Court of Chancery Rejects Fiduciary Duty and Veil-Piercing Theories in Crypto Case

Earlier this year, the Delaware Court of Chancery dismissed a suit brought by Hash Asset Management, Limited (“Hash”) arising from a failed cryptocurrency investment involving DMA Labs, Inc. (“DMA”), ICHI Foundation, and several individuals allegedly affiliated with those entities. Hash Asset Mgmt. Ltd. v. DMA Labs, Inc., No. 2025-0374-BWD (Del. Ch. Feb. 9, 2026). Vice Chancellor David found the Court of Chancery lacked subject matter jurisdiction because the claim for breach of fiduciary duty and veil-piercing theory was insufficiently pled.

Background

DMA, a Delaware corporation, created and issued a cryptocurrency called “ICHI.” Considering acquiring ICHI tokens, Hash entered discussions with certain Defendants. During those discussions, Defendants offered Hash the opportunity to invest in “Rari Pool 136” (the “Pool”), a lending and borrowing pool hosted by non-party Rari Capital. Investors that pledged cryptocurrency as collateral to the Pool could earn interest and borrow from the Pool. Hash—relying on Defendants’ public and private statements—invested $16 million in ICHI tokens.

Hash alleged that Defendants then used the borrowing feature of the Pool to artificially inflate ICHI’s price and then quickly sold large amounts of the token at a profit. This caused a bank run on the ICHI token, and the value of Hash’s investment ICHI tokens plunged.

Procedural History

Hash first filed suit in the U.S. District Court for the District of Delaware, but it was dismissed for lack of subject matter jurisdiction. It refiled in the Delaware Court of Chancery, but the Defendants removed the case to federal court since the complaint still included federal securities claims. Hash then dropped those federal claims in an amended complaint, and the action was remanded to the Court of Chancery.

In the Court of Chancery, the Defendants moved to dismiss the amended complaint for lack of subject matter jurisdiction. Vice Chancellor David agreed, finding that the Court of Chancery lacked jurisdiction because the only potential equitable hooks in the complaint—breach of fiduciary duty and veil piercing—were not adequately pled. As the Court explained, the Court of Chancery is a court of limited jurisdiction: it “maintains subject matter jurisdiction only when (1) the complaint states a claim for relief that is equitable in character, (2) the complaint requests an equitable remedy when there is no adequate remedy at law, or (3) Chancery is vested with jurisdiction by statute.”

Breach of Fiduciary Duty

The Court first considered Hash’s fiduciary duty claim. Under Delaware law, a fiduciary duty claim requires a special relationship where a party places special trust in another, or where a party has a duty to protect the interests of another. Certain relationships, like attorney and client, general partners, officers, directors, and controlling stockholders, are well-recognized fiduciary relationships under Delaware law. By contrast, “[b]argained-for commercial relationships between sophisticated parties do not give rise to fiduciary duties.”

Here, the Court found that Hash had not sufficiently pled a fiduciary relationship between itself and any Defendant. Instead, the complaint relied largely on conclusory group pleading and generalized allegations that Defendants controlled ICHI and possessed superior information on the operation of the token. But these allegations were insufficient. Even assuming Defendants exercised significant control over the operation of ICHI, the Court of Chancery found that the relationship was nothing more than an arm’s-length commercial relationship between sophisticated parties. The Court thus dismissed the claim.

Piercing the Veil

The Court next considered whether Hash’s veil-piercing theory could support an equitable basis for jurisdiction. But that theory, too, was inadequately pled.

The Court first noted that veil piercing is an uphill battle in Delaware; Delaware law steadfastly upholds the separate legal existence of corporate entities, and “public policy does not lightly disregard the separate legal existence of corporations[.]” Courts consider a range of factors in deciding whether there exists “complete domination and control of the entity” to pierce the corporate veil. The “overarching issue” is whether there are sufficient facts to support that the corporate structure was effectively a sham and existed for no purpose other than to perpetrate fraud. Setting aside the conclusory allegations, the Court held the remaining factual assertions fell short of reaching this standard.

In the absence of a viable equitable claim or theory to invoke the Court of Chancery’s limited jurisdiction, the Court dismissed the action with leave to transfer the case to Delaware Superior Court.

Takeaways

Although the decision is not groundbreaking, it offers several useful reminders of practicing in the Court of Chancery and reflects the Court’s commitment to long-standing judicial principles even when concerning newer financial instruments like cryptocurrency.

First, the Court of Chancery remains a court of limited jurisdiction; every business dispute involving a Delaware company does not necessarily belong in the Court of Chancery. The jurisdictional analysis still matters, and it can be dispositive. Second, an arm’s-length commercial relationship is not easily treated as a fiduciary one. Plaintiffs must plead sufficient facts, not conclusory allegations, demonstrating the existence of a special relationship. In the context of cryptocurrency, control, informational asymmetry, and influence over a cryptocurrency is not, without more, enough. Third, veil piercing remains difficult to plead (and even harder to prove). Conclusory allegations that entities were shells or alter egos will not suffice. The Court of Chancery continues to demand well-pleaded facts showing that the corporate form is abused in a way that justifies disregarding it.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.