notice did not violate the participant bylaw.

Undisclosed hedge. The second main argument for rejecting ATG’s nomination notice was its failure to disclose a bitcoin hedge. At the time ATG submitted the nomination notice, it had hedged its Empery equity position “dollar for dollar” to isolate and eliminate the risk of bitcoin price movement by shorting bitcoin ETFs. The defendants assert that this undisclosed hedge misaligned ATG with Empery’s long-only stockholders and incentivized ATG to push for the liquidation of the company’s bitcoin.

If the board wanted to know about commodity hedges, it could have adopted a bylaw expressly requiring that information, included such a request in its nominee questionnaire, or asked ATG directly, the court stated. ATG could not be expected to guess that the board would interpret the bylaws to require the disclosure of a bitcoin short position.

To the extent the interplay between the bylaws and Section 14(a) creates any ambiguity, Delaware law resolves that doubt in favor of the stockholder’s electoral rights, the court noted.

A fatal flaw. The board’s rejection suffered from a fatal flaw, the court stated: Empery had no advance notice bylaw provision requiring disclosure of the information that the board identified as missing. The board instead invoked general bylaw provisions incorporating federal proxy rules, some of which were not raised until trial and others that do not call for the information the board demands.

It is the fundamental right of the stockholders, not the directors, to select the individuals who will determine the strategic direction of the company, the court said. Empery’s board is free to raise its views during the proxy contest. But, given the lack of relevant bylaws, it was both contractually improper and inequitable to reject the nomination notice entirely.

The case is No. 2026-0447-LWW.

Attorneys: A. Thompson Bayliss, John M. Seaman, Caitlin C. Bozman and Bryan M. Blaylock (Abrams & Bayliss LLP) for ATG Capital Opportunities Fund LP. John P. DiTomo, Jacob M. Perrone and Nicholas R. Gottemoller (Morris, Nichols, Arsht & Tunnell LLP) for Ryan Lane, John Kim, Jonathan P. Foster, Adriansolgaard, Örn Ólason, Rohan Chauhan, Matthew Homer, Ian Read, and Empery Digital, Inc.

Companies: ATG Capital Opportunities Fund LP; Empery Digital, Inc.

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