Digital Brands Group, Inc. (DBGI), the Austin, TX-based e-commerce and apparel portfolio company that represents the Stateside, Sundry, Bailey 44, DSTLD, and AVO Studio brands, has reportedly canceled 7.1 million pre-funded warrants to protect shareholders pending a legal investigation. 

The company, also known as DBGI or DBG Corp., said it has been notified by concerned shareholders of a troubling series of events involving collusion, acting in concert, multiple violations of the 4.99 percent rule, the use of foreign silent partners as nominees, and transfer agent discrepancies. 

DBGI said, “shareholders and stakeholders are actively seeking immediate clarification and corrective action from the Board of Directors regarding these concerns.” The company said it “remains committed to adhering to SEC regulations and ensuring a fair, transparent market for all investors.” Further updates will be provided as this matter develops. 

The following details were outlined by the company: 

  1. Concerns Over Collusion and Ownership Caps: Pre-funded warrants are typically structured with a 4.99 percent or 9.99 percent beneficial ownership blocker to prevent individual entities from triggering change-of-control provisions or crossing SEC reporting thresholds. Shareholders have raised serious red flags regarding a concerted effort by certain entities to circumvent these caps. The company is being urged to investigate whether related parties and attribution affiliates are coordinating (colluding) and acting in concert to exert disproportionate control over the share price and trading activity, including through share price manipulation. 
  1. Using Foreign Silent Partners as Nominees: Shareholders are requesting a formal investigation into suspected misconduct, market manipulation and the undisclosed use of foreign silent partners as nominees. The complaint alleges that certain entities transferred pre-funded warrant allocations to foreign silent partners to collude, control share allocations, and artificially manipulate share prices. Share transfers and Share Purchase Agreements (SPAs) were submitted to the transfer agent. 
  1. Transfer Agent (TA) Errors and Share Count Discrepancies: Beyond control and collusion concerns, and the 4.99 percent beneficial ownership issues and using foreign silent partners as nominees, there are “glaring inaccuracies” in the outstanding warrant total and records logged per entity, given the SPA’s and transfer agreements that a single controlling party from this group provided to the transfer agent. 

DGBI stressed that accurate records are “critical” to maintain compliance with the Securities and Exchange Commission (SEC) and exchange listing rules. 

Image courtesy Digital Brands Group, Inc.