Plaintiff Vadim Fainberg, who according to the complaint has held Hercules common stock since July 2015, brought the suit derivatively on behalf of the San Mateo-based venture lender against CEO and Chief Investment Officer Scott Bluestein, CFO Seth Meyer, and seven board members. The case is Fainberg v. Bluestein et al., No. 5:26-cv-03213.
The complaint centers on a February 27, 2026, report by Hunterbrook Media titled "The Myth of Hercules Capital." According to the suit, the report disclosed testimony from a former Hercules analyst who described the company's deal sourcing process as "[g]o[ing] on the website for Google Ventures and just see what they invest in and just copy it." The complaint alleges a former member of the company's finance team told Hunterbrook that the valuation team "consisted of just four people in a single reporting line responsible for dozens of companies" and described a small, overstretched team with "few checks in place."
Hercules shares fell $1.22, or approximately 7.9%, on the day the Hunterbrook report was published, closing at $14.21, according to the complaint.
The suit alleges that from May 1, 2025, through February 27, 2026, the defendants caused Hercules to make false and misleading statements in SEC filings and press releases about the company's due diligence protocols, deal sourcing, loan origination, and investment valuation processes. The complaint points to quarterly 10-Q filings and the fiscal year 2025 10-K, which described non-binding term sheets as "subject to completion of our due diligence and final investment committee approval process" and commitments as subject to "underwriting and ongoing portfolio maintenance."
The complaint also alleges the Hunterbrook report revealed that Hercules was "assign[ing] certain businesses that describe themselves as software companies to categories outside of software," and that the company valued its $1.5 billion software loan portfolio "at 100 cents on the dollar" despite "billions worth of [software] debt across the industry falling into distressed territory."
Fainberg alleges that during the relevant period, Bluestein sold 111,619 shares for proceeds exceeding $2 million, and Meyer sold 35,035 shares for approximately $639,668. The complaint characterizes these as insider sales "made with knowledge of material nonpublic information."
The suit brings six claims: breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets against all individual defendants, plus a contribution claim under Sections 10(b) and 21D of the Exchange Act against Bluestein and Meyer. The complaint notes a separate federal securities fraud class action is already pending against the company, its CEO, and its CFO in the same district. The plaintiff argues that a pre-suit demand on the board would be futile because all eight current directors face a substantial likelihood of liability.
Fainberg is represented by Robert C. Moest of The Brown Law Firm.