Elco Securities, LTD v. Dear Cashmere Holdings, Inc.
- Barbara Moses
- 1:23-cv-05008
- U.S. District Court · Southern District of New York
- 4
In Elco Securities v. Dear Cashmere, Judge Moses approved a settlement providing cash and shares in exchange for releasing Elco’s claims.
Elco Securities, LTD and Dear Cashmere Holdings, Inc.; the settlement also concerns Elco’s designees and Dear Cashmere’s shareholders because of the proposed issuance of 4,000,000 unrestricted shares.
What happened
Elco Securities, LTD sued Dear Cashmere Holdings, Inc. over an alleged failure to repay a loan under a promissory note, asserting several claims including breach of contract, fraud, and conversion.
The court granted the parties’ joint motion after a fairness hearing. The settlement requires Dear Cashmere to pay Elco $85,000 in four monthly installments and issue 4,000,000 unrestricted shares, in exchange for releasing the claims and dismissing the action with prejudice. The parties must submit a dismissal stipulation by August 27, 2025.
Judge Barbara Moses found that the requirements for the federal securities-law exemption were met and that the exchange terms were fair. The case will be closed when the dismissal stipulation is filed.
The detailed version
- Elco Securities, LTD v. Dear Cashmere Holdings, Inc. · No. 1:23-cv-05008
- Barbara Moses
- Aug. 5, 2025
Background
Elco Securities, LTD sued Dear Cashmere Holdings, Inc. over Dear Cashmere’s alleged breach of a promissory note and failure to repay, with interest, a loan made by Elco. The complaint asserted claims for declaratory judgment, breach of contract, breach of fiduciary duty, negligence, conversion, unjust enrichment, breach of the implied covenant of good faith and fair dealing, and fraud.
The parties reached a settlement in principle at a May 13, 2025 settlement conference and later executed a Settlement Agreement and General Release. Under the agreement, Dear Cashmere must pay Elco $85,000 over four consecutive months and issue Elco and/or its designees 4,000,000 unrestricted, free-trading shares of Dear Cashmere common stock. In exchange, the parties agreed to release the claims and dismiss the action with prejudice, subject to court approval of the stock issuance.
Legal standard
Section 3(a)(10) of the Securities Act of 1933 provides an exemption from registration for securities issued in exchange for outstanding securities, claims, or property interests when a court holds a hearing on the fairness of the terms, gives the proposed recipients an opportunity to appear, and approves the exchange as fair.
Court’s analysis
The court found that all statutory requirements were met. First, the shares would be issued in exchange for the release of Elco’s claims. Second, the court held a telephonic fairness hearing on August 5, 2025, at which both parties appeared, had a full opportunity to be heard, and reaffirmed that they considered the terms fair. Third, the court found the terms and conditions of the exchange fair to the people receiving the securities.
Disposition
The court granted the parties’ joint motion. No later than August 27, 2025, the parties must submit a stipulation of dismissal with prejudice under their agreement, after which the case will be closed. If Dear Cashmere has not issued the 4,000,000 shares or made the first installment payment by that date, the parties must submit a joint letter explaining the delay.
Classification note
This is a procedural order because the court approved a settlement and the related securities issuance rather than deciding the underlying claims on their merits.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.