1033-00006 · Redstone Gaming Corp · Discovery

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Francesca Morano, Samuel Eklund, Carlos Espinoza

FROM: Hannah Brinkley

DATE: August 22, 2024

RE: Deposition Summary — Tobias "Toby" Fenchurch, Managing Member, Grizzly Peak Research LLC

MATTER: Redstone Gaming Corp. v. Grizzly Peak Research LLC et al., Case No. 24STCV-01892, Superior Court of California, County of Los Angeles

I. Overview and Logistics

The deposition of Tobias "Toby" Fenchurch was taken on August 20, 2024, at the offices of Caldwell, Tseng & Barrow LLP, 555 California Street, Suite 3100, San Francisco, California 94104. The examination was conducted by Carlos Espinoza of Calderwood & Harkness LLP, 333 South Grand Avenue, Suite 4800, Los Angeles, California 90071, on behalf of plaintiff Redstone Gaming Corp. ("RGC" or "Redstone"). Defense counsel Raymond Caldwell and Natalie Orenstein of Caldwell, Tseng & Barrow LLP appeared on behalf of the witness and the Grizzly Peak defendants.

The deposition lasted approximately six hours and forty-five minutes, exclusive of breaks, across a morning and afternoon session. Fenchurch appeared in three capacities: (1) as Managing Member of Grizzly Peak Research LLC ("GPR"); (2) as sole managing member of Grizzly Peak Capital GP LLC, which serves as the general partner of Grizzly Peak Capital Partners LP ("GPCP"); and (3) in his individual capacity as a named defendant in this action.

This deposition is one of fourteen depositions scheduled during the discovery phase, which runs from June through November 2024. All page and line citations referenced throughout this memorandum are to the certified transcript prepared by the court reporter. The transcript has been ordered on an expedited basis and is expected to arrive in final certified form no later than August 27, 2024. A preliminary rough transcript was used in preparing this summary and has been cross-referenced against contemporaneous notes taken during the examination.

II. Background and Qualifications of Witness

A. Personal Background

Fenchurch's full legal name is Tobias Alan Fenchurch. He testified that he goes by the name "Toby" in both professional and personal contexts. He resides in San Francisco, California, and has lived in the San Francisco Bay Area continuously since approximately 2012. (Tr. at 14:3–15.)

Fenchurch holds a Master of Business Administration with a concentration in finance. He testified that prior to founding GPR, he worked at two investment banks, though he was somewhat vague regarding the specifics of his roles and the duration of his tenure at each institution. He identified the firms as Whitfield Bancroft Securities and Ridgeline Partners, and described his work as focused on equity research and sell-side coverage of the consumer discretionary and technology sectors. (Tr. at 15:8–16:22.)

Fenchurch testified that he founded Grizzly Peak Research LLC approximately six years ago — roughly in 2018 — as a short-seller research firm focused on publishing investigative reports about publicly traded companies that GPR believed were engaged in accounting irregularities, corporate governance failures, or fraud. (Tr. at 17:1–18:4.)

GPR is organized as a Delaware limited liability company. Its principal office is located at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR's registered agent in the State of Delaware is Pacific Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. (Tr. at 18:10–19:7.)

B. Professional Roles

Fenchurch testified extensively about his professional roles within the Grizzly Peak organizational structure. As Managing Member of Grizzly Peak Research LLC, he oversees all research publications, makes all editorial decisions, and provides final approval for any report before it is published and disseminated to the public. He described his editorial role as "hands on," noting that he personally reads, revises, and signs off on every piece of research that bears the GPR name. (Tr. at 20:3–21:14.)

In addition to his role at GPR, Fenchurch serves as the sole managing member of Grizzly Peak Capital GP LLC, which in turn serves as the general partner of Grizzly Peak Capital Partners LP. GPCP is a Delaware limited partnership that manages external capital and maintains investment positions — including short positions — in the companies that are typically the subjects of GPR's research reports. Fenchurch testified that GPCP's estimated assets under management are approximately $185 million. He acknowledged the structural relationship between the research arm (GPR) and the investment arm (GPCP), but maintained that the two entities operate independently with respect to investment and editorial decisions, a characterization that, as discussed below, is contradicted by his own internal communications. (Tr. at 22:1–24:18.)

GPR itself, as distinct from GPCP, is an operating limited liability company. Fenchurch testified that GPR had approximately $22 million in cash and receivables as of year-end 2024, derived from subscription revenue, consulting arrangements, and other advisory fees. (Tr. at 24:20–25:11.)

GPR distributes its research reports via its website, grizzlypeakresearch.com, and promotes them through the social media account @GrizzlyPeakRes. Fenchurch confirmed that at the time of the publications relevant to this action, the @GrizzlyPeakRes account had approximately 142,000 followers across social media platforms. He acknowledged that this audience size gives GPR's publications meaningful market impact and the capacity to influence trading volume and stock prices. (Tr. at 25:14–26:22.)

III. GPR's Research Methodology

A. General Process Described by Fenchurch

Fenchurch described GPR's general research process in relatively broad terms. He testified that a typical GPR research project involves: (1) identification of a target company, often based on tips, publicly available red flags, or anomalies identified through screening; (2) review of SEC filings, annual and quarterly reports, proxy statements, and other publicly available documents; (3) industry source interviews; and (4) data analysis, including financial modeling and comparison of the target company's reported results to industry benchmarks and peer performance. (Tr. at 28:5–30:12.)

Fenchurch stated that GPR typically spends "several weeks to a few months" researching a target before publication. He characterized this timeline as reflecting "thorough" research, but was vague about the number of personnel involved in any given project and could not cite any specific milestones or quality checkpoints in the research timeline. (Tr. at 30:14–31:8.)

Fenchurch initially claimed that GPR's reports undergo an internal review process prior to publication. However, when Mr. Espinoza pressed him on the specifics of this review process, Fenchurch acknowledged that the "review" consisted solely of himself and his co-author Ava Lin, GPR's Senior Analyst, reading each other's drafts and providing comments. There is no independent fact-checking function within GPR. There is no compliance officer tasked with reviewing the accuracy of factual assertions in GPR's reports. There is no pre-publication legal review for accuracy, although Fenchurch acknowledged that GPR has from time to time consulted outside counsel at Caldwell, Tseng & Barrow LLP on defamation-risk issues. He drew a distinction between consulting counsel on "legal risk" and having counsel review the accuracy of the underlying factual allegations — a distinction that underscores the absence of any rigorous verification process. (Tr. at 31:10–34:22.)

Fenchurch further acknowledged, when specifically asked, that GPR has no written research methodology guidelines or standards manual. He stated that GPR's methodology is "understood" among team members and is based on "industry best practices," but he could not identify any specific industry body or set of published standards to which GPR adheres. (Tr. at 35:1–18.)

Significantly, Fenchurch conceded that GPR does not routinely contact the target company before publishing allegations against it. He characterized this as a deliberate editorial choice, asserting that contacting the target would risk "tipping off" management and potentially allowing the company to "get ahead of the story." This admission is relevant to the question of actual malice, as it demonstrates a pattern and practice of foregoing basic verification steps that any reasonable investigator would take prior to publishing serious allegations of fraud. (Tr. at 35:20–37:4.)

B. Research Process Specific to Redstone Gaming Corp.

Turning to the research process specific to Redstone Gaming Corp. (Nasdaq: RDGM), Fenchurch testified that GPR's investigation of RGC began in approximately late November 2023. He could not recall the precise date on which the investigation commenced, but placed the starting point at "Thanksgiving week or the week after." (Tr. at 38:2–14.)

Fenchurch stated that the research was initiated after GPR received a "tip" from an unnamed individual whom he described as a "former RGC employee." When Mr. Espinoza asked Fenchurch to identify the tipster by name, position, and dates of employment at RGC, defense counsel Raymond Caldwell interposed an objection and instructed the witness not to answer, asserting journalist privilege under California's Shield Law (Cal. Evid. Code § 1070) and the First Amendment. Fenchurch declined to identify the tipster. The objection was noted for the record, and this issue may require a motion to compel. (Tr. at 38:16–40:22.)

Fenchurch acknowledged that GPR did not send any written questions or request for comment to RGC, its Chief Executive Officer Marcus J. Calloway, its Chief Financial Officer Priya Ramaswaran, its General Counsel Derek Olafson, or its Vice President of Investor Relations Janelle Hu, prior to publishing any of the three reports at issue in this litigation. When asked why GPR did not extend this basic courtesy, Fenchurch reiterated his general position that contacting the target company risks compromising the investigative process. (Tr. at 41:1–42:18.)

Fenchurch also admitted that GPR did not contact Pinnacle Audit & Advisory LLP, RGC's independent auditor (engagement partner Walter Ng, CPA), to verify or challenge the audited financial statements before publication of any of the three reports. This is particularly significant given that Report 1 directly challenged the integrity of the financial statements upon which Pinnacle had issued an unqualified audit opinion. Fenchurch did not offer any substantive justification for failing to contact the auditor, other than reiterating his general reluctance to alert parties who might "circle the wagons." (Tr. at 42:20–44:11.)

IV. The Short Position and Financial Motive

A. Timing of the Short Position

A substantial portion of the deposition was devoted to exploring the timing and magnitude of GPCP's short position in RDGM shares and its relationship to the publication of the three GPR reports. This testimony is central to establishing the financial motive element of RGC's claims.

Fenchurch confirmed that Grizzly Peak Capital Partners LP established a short position in RDGM shares in advance of the publication of Report 1. The short position consisted of approximately 680,000 shares. At the pre-publication closing price of $92.14 per share (the closing price on February 6, 2024, the last trading day before Report 1 was published on February 7, 2024), the notional value of the short position was approximately $62.66 million. (Tr. at 48:3–49:20.)

Fenchurch initially testified that the short position was established in "late January 2024." When Mr. Espinoza confronted him with the brokerage records produced in discovery (marked as Exhibit 4), Fenchurch narrowed the timing to approximately January 25–29, 2024. This means that the short position was established approximately nine to thirteen days before the publication of Report 1 on February 7, 2024. The proximity between the establishment of the short position and the publication of the first report is notable and supports the inference that the publications were timed to maximize the profitability of the trade. (Tr. at 49:22–52:14.)

Fenchurch acknowledged that he personally made the decision to establish the short position and that the trade was executed through GPCP's prime brokerage account. He did not identify any other individual who participated in the investment decision, though he stated that "the team was aware" of the position. (Tr. at 52:16–53:8.)

B. Profit on the Short

Mr. Espinoza questioned Fenchurch about the closing of the short position. Fenchurch stated that the position was "substantially" closed by mid-March 2024, though he could not — or would not — identify the precise dates on which covering transactions were executed. He was directed to the brokerage records for specifics but provided only general estimates during his live testimony. (Tr. at 54:1–55:12.)

The trading data and RDGM stock-price chart (Exhibit 7) establish the following price trajectory:

• February 6, 2024 (pre-Report 1): RDGM closed at $92.14

• February 7, 2024 (Report 1 published): RDGM closed at $84.37 (decline of $7.77/share, or 8.4%)

• February 14, 2024 (Report 2 published): RDGM closed at $78.52 (cumulative decline of $13.62/share, or 14.8%)

• February 21, 2024 (Report 3 published): RDGM closed at $72.80 (cumulative decline of $19.34/share, or 21.0%)

The trough of $72.80 per share was reached at the close on February 21, 2024, following the publication of Report 3. Based on an estimated average closing price of approximately $72.80 per share, the estimated gross profit on GPCP's short position was approximately:

($92.14 − $72.80) × 680,000 shares = approximately $13.15 million

Fenchurch was evasive about the precise profit figure throughout this line of questioning. He repeatedly stated that the exact number would depend on the specific execution prices of the covering transactions and other factors. However, he did not dispute the approximate calculation when Mr. Espinoza walked him through it using the brokerage records produced in discovery. His non-denial is significant and can be used effectively at trial. (Tr. at 55:14–58:22.)

C. Disclosure of Short Position

Fenchurch confirmed that GPR included standard disclaimers in each of the three reports disclosing that GPR's principals and affiliated entities maintained short positions in RDGM securities at the time of publication. The disclaimers were marked collectively as Exhibit 8. (Tr. at 59:1–16.)

However, Fenchurch acknowledged, when shown copies of the reports, that the disclaimers were placed at the end of each report, in a smaller font size than the body text. He characterized this placement as "industry standard" for short-seller research, but conceded that a reader who did not scroll to the final page of the report might not encounter the disclosure. (Tr. at 59:18–61:4.)

Fenchurch denied that the financial motive created by GPCP's short position influenced the content or timing of the reports. He maintained that GPR publishes its research "in the public interest" and that the short position was merely a reflection of GPR's conviction in the accuracy of its research conclusions. As discussed below, this characterization is directly contradicted by Fenchurch's own internal Meridian Solutions messages. (Tr. at 61:6–62:14.)

V. Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings" (Published February 7, 2024)

A. Revenue-Fabrication Allegation

Report 1, which runs to 48 pages (marked as Exhibit 1), alleged that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. This is a grave allegation — it amounts to an accusation that Redstone engaged in deliberate securities fraud by manufacturing nearly half a billion dollars in fictitious revenue. (Tr. at 65:1–66:10.)

For context, RGC's audited FY 2023 revenue was $3.42 billion, with EBITDA of $812 million, representing an EBITDA margin of approximately 23.7%. These financial statements were audited by Pinnacle Audit & Advisory LLP, which issued an unqualified (i.e., "clean") audit opinion for FY 2023, as it had for FY 2021 and FY 2022. (Tr. at 66:12–67:8.)

Mr. Espinoza asked Fenchurch to identify the factual basis for the $410 million revenue-fabrication figure. Fenchurch stated that the figure was derived from GPR's own analysis of segment-level revenue disclosures in RGC's SEC filings, as compared to estimated market-share data obtained from third-party industry research providers. He identified the third-party sources as industry reports from Clarion Research Group and Apex Gaming Analytics, but when pressed, he admitted that GPR did not independently verify the accuracy or methodology of these third-party estimates. In other words, GPR used unverified third-party estimates as the baseline against which it measured RGC's reported revenue, and then presented the resulting discrepancy as evidence of fraud — without any direct evidence of fabricated transactions. (Tr. at 67:10–70:18.)

Perhaps most significantly, Fenchurch conceded that GPR did not obtain or review any of RGC's intercompany transaction ledgers, consolidation schedules, or internal accounting records. GPR likewise did not obtain or review any work papers from Pinnacle Audit & Advisory LLP related to the audit of intercompany transactions. Fenchurch acknowledged that these documents would be the most direct and probative evidence of whether intercompany revenue was legitimate or fabricated, but stated that GPR did not have access to them and did not attempt to obtain them through any channel. (Tr. at 70:20–72:14.)

B. Awareness of Clean Audit Opinions

One of the most important admissions obtained during the deposition relates to Fenchurch's awareness of Pinnacle's audit opinions prior to publication. When asked directly, Fenchurch acknowledged that he was aware, before GPR published Report 1 on February 7, 2024, that Pinnacle Audit & Advisory LLP had issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for each of fiscal years 2021, 2022, and 2023. (Tr. at 73:1–14.)

Mr. Espinoza then asked whether the existence of three consecutive clean audit opinions from a major independent auditor gave Fenchurch any pause regarding the revenue-fabrication allegation. Fenchurch responded:

"Auditors miss things all the time. We had reason to believe the numbers were inflated." (Tr. at 73:16–18.)

When pressed to identify any specific audit failure by Pinnacle — any red flag in Pinnacle's work, any evidence of inadequate audit procedures, any indication that the audit was compromised — Fenchurch could not do so. He could not identify any specific deficiency in Pinnacle's audit methodology, any limitation on the scope of the engagement, or any reason to believe that Pinnacle's audit team had been deceived or had failed to perform competently. (Tr. at 73:20–75:8.)

Fenchurch further admitted that he did not contact Walter Ng, the engagement partner at Pinnacle, or any other person at Pinnacle Audit & Advisory LLP, to discuss the audit methodology or to raise any of GPR's concerns before publishing the revenue-fabrication allegation. He offered no substantive justification for this failure beyond his general reluctance to "tip off" interested parties. (Tr. at 75:10–76:4.)

This testimony is directly relevant to the actual-malice standard. A publisher who knows that a major independent auditor has thrice confirmed the accuracy of the very financial statements the publisher is calling fraudulent, and who cannot identify any reason to doubt the auditor's work, yet proceeds to publish without even contacting the auditor, has at a minimum acted with reckless disregard for the truth or falsity of the published statements.

VI. Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" (Published February 14, 2024)

A. RNG-Manipulation Allegation

Report 2 (36 pages; marked as Exhibit 2) alleged that RGC manipulated its random-number-generator ("RNG") software to inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB"). This is an allegation of regulatory fraud — a claim that RGC was systematically deceiving the primary regulatory body overseeing its gaming operations. (Tr. at 80:1–81:12.)

Fenchurch testified that the RNG-manipulation allegation was based on two categories of evidence: (1) statistical analysis of publicly available payout data reported by Nevada casinos operating RGC's slot machines; and (2) information provided by a "confidential source." (Tr. at 81:14–82:10.)

With respect to the statistical analysis, Fenchurch described a methodology in which GPR compared reported payout percentages to what GPR believed to be expected ranges based on historical data. He acknowledged, however, that the analysis was performed internally by himself and Ava Lin, neither of whom holds any degree or certification in statistics, actuarial science, or gaming technology. (Tr. at 82:12–83:20.)

With respect to the confidential source, Mr. Espinoza asked Fenchurch to identify the individual and describe the basis for GPR's confidence in the source's reliability. Defense counsel again asserted journalist privilege, and Fenchurch declined to identify the source. However, in a significant concession, Fenchurch acknowledged that the confidential source relied upon for Report 2 was not a current or former employee of RGC's technology division — the division responsible for the development and maintenance of the RNG software at issue. (Tr. at 84:1–85:18.) When asked what the source's connection to RGC was, Fenchurch stated only that the source had "familiarity with the gaming industry" — a characterization so vague as to be effectively meaningless.

Fenchurch further admitted that neither he nor Ava Lin had any technical expertise in RNG systems, gaming software engineering, or the regulatory testing protocols employed by the NGCB or its approved testing laboratories. He conceded that GPR did not retain any independent expert in gaming technology, software engineering, or statistical analysis to review the RNG-manipulation allegation before publication. (Tr. at 86:1–87:14.) This means that the most technically complex and consequential allegation in the three-report series was published without any expert review whatsoever, by authors who lacked the qualifications to evaluate its accuracy.

B. Nevada Gaming Control Board Clearance

Following the publication of GPR's reports, the Nevada Gaming Control Board conducted an independent RNG audit of RGC's slot machine software. That audit was completed on March 29, 2024, and the NGCB cleared RGC's systems, finding no evidence of manipulation or irregularity. (Tr. at 88:1–14.)

Mr. Espinoza confronted Fenchurch with the NGCB's findings. Although Fenchurch correctly noted that the NGCB audit postdated the publication of Report 2, his response to the substance of the findings was revealing. He stated:

"I'm not surprised they found nothing. Regulatory capture is part of the problem." (Tr. at 88:16–20.)

This response is notable for two reasons. First, Fenchurch essentially dismissed the findings of the very regulatory body whose authority he invoked in Report 2 — GPR alleged that RGC was "cheating the regulators," but when those regulators investigated and found no cheating, Fenchurch dismissed them as "captured." Second, and more importantly, Fenchurch acknowledged that GPR has published no follow-up, correction, or retraction addressing the NGCB's findings, notwithstanding that the regulatory body specifically cleared the systems GPR had publicly accused RGC of manipulating. (Tr. at 88:22–90:4.)

By the close of trading on February 14, 2024 — the date Report 2 was published — RDGM stock had declined to $78.52 per share, representing a cumulative decline of $13.62 per share, or 14.8%, from the pre-publication close of $92.14 on February 6, 2024. (Tr. at 90:6–12.)

VII. Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game" (Published February 21, 2024)

A. Vermilion Holdings LLC Allegation

Report 3 (29 pages; marked as Exhibit 3) alleged undisclosed related-party dealings between RGC's CEO, Marcus J. Calloway, and a purported shell entity called Vermilion Holdings LLC. The report alleged that Calloway controlled Vermilion Holdings and used it to conduct transactions with RGC that were not properly disclosed in RGC's public filings, in violation of SEC reporting requirements and corporate governance standards. (Tr. at 94:1–95:16.)

Fenchurch testified that GPR identified Vermilion Holdings LLC through a search of state corporate databases. He stated that GPR noted that Vermilion Holdings LLC shared a registered agent with a trust identified in public records as associated with the Calloway family. Fenchurch characterized this shared registered agent as "circumstantial evidence" of a connection between Calloway and Vermilion Holdings. (Tr. at 95:18–97:4.)

Mr. Espinoza then asked the critical question: whether GPR confirmed, prior to publication, that Calloway had any ownership interest in or control over Vermilion Holdings LLC. Fenchurch's answer constitutes one of the most significant admissions of the entire deposition:

"We were still working on that when we decided to go ahead and publish." (Tr. at 97:8–10.)

This admission is devastating to the defendants' position. Fenchurch acknowledged, on the record and under oath, that the verification of the central allegation of Report 3 — namely, that Marcus Calloway was conducting undisclosed related-party transactions through Vermilion Holdings LLC — was incomplete at the time of publication. GPR published a report publicly accusing the CEO of a Nasdaq-listed company of engaging in undisclosed related-party fraud through a shell entity without first confirming that the CEO actually owned or controlled that entity. (Tr. at 97:12–99:2.)

B. Decision to Publish Before Verification Complete

Mr. Espinoza pressed Fenchurch on why GPR published Report 3 without completing verification of the Vermilion Holdings connection. After several evasive responses, Fenchurch offered the following explanation:

"We felt the circumstantial evidence was strong enough and we wanted to get it out before the market moved further." (Tr. at 99:8–12.)

This statement is remarkable in its candor and profoundly damaging to the defendants' position. It directly links the publication timing to the RDGM stock price and, by necessary implication, to GPCP's open short position. "Before the market moved further" is a clear reference to the possibility that RDGM's stock price might stabilize or recover — thereby reducing the profitability of GPCP's 680,000-share short position — before GPR could publish the third installment of its report series. (Tr. at 99:14–100:20.)

Mr. Espinoza pressed the point, asking whether the phrase "before the market moved further" referred specifically to Fenchurch's concern that the stock price might recover before Report 3 was published, thereby reducing the profitability of GPCP's short position. Fenchurch denied this interpretation but offered no alternative explanation for what he meant by "before the market moved further." Defense counsel interposed an objection as to form but did not instruct the witness not to answer. Fenchurch's denial, unsupported by any alternative explanation, is unlikely to be credited by the trier of fact, particularly in light of the Meridian Solutions messages discussed in Section VIII below. (Tr. at 100:22–102:14.)

Fenchurch confirmed that he personally gave the final instruction to Ava Lin to proceed with publication of Report 3 on the morning of February 21, 2024. He made this decision with full knowledge that the Vermilion Holdings verification was incomplete. (Tr. at 102:16–103:8.)

The market impact of Report 3 was immediate and severe. RDGM stock fell to $72.80 at the close on February 21, 2024 — the trough of the decline triggered by GPR's report series. This represented a cumulative decline of $19.34 per share, or 21.0%, from the pre-publication closing price of $92.14. Given that RGC had approximately 73.8 million shares outstanding, the aggregate market-capitalization loss attributable to the three-report series was approximately $1.427 billion ($19.34 × 73.8 million shares). (Tr. at 103:10–104:4.)

C. SEC Inquiry Outcome

Following the publication of the GPR reports, the U.S. Securities and Exchange Commission opened an informal inquiry in March 2024 into the allegations raised in the reports. That inquiry was closed on August 16, 2024 — four days before Fenchurch's deposition — with no enforcement action taken. (Tr. at 105:1–14.)

Fenchurch acknowledged awareness that the SEC inquiry had been closed without action. When asked whether this outcome indicated that the SEC found no basis for GPR's allegations of financial fraud, Fenchurch maintained that the closure of the inquiry "did not validate RGC's position" and stated that the SEC "has limited resources" and makes enforcement decisions based on "many factors." He did not, however, identify any specific factor that might have led the SEC to decline action despite the existence of a meritorious basis for enforcement. (Tr. at 105:16–107:2.)

VIII. Communications with Ava Lin

A. Internal Discussions About Allegations

A significant portion of the afternoon session was devoted to questioning Fenchurch about his internal communications with Ava Lin, GPR's Senior Analyst and co-author of all three reports. The communications at issue were internal Meridian Solutions messages obtained through discovery, which produced approximately 87,000 documents from GPR's systems. The relevant Meridian Solutions messages were marked collectively as Exhibit 5. (Tr. at 110:1–111:8.)

The Meridian Solutions exchanges between Fenchurch and Lin in late January and early February 2024 are among the most important pieces of evidence in this case. Two exchanges in particular are highly probative of actual malice.

First Exchange (approximately January 30, 2024): In a Meridian Solutions message sent to Fenchurch, Lin wrote:

"I'm not sure the revenue numbers add up the way we're presenting them. Their auditor would have caught a $410M gap." (Tr. at 112:3–8.)

Fenchurch responded:

"The auditor is conflicted — they get paid by Redstone. Stick with the thesis." (Tr. at 112:10–12.)

This exchange demonstrates several things. First, GPR's own Senior Analyst — the person who co-authored the reports and was most intimately familiar with the underlying data — expressed doubt about the accuracy of the revenue-fabrication allegation, specifically noting that the independent auditor would have identified a $410 million discrepancy. Second, Fenchurch dismissed this concern not with a substantive response, but with a conclusory assertion that the auditor was "conflicted" — an assertion for which he offered no evidentiary support. Third, Fenchurch instructed Lin to "[s]tick with the thesis," indicating that the conclusion had been predetermined and that contrary evidence or analysis was to be disregarded. (Tr. at 112:14–114:22.)

Second Exchange (approximately February 12, 2024): Two days before the publication of Report 2, Lin sent the following message to Fenchurch:

"We should probably have someone with gaming tech expertise review the RNG section." (Tr. at 115:1–4.)

Fenchurch replied:

"We don't have time. The position is open and we need to keep momentum." (Tr. at 115:6–8.)

This exchange is extraordinarily damaging to the defendants. Lin recognized the need for expert review of the highly technical RNG-manipulation allegation — the precise deficiency identified in Section VI above. Fenchurch rejected the suggestion on two grounds, both of which are damning: (1) time pressure, and (2) the open short position. The phrase "the position is open" is an explicit reference to GPCP's short position in RDGM, and the phrase "we need to keep momentum" indicates that the publication schedule was being driven not by the state of the research but by the desire to sustain downward pressure on the stock price while the short position remained open. (Tr. at 115:10–118:4.)

These exchanges are highly probative of actual malice under New York Times Co. v. Sullivan, 376 U.S. 254 (1964), and its progeny. They demonstrate that Fenchurch was aware of serious doubts about the accuracy of GPR's allegations — doubts raised by his own co-author — and chose to proceed with publication regardless, motivated at least in part by the financial incentives created by GPCP's open short position.

B. Editorial Control

Fenchurch confirmed during the deposition that he exercised final editorial control over all three reports. While Ava Lin could suggest changes, make edits, and express concerns — as the Meridian Solutions messages demonstrate she did — Fenchurch held sole authority to approve or reject any editorial change and sole authority to authorize publication. (Tr. at 119:1–120:10.)

Fenchurch reviewed and approved the final drafts of all three reports before they were posted to grizzlypeakresearch.com and promoted via the @GrizzlyPeakRes social media account. He acknowledged that he read each final draft in its entirety before giving the instruction to publish. This testimony eliminates any potential argument that Fenchurch was unaware of the specific content of the reports or that publication decisions were made without his knowledge or involvement. (Tr. at 120:12–121:18.)

IX. Post-Publication Conduct

The final substantive area of examination addressed GPR's post-publication conduct. Fenchurch confirmed that GPR did not publish any correction, retraction, or update to any of the three reports after their initial publication. This is true despite the occurrence of three significant exonerating developments:

1. The Nevada Gaming Control Board completed an independent RNG audit on March 29, 2024, and cleared RGC's systems of the very manipulation that Report 2 alleged.

2. The U.S. Securities and Exchange Commission closed its informal inquiry on August 16, 2024, without taking any enforcement action against RGC.

3. Pinnacle Audit & Advisory LLP reaffirmed its unqualified audit opinions on RGC's consolidated financial statements.

(Tr. at 124:1–126:4.)

When asked why GPR had not published any correction or update in light of these developments, Fenchurch stated that GPR "stands by its research" and saw no need to issue corrections. He characterized the NGCB clearance, the SEC closure, and Pinnacle's reaffirmation as "not dispositive" of the accuracy of GPR's allegations. He did not explain what additional evidence would, in his view, be dispositive. (Tr. at 126:6–127:14.)

Fenchurch further acknowledged that all three reports remain posted on grizzlypeakresearch.com as of the date of the deposition, August 20, 2024. They are publicly accessible without subscription and continue to be indexed by search engines. No disclaimer, editor's note, or update has been appended to any of the reports to reflect the subsequent exonerating developments. (Tr. at 127:16–128:8.)

This post-publication conduct is relevant both to the actual-malice inquiry and to damages. The refusal to issue corrections despite overwhelming exonerating evidence demonstrates a continuing disregard for the truth and supports an inference that the reports were never intended as good-faith investigative journalism but rather as tools to drive down RDGM's stock price for the financial benefit of GPCP and its principals, including Fenchurch personally.

X. Exhibits Marked During Deposition

The following key exhibits were referenced and/or marked during the Fenchurch deposition:

Additional exhibits were marked during the deposition but are of secondary significance and are not individually catalogued in this summary. A complete exhibit list will be appended to the final certified transcript.

XI. Key Admissions — Summary for Litigation Use

The following is a consolidated summary of the most significant admissions obtained during the Fenchurch deposition, organized for efficient reference in opposing the defendants' anticipated motion for summary judgment and for use at trial:

1. No contact with RGC or its auditor before publication. Fenchurch admitted that GPR did not contact RGC, any of its officers (CEO Marcus J. Calloway, CFO Priya Ramaswaran, General Counsel Derek Olafson, VP of Investor Relations Janelle Hu), or Pinnacle Audit & Advisory LLP (engagement partner Walter Ng, CPA) before publishing any of the three reports. GPR made no effort to seek comment, verify factual allegations, or allow the target company to respond prior to publication.

2. Awareness of clean audit opinions. Fenchurch acknowledged that he knew, before GPR published Report 1, that Pinnacle Audit & Advisory LLP had issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023. Despite this knowledge, he proceeded to publish an allegation of $410 million in fabricated revenue without any evidence that Pinnacle's audits were deficient.

3. No independent expert on RNG systems. GPR had no in-house gaming technology or statistical expertise. Neither Fenchurch nor co-author Ava Lin had any qualifications in RNG systems, software engineering, or gaming regulation. GPR retained no independent expert to review the RNG-manipulation allegation in Report 2 before publication.

4. Incomplete verification of Vermilion Holdings allegation. Fenchurch admitted under oath that GPR published Report 3 before completing verification of the central related-party allegation — specifically, before confirming that CEO Marcus Calloway had any ownership interest in or control over Vermilion Holdings LLC. Fenchurch's instruction to publish was driven in part by concern about "market" timing, as evidenced by his statement that GPR wanted to publish "before the market moved further."

5. Financial motive linked to timing. Fenchurch's statement about wanting to publish Report 3 "before the market moved further," combined with the fact that GPCP held a 680,000-share short position in RDGM with a notional value of approximately $62.66 million, constitutes strong evidence of actual malice. The publication schedule was driven by the profitability of the short position, not by the completion of the research process.

6. Internal doubts expressed by co-author. Meridian Solutions messages (Exhibit 5) show that Ava Lin expressly questioned the accuracy of the revenue-fabrication figures ("I'm not sure the revenue numbers add up the way we're presenting them. Their auditor would have caught a $410M gap.") and recommended expert review of the RNG allegations ("We should probably have someone with gaming tech expertise review the RNG section."). Fenchurch overruled both concerns. With respect to the revenue numbers, he instructed Lin to "[s]tick with the thesis." With respect to the RNG review, he stated: "We don't have time. The position is open and we need to keep momentum."

7. No corrections issued. GPR published no corrections, retractions, or updates to any of the three reports despite three significant exonerating developments: the Nevada Gaming Control Board's clearance of RGC's RNG systems (March 29, 2024); the SEC's closure of its informal inquiry without action (August 16, 2024); and Pinnacle Audit & Advisory LLP's reaffirmation of its clean audit opinions. All three reports remain publicly posted on grizzlypeakresearch.com without amendment.

8. No written research methodology standards. GPR operates without written research methodology guidelines, a standards manual, a compliance function, a fact-checking department, or pre-publication legal review for the accuracy of factual assertions. The sole "review" process consists of Fenchurch and Lin reading each other's drafts.

XII. Assessment and Recommendations

Fenchurch's deposition testimony significantly strengthens RGC's case on the actual-malice element, which represents the highest evidentiary hurdle for a public-company trade-libel and defamation plaintiff. Under New York Times Co. v. Sullivan and its California progeny, a public-figure plaintiff must demonstrate by clear and convincing evidence that the defendant published defamatory statements with knowledge of their falsity or with reckless disregard for whether they were true or false. Fenchurch's testimony — particularly his admissions regarding the incomplete Vermilion Holdings verification, his awareness of clean audit opinions, and his rejection of Ava Lin's internal concerns — goes directly to this standard.

The Meridian Solutions messages (Exhibit 5), combined with Fenchurch's own testimony about publishing Report 3 before verification was complete, provide compelling evidence of reckless disregard for truth or falsity. The exchange in which Fenchurch instructed Lin to "[s]tick with the thesis" despite her doubts about the revenue figures is particularly powerful, as it suggests that the conclusions of the reports were predetermined and that contrary evidence was suppressed. The exchange in which Fenchurch rejected expert review of the RNG allegations because "the position is open" explicitly links editorial decisions to the profitability of the short trade.

We recommend using Fenchurch's admissions prominently in opposing the defendants' anticipated motion for summary judgment. Based on our understanding of the case schedule, the defendants' MSJ is expected to be filed on or around October 22, 2024. The admissions catalogued in Section XI above, combined with the Meridian Solutions messages and brokerage records, should be sufficient to create at minimum a triable issue of material fact on actual malice, and we believe the evidence rises to the level necessary to survive a motion for summary judgment even under the clear-and-convincing standard.

Fenchurch's testimony also supports the damages analysis being prepared by Dr. Elena Vostrikova of Meridian Forensic Economics LLC. Specifically, the testimony establishes the causal link between GPR's publications and the RDGM stock-price decline by demonstrating that: (a) the reports were published in a deliberate sequence designed to sustain downward pressure on the stock; (b) each publication was followed by a measurable price decline; and (c) the publication timing was driven by financial motives tied to the short position. The event-study-adjusted damages of $327.6 million, as calculated by Dr. Vostrikova, are supported by the timeline of report publications and corresponding RDGM price declines ($92.14 → $84.37 → $78.52 → $72.80).

RGC's out-of-pocket costs — totaling $4.627 million in crisis communications expenses, the supplemental forensic audit engagement, and regulatory-response legal fees paid to Hargrove & Sato LLP — are further buttressed by Fenchurch's admissions regarding GPR's deficient methodology. The fact that GPR published without contacting RGC, without consulting the auditor, without retaining any experts, and without completing basic verification necessitated RGC's expenditure of millions of dollars to defend its reputation, respond to regulatory inquiries, and commission a supplemental forensic audit to rebut GPR's allegations. These costs are directly traceable to GPR's reckless conduct.

Next Steps:

The deposition of Ava Lin is scheduled for August 29, 2024. Based on the Fenchurch testimony, we recommend focusing Lin's examination on the following areas:

(a) Her internal doubts about the revenue-fabrication figures, as reflected in the January 30, 2024 Meridian Solutions exchange, and the extent to which she communicated those doubts to Fenchurch beyond the messages already produced;

(b) Her role in drafting the RNG-manipulation allegations in Report 2, her qualifications (or lack thereof) to analyze RNG systems, and her recommendation that an independent expert be retained;

(c) Her knowledge of the incomplete Vermilion Holdings verification at the time Report 3 was published, and whether she expressed any objection to Fenchurch's decision to proceed with publication;

(d) Her awareness of GPCP's short position and the extent to which she understood that publication timing was being influenced by the open position;

(e) Any communications with the confidential sources referenced by Fenchurch, to the extent she can provide information not covered by the asserted journalist privilege.

We further recommend sharing this summary with co-counsel at Hargrove & Sato LLP, 300 South 4th Street, Suite 1800, Las Vegas, Nevada 89101, for coordination on regulatory matters arising from the NGCB inquiry and any ongoing communications with Nevada gaming regulators. Additionally, this summary should be shared with Crestline Equity Partners Group Inc. (Simone Arecchi) for alignment of the crisis-communications strategy with the litigation posture reflected in the deposition testimony.

XIII. Distribution

This memorandum constitutes privileged attorney work product prepared in anticipation of litigation and is protected from disclosure under the attorney work-product doctrine, the attorney-client privilege, and applicable state and federal law. The contents of this memorandum reflect the mental impressions, conclusions, opinions, and legal theories of counsel.

Distribution of this memorandum is strictly limited to the following individuals:

• Calderwood & Harkness LLP Engagement Team: Francesca Morano, Samuel Eklund, Carlos Espinoza, Hannah Brinkley

• Authorized Client Representative: Derek Olafson, General Counsel, Redstone Gaming Corp.

This memorandum may not be forwarded, copied, or distributed to any other individual or entity without the prior written approval of Francesca Morano, lead engagement partner.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT. This memorandum was prepared by Calderwood & Harkness LLP in anticipation of litigation and is not intended for distribution beyond the individuals identified above. Unauthorized disclosure may result in waiver of applicable privileges.

Exhibit No.	Description
Exhibit 1	Report 1, "House of Cards: Redstone Gaming's Manufactured Earnings" (Feb. 7, 2024, 48 pages)
Exhibit 2	Report 2, "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" (Feb. 14, 2024, 36 pages)
Exhibit 3	Report 3, "Double Down on Fraud: Redstone's Related-Party Shell Game" (Feb. 21, 2024, 29 pages)
Exhibit 4	GPCP brokerage records showing establishment and closing of 680,000-share short position in RDGM (various dates, Jan.–Mar. 2024)
Exhibit 5	Internal Meridian Solutions messages between Fenchurch and Ava Lin (various dates, Jan.–Feb. 2024)
Exhibit 6	Pinnacle Audit & Advisory LLP unqualified audit opinion for RGC FY 2023
Exhibit 7	RDGM stock-price chart, January 1 – March 31, 2024
Exhibit 8	GPR standard short-position disclaimers (appended to each of the three reports)

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Francesca Morano, Samuel Eklund, Carlos Espinoza
FROM: Hannah Brinkley
DATE: August 22, 2024
RE: Deposition Summary — Tobias "Toby" Fenchurch, Managing Member, Grizzly Peak Research LLC
MATTER: Redstone Gaming Corp. v. Grizzly Peak Research LLC et al., Case No. 24STCV-01892, Superior Court of California, County of Los Angeles
I. Overview and Logistics
The deposition of Tobias "Toby" Fenchurch was taken on August 20, 2024, at the offices of Caldwell, Tseng & Barrow LLP, 555 California Street, Suite 3100, San Francisco, California 94104. The examination was conducted by Carlos Espinoza of Calderwood & Harkness LLP, 333 South Grand Avenue, Suite 4800, Los Angeles, California 90071, on behalf of plaintiff Redstone Gaming Corp. ("RGC" or "Redstone"). Defense counsel Raymond Caldwell and Natalie Orenstein of Caldwell, Tseng & Barrow LLP appeared on behalf of the witness and the Grizzly Peak defendants.
The deposition lasted approximately six hours and forty-five minutes, exclusive of breaks, across a morning and afternoon session. Fenchurch appeared in three capacities: (1) as Managing Member of Grizzly Peak Research LLC ("GPR"); (2) as sole managing member of Grizzly Peak Capital GP LLC, which serves as the general partner of Grizzly Peak Capital Partners LP ("GPCP"); and (3) in his individual capacity as a named defendant in this action.
This deposition is one of fourteen depositions scheduled during the discovery phase, which runs from June through November 2024. All page and line citations referenced throughout this memorandum are to the certified transcript prepared by the court reporter. The transcript has been ordered on an expedited basis and is expected to arrive in final certified form no later than August 27, 2024. A preliminary rough transcript was used in preparing this summary and has been cross-referenced against contemporaneous notes taken during the examination.
II. Background and Qualifications of Witness
A. Personal Background
Fenchurch's full legal name is Tobias Alan Fenchurch. He testified that he goes by the name "Toby" in both professional and personal contexts. He resides in San Francisco, California, and has lived in the San Francisco Bay Area continuously since approximately 2012. (Tr. at 14:3–15.)
Fenchurch holds a Master of Business Administration with a concentration in finance. He testified that prior to founding GPR, he worked at two investment banks, though he was somewhat vague regarding the specifics of his roles and the duration of his tenure at each institution. He identified the firms as Whitfield Bancroft Securities and Ridgeline Partners, and described his work as focused on equity research and sell-side coverage of the consumer discretionary and technology sectors. (Tr. at 15:8–16:22.)
Fenchurch testified that he founded Grizzly Peak Research LLC approximately six years ago — roughly in 2018 — as a short-seller research firm focused on publishing investigative reports about publicly traded companies that GPR believed were engaged in accounting irregularities, corporate governance failures, or fraud. (Tr. at 17:1–18:4.)
GPR is organized as a Delaware limited liability company. Its principal office is located at 44 Maiden Lane, 7th Floor, San Francisco, California 94108. GPR's registered agent in the State of Delaware is Pacific Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801. (Tr. at 18:10–19:7.)
B. Professional Roles
Fenchurch testified extensively about his professional roles within the Grizzly Peak organizational structure. As Managing Member of Grizzly Peak Research LLC, he oversees all research publications, makes all editorial decisions, and provides final approval for any report before it is published and disseminated to the public. He described his editorial role as "hands on," noting that he personally reads, revises, and signs off on every piece of research that bears the GPR name. (Tr. at 20:3–21:14.)
In addition to his role at GPR, Fenchurch serves as the sole managing member of Grizzly Peak Capital GP LLC, which in turn serves as the general partner of Grizzly Peak Capital Partners LP. GPCP is a Delaware limited partnership that manages external capital and maintains investment positions — including short positions — in the companies that are typically the subjects of GPR's research reports. Fenchurch testified that GPCP's estimated assets under management are approximately $185 million. He acknowledged the structural relationship between the research arm (GPR) and the investment arm (GPCP), but maintained that the two entities operate independently with respect to investment and editorial decisions, a characterization that, as discussed below, is contradicted by his own internal communications. (Tr. at 22:1–24:18.)
GPR itself, as distinct from GPCP, is an operating limited liability company. Fenchurch testified that GPR had approximately $22 million in cash and receivables as of year-end 2024, derived from subscription revenue, consulting arrangements, and other advisory fees. (Tr. at 24:20–25:11.)
GPR distributes its research reports via its website, grizzlypeakresearch.com, and promotes them through the social media account @GrizzlyPeakRes. Fenchurch confirmed that at the time of the publications relevant to this action, the @GrizzlyPeakRes account had approximately 142,000 followers across social media platforms. He acknowledged that this audience size gives GPR's publications meaningful market impact and the capacity to influence trading volume and stock prices. (Tr. at 25:14–26:22.)
III. GPR's Research Methodology
A. General Process Described by Fenchurch
Fenchurch described GPR's general research process in relatively broad terms. He testified that a typical GPR research project involves: (1) identification of a target company, often based on tips, publicly available red flags, or anomalies identified through screening; (2) review of SEC filings, annual and quarterly reports, proxy statements, and other publicly available documents; (3) industry source interviews; and (4) data analysis, including financial modeling and comparison of the target company's reported results to industry benchmarks and peer performance. (Tr. at 28:5–30:12.)
Fenchurch stated that GPR typically spends "several weeks to a few months" researching a target before publication. He characterized this timeline as reflecting "thorough" research, but was vague about the number of personnel involved in any given project and could not cite any specific milestones or quality checkpoints in the research timeline. (Tr. at 30:14–31:8.)
Fenchurch initially claimed that GPR's reports undergo an internal review process prior to publication. However, when Mr. Espinoza pressed him on the specifics of this review process, Fenchurch acknowledged that the "review" consisted solely of himself and his co-author Ava Lin, GPR's Senior Analyst, reading each other's drafts and providing comments. There is no independent fact-checking function within GPR. There is no compliance officer tasked with reviewing the accuracy of factual assertions in GPR's reports. There is no pre-publication legal review for accuracy, although Fenchurch acknowledged that GPR has from time to time consulted outside counsel at Caldwell, Tseng & Barrow LLP on defamation-risk issues. He drew a distinction between consulting counsel on "legal risk" and having counsel review the accuracy of the underlying factual allegations — a distinction that underscores the absence of any rigorous verification process. (Tr. at 31:10–34:22.)
Fenchurch further acknowledged, when specifically asked, that GPR has no written research methodology guidelines or standards manual. He stated that GPR's methodology is "understood" among team members and is based on "industry best practices," but he could not identify any specific industry body or set of published standards to which GPR adheres. (Tr. at 35:1–18.)
Significantly, Fenchurch conceded that GPR does not routinely contact the target company before publishing allegations against it. He characterized this as a deliberate editorial choice, asserting that contacting the target would risk "tipping off" management and potentially allowing the company to "get ahead of the story." This admission is relevant to the question of actual malice, as it demonstrates a pattern and practice of foregoing basic verification steps that any reasonable investigator would take prior to publishing serious allegations of fraud. (Tr. at 35:20–37:4.)
B. Research Process Specific to Redstone Gaming Corp.
Turning to the research process specific to Redstone Gaming Corp. (Nasdaq: RDGM), Fenchurch testified that GPR's investigation of RGC began in approximately late November 2023. He could not recall the precise date on which the investigation commenced, but placed the starting point at "Thanksgiving week or the week after." (Tr. at 38:2–14.)
Fenchurch stated that the research was initiated after GPR received a "tip" from an unnamed individual whom he described as a "former RGC employee." When Mr. Espinoza asked Fenchurch to identify the tipster by name, position, and dates of employment at RGC, defense counsel Raymond Caldwell interposed an objection and instructed the witness not to answer, asserting journalist privilege under California's Shield Law (Cal. Evid. Code § 1070) and the First Amendment. Fenchurch declined to identify the tipster. The objection was noted for the record, and this issue may require a motion to compel. (Tr. at 38:16–40:22.)
Fenchurch acknowledged that GPR did not send any written questions or request for comment to RGC, its Chief Executive Officer Marcus J. Calloway, its Chief Financial Officer Priya Ramaswaran, its General Counsel Derek Olafson, or its Vice President of Investor Relations Janelle Hu, prior to publishing any of the three reports at issue in this litigation. When asked why GPR did not extend this basic courtesy, Fenchurch reiterated his general position that contacting the target company risks compromising the investigative process. (Tr. at 41:1–42:18.)
Fenchurch also admitted that GPR did not contact Pinnacle Audit & Advisory LLP, RGC's independent auditor (engagement partner Walter Ng, CPA), to verify or challenge the audited financial statements before publication of any of the three reports. This is particularly significant given that Report 1 directly challenged the integrity of the financial statements upon which Pinnacle had issued an unqualified audit opinion. Fenchurch did not offer any substantive justification for failing to contact the auditor, other than reiterating his general reluctance to alert parties who might "circle the wagons." (Tr. at 42:20–44:11.)
IV. The Short Position and Financial Motive
A. Timing of the Short Position
A substantial portion of the deposition was devoted to exploring the timing and magnitude of GPCP's short position in RDGM shares and its relationship to the publication of the three GPR reports. This testimony is central to establishing the financial motive element of RGC's claims.
Fenchurch confirmed that Grizzly Peak Capital Partners LP established a short position in RDGM shares in advance of the publication of Report 1. The short position consisted of approximately 680,000 shares. At the pre-publication closing price of $92.14 per share (the closing price on February 6, 2024, the last trading day before Report 1 was published on February 7, 2024), the notional value of the short position was approximately $62.66 million. (Tr. at 48:3–49:20.)
Fenchurch initially testified that the short position was established in "late January 2024." When Mr. Espinoza confronted him with the brokerage records produced in discovery (marked as Exhibit 4), Fenchurch narrowed the timing to approximately January 25–29, 2024. This means that the short position was established approximately nine to thirteen days before the publication of Report 1 on February 7, 2024. The proximity between the establishment of the short position and the publication of the first report is notable and supports the inference that the publications were timed to maximize the profitability of the trade. (Tr. at 49:22–52:14.)
Fenchurch acknowledged that he personally made the decision to establish the short position and that the trade was executed through GPCP's prime brokerage account. He did not identify any other individual who participated in the investment decision, though he stated that "the team was aware" of the position. (Tr. at 52:16–53:8.)
B. Profit on the Short
Mr. Espinoza questioned Fenchurch about the closing of the short position. Fenchurch stated that the position was "substantially" closed by mid-March 2024, though he could not — or would not — identify the precise dates on which covering transactions were executed. He was directed to the brokerage records for specifics but provided only general estimates during his live testimony. (Tr. at 54:1–55:12.)
The trading data and RDGM stock-price chart (Exhibit 7) establish the following price trajectory:
• February 6, 2024 (pre-Report 1): RDGM closed at $92.14
• February 7, 2024 (Report 1 published): RDGM closed at $84.37 (decline of $7.77/share, or 8.4%)
• February 14, 2024 (Report 2 published): RDGM closed at $78.52 (cumulative decline of $13.62/share, or 14.8%)
• February 21, 2024 (Report 3 published): RDGM closed at $72.80 (cumulative decline of $19.34/share, or 21.0%)
The trough of $72.80 per share was reached at the close on February 21, 2024, following the publication of Report 3. Based on an estimated average closing price of approximately $72.80 per share, the estimated gross profit on GPCP's short position was approximately:
($92.14 − $72.80) × 680,000 shares = approximately $13.15 million
Fenchurch was evasive about the precise profit figure throughout this line of questioning. He repeatedly stated that the exact number would depend on the specific execution prices of the covering transactions and other factors. However, he did not dispute the approximate calculation when Mr. Espinoza walked him through it using the brokerage records produced in discovery. His non-denial is significant and can be used effectively at trial. (Tr. at 55:14–58:22.)
C. Disclosure of Short Position
Fenchurch confirmed that GPR included standard disclaimers in each of the three reports disclosing that GPR's principals and affiliated entities maintained short positions in RDGM securities at the time of publication. The disclaimers were marked collectively as Exhibit 8. (Tr. at 59:1–16.)
However, Fenchurch acknowledged, when shown copies of the reports, that the disclaimers were placed at the end of each report, in a smaller font size than the body text. He characterized this placement as "industry standard" for short-seller research, but conceded that a reader who did not scroll to the final page of the report might not encounter the disclosure. (Tr. at 59:18–61:4.)
Fenchurch denied that the financial motive created by GPCP's short position influenced the content or timing of the reports. He maintained that GPR publishes its research "in the public interest" and that the short position was merely a reflection of GPR's conviction in the accuracy of its research conclusions. As discussed below, this characterization is directly contradicted by Fenchurch's own internal Meridian Solutions messages. (Tr. at 61:6–62:14.)
V. Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings" (Published February 7, 2024)
A. Revenue-Fabrication Allegation
Report 1, which runs to 48 pages (marked as Exhibit 1), alleged that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. This is a grave allegation — it amounts to an accusation that Redstone engaged in deliberate securities fraud by manufacturing nearly half a billion dollars in fictitious revenue. (Tr. at 65:1–66:10.)
For context, RGC's audited FY 2023 revenue was $3.42 billion, with EBITDA of $812 million, representing an EBITDA margin of approximately 23.7%. These financial statements were audited by Pinnacle Audit & Advisory LLP, which issued an unqualified (i.e., "clean") audit opinion for FY 2023, as it had for FY 2021 and FY 2022. (Tr. at 66:12–67:8.)
Mr. Espinoza asked Fenchurch to identify the factual basis for the $410 million revenue-fabrication figure. Fenchurch stated that the figure was derived from GPR's own analysis of segment-level revenue disclosures in RGC's SEC filings, as compared to estimated market-share data obtained from third-party industry research providers. He identified the third-party sources as industry reports from Clarion Research Group and Apex Gaming Analytics, but when pressed, he admitted that GPR did not independently verify the accuracy or methodology of these third-party estimates. In other words, GPR used unverified third-party estimates as the baseline against which it measured RGC's reported revenue, and then presented the resulting discrepancy as evidence of fraud — without any direct evidence of fabricated transactions. (Tr. at 67:10–70:18.)
Perhaps most significantly, Fenchurch conceded that GPR did not obtain or review any of RGC's intercompany transaction ledgers, consolidation schedules, or internal accounting records. GPR likewise did not obtain or review any work papers from Pinnacle Audit & Advisory LLP related to the audit of intercompany transactions. Fenchurch acknowledged that these documents would be the most direct and probative evidence of whether intercompany revenue was legitimate or fabricated, but stated that GPR did not have access to them and did not attempt to obtain them through any channel. (Tr. at 70:20–72:14.)
B. Awareness of Clean Audit Opinions
One of the most important admissions obtained during the deposition relates to Fenchurch's awareness of Pinnacle's audit opinions prior to publication. When asked directly, Fenchurch acknowledged that he was aware, before GPR published Report 1 on February 7, 2024, that Pinnacle Audit & Advisory LLP had issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for each of fiscal years 2021, 2022, and 2023. (Tr. at 73:1–14.)
Mr. Espinoza then asked whether the existence of three consecutive clean audit opinions from a major independent auditor gave Fenchurch any pause regarding the revenue-fabrication allegation. Fenchurch responded:
"Auditors miss things all the time. We had reason to believe the numbers were inflated." (Tr. at 73:16–18.)
When pressed to identify any specific audit failure by Pinnacle — any red flag in Pinnacle's work, any evidence of inadequate audit procedures, any indication that the audit was compromised — Fenchurch could not do so. He could not identify any specific deficiency in Pinnacle's audit methodology, any limitation on the scope of the engagement, or any reason to believe that Pinnacle's audit team had been deceived or had failed to perform competently. (Tr. at 73:20–75:8.)
Fenchurch further admitted that he did not contact Walter Ng, the engagement partner at Pinnacle, or any other person at Pinnacle Audit & Advisory LLP, to discuss the audit methodology or to raise any of GPR's concerns before publishing the revenue-fabrication allegation. He offered no substantive justification for this failure beyond his general reluctance to "tip off" interested parties. (Tr. at 75:10–76:4.)
This testimony is directly relevant to the actual-malice standard. A publisher who knows that a major independent auditor has thrice confirmed the accuracy of the very financial statements the publisher is calling fraudulent, and who cannot identify any reason to doubt the auditor's work, yet proceeds to publish without even contacting the auditor, has at a minimum acted with reckless disregard for the truth or falsity of the published statements.
VI. Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" (Published February 14, 2024)
A. RNG-Manipulation Allegation
Report 2 (36 pages; marked as Exhibit 2) alleged that RGC manipulated its random-number-generator ("RNG") software to inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB"). This is an allegation of regulatory fraud — a claim that RGC was systematically deceiving the primary regulatory body overseeing its gaming operations. (Tr. at 80:1–81:12.)
Fenchurch testified that the RNG-manipulation allegation was based on two categories of evidence: (1) statistical analysis of publicly available payout data reported by Nevada casinos operating RGC's slot machines; and (2) information provided by a "confidential source." (Tr. at 81:14–82:10.)
With respect to the statistical analysis, Fenchurch described a methodology in which GPR compared reported payout percentages to what GPR believed to be expected ranges based on historical data. He acknowledged, however, that the analysis was performed internally by himself and Ava Lin, neither of whom holds any degree or certification in statistics, actuarial science, or gaming technology. (Tr. at 82:12–83:20.)
With respect to the confidential source, Mr. Espinoza asked Fenchurch to identify the individual and describe the basis for GPR's confidence in the source's reliability. Defense counsel again asserted journalist privilege, and Fenchurch declined to identify the source. However, in a significant concession, Fenchurch acknowledged that the confidential source relied upon for Report 2 was not a current or former employee of RGC's technology division — the division responsible for the development and maintenance of the RNG software at issue. (Tr. at 84:1–85:18.) When asked what the source's connection to RGC was, Fenchurch stated only that the source had "familiarity with the gaming industry" — a characterization so vague as to be effectively meaningless.
Fenchurch further admitted that neither he nor Ava Lin had any technical expertise in RNG systems, gaming software engineering, or the regulatory testing protocols employed by the NGCB or its approved testing laboratories. He conceded that GPR did not retain any independent expert in gaming technology, software engineering, or statistical analysis to review the RNG-manipulation allegation before publication. (Tr. at 86:1–87:14.) This means that the most technically complex and consequential allegation in the three-report series was published without any expert review whatsoever, by authors who lacked the qualifications to evaluate its accuracy.
B. Nevada Gaming Control Board Clearance
Following the publication of GPR's reports, the Nevada Gaming Control Board conducted an independent RNG audit of RGC's slot machine software. That audit was completed on March 29, 2024, and the NGCB cleared RGC's systems, finding no evidence of manipulation or irregularity. (Tr. at 88:1–14.)
Mr. Espinoza confronted Fenchurch with the NGCB's findings. Although Fenchurch correctly noted that the NGCB audit postdated the publication of Report 2, his response to the substance of the findings was revealing. He stated:
"I'm not surprised they found nothing. Regulatory capture is part of the problem." (Tr. at 88:16–20.)
This response is notable for two reasons. First, Fenchurch essentially dismissed the findings of the very regulatory body whose authority he invoked in Report 2 — GPR alleged that RGC was "cheating the regulators," but when those regulators investigated and found no cheating, Fenchurch dismissed them as "captured." Second, and more importantly, Fenchurch acknowledged that GPR has published no follow-up, correction, or retraction addressing the NGCB's findings, notwithstanding that the regulatory body specifically cleared the systems GPR had publicly accused RGC of manipulating. (Tr. at 88:22–90:4.)
By the close of trading on February 14, 2024 — the date Report 2 was published — RDGM stock had declined to $78.52 per share, representing a cumulative decline of $13.62 per share, or 14.8%, from the pre-publication close of $92.14 on February 6, 2024. (Tr. at 90:6–12.)
VII. Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game" (Published February 21, 2024)
A. Vermilion Holdings LLC Allegation
Report 3 (29 pages; marked as Exhibit 3) alleged undisclosed related-party dealings between RGC's CEO, Marcus J. Calloway, and a purported shell entity called Vermilion Holdings LLC. The report alleged that Calloway controlled Vermilion Holdings and used it to conduct transactions with RGC that were not properly disclosed in RGC's public filings, in violation of SEC reporting requirements and corporate governance standards. (Tr. at 94:1–95:16.)
Fenchurch testified that GPR identified Vermilion Holdings LLC through a search of state corporate databases. He stated that GPR noted that Vermilion Holdings LLC shared a registered agent with a trust identified in public records as associated with the Calloway family. Fenchurch characterized this shared registered agent as "circumstantial evidence" of a connection between Calloway and Vermilion Holdings. (Tr. at 95:18–97:4.)
Mr. Espinoza then asked the critical question: whether GPR confirmed, prior to publication, that Calloway had any ownership interest in or control over Vermilion Holdings LLC. Fenchurch's answer constitutes one of the most significant admissions of the entire deposition:
"We were still working on that when we decided to go ahead and publish." (Tr. at 97:8–10.)
This admission is devastating to the defendants' position. Fenchurch acknowledged, on the record and under oath, that the verification of the central allegation of Report 3 — namely, that Marcus Calloway was conducting undisclosed related-party transactions through Vermilion Holdings LLC — was incomplete at the time of publication. GPR published a report publicly accusing the CEO of a Nasdaq-listed company of engaging in undisclosed related-party fraud through a shell entity without first confirming that the CEO actually owned or controlled that entity. (Tr. at 97:12–99:2.)
B. Decision to Publish Before Verification Complete
Mr. Espinoza pressed Fenchurch on why GPR published Report 3 without completing verification of the Vermilion Holdings connection. After several evasive responses, Fenchurch offered the following explanation:
"We felt the circumstantial evidence was strong enough and we wanted to get it out before the market moved further." (Tr. at 99:8–12.)
This statement is remarkable in its candor and profoundly damaging to the defendants' position. It directly links the publication timing to the RDGM stock price and, by necessary implication, to GPCP's open short position. "Before the market moved further" is a clear reference to the possibility that RDGM's stock price might stabilize or recover — thereby reducing the profitability of GPCP's 680,000-share short position — before GPR could publish the third installment of its report series. (Tr. at 99:14–100:20.)
Mr. Espinoza pressed the point, asking whether the phrase "before the market moved further" referred specifically to Fenchurch's concern that the stock price might recover before Report 3 was published, thereby reducing the profitability of GPCP's short position. Fenchurch denied this interpretation but offered no alternative explanation for what he meant by "before the market moved further." Defense counsel interposed an objection as to form but did not instruct the witness not to answer. Fenchurch's denial, unsupported by any alternative explanation, is unlikely to be credited by the trier of fact, particularly in light of the Meridian Solutions messages discussed in Section VIII below. (Tr. at 100:22–102:14.)
Fenchurch confirmed that he personally gave the final instruction to Ava Lin to proceed with publication of Report 3 on the morning of February 21, 2024. He made this decision with full knowledge that the Vermilion Holdings verification was incomplete. (Tr. at 102:16–103:8.)
The market impact of Report 3 was immediate and severe. RDGM stock fell to $72.80 at the close on February 21, 2024 — the trough of the decline triggered by GPR's report series. This represented a cumulative decline of $19.34 per share, or 21.0%, from the pre-publication closing price of $92.14. Given that RGC had approximately 73.8 million shares outstanding, the aggregate market-capitalization loss attributable to the three-report series was approximately $1.427 billion ($19.34 × 73.8 million shares). (Tr. at 103:10–104:4.)
C. SEC Inquiry Outcome
Following the publication of the GPR reports, the U.S. Securities and Exchange Commission opened an informal inquiry in March 2024 into the allegations raised in the reports. That inquiry was closed on August 16, 2024 — four days before Fenchurch's deposition — with no enforcement action taken. (Tr. at 105:1–14.)
Fenchurch acknowledged awareness that the SEC inquiry had been closed without action. When asked whether this outcome indicated that the SEC found no basis for GPR's allegations of financial fraud, Fenchurch maintained that the closure of the inquiry "did not validate RGC's position" and stated that the SEC "has limited resources" and makes enforcement decisions based on "many factors." He did not, however, identify any specific factor that might have led the SEC to decline action despite the existence of a meritorious basis for enforcement. (Tr. at 105:16–107:2.)
VIII. Communications with Ava Lin
A. Internal Discussions About Allegations
A significant portion of the afternoon session was devoted to questioning Fenchurch about his internal communications with Ava Lin, GPR's Senior Analyst and co-author of all three reports. The communications at issue were internal Meridian Solutions messages obtained through discovery, which produced approximately 87,000 documents from GPR's systems. The relevant Meridian Solutions messages were marked collectively as Exhibit 5. (Tr. at 110:1–111:8.)
The Meridian Solutions exchanges between Fenchurch and Lin in late January and early February 2024 are among the most important pieces of evidence in this case. Two exchanges in particular are highly probative of actual malice.
First Exchange (approximately January 30, 2024): In a Meridian Solutions message sent to Fenchurch, Lin wrote:
"I'm not sure the revenue numbers add up the way we're presenting them. Their auditor would have caught a $410M gap." (Tr. at 112:3–8.)
Fenchurch responded:
"The auditor is conflicted — they get paid by Redstone. Stick with the thesis." (Tr. at 112:10–12.)
This exchange demonstrates several things. First, GPR's own Senior Analyst — the person who co-authored the reports and was most intimately familiar with the underlying data — expressed doubt about the accuracy of the revenue-fabrication allegation, specifically noting that the independent auditor would have identified a $410 million discrepancy. Second, Fenchurch dismissed this concern not with a substantive response, but with a conclusory assertion that the auditor was "conflicted" — an assertion for which he offered no evidentiary support. Third, Fenchurch instructed Lin to "[s]tick with the thesis," indicating that the conclusion had been predetermined and that contrary evidence or analysis was to be disregarded. (Tr. at 112:14–114:22.)
Second Exchange (approximately February 12, 2024): Two days before the publication of Report 2, Lin sent the following message to Fenchurch:
"We should probably have someone with gaming tech expertise review the RNG section." (Tr. at 115:1–4.)
Fenchurch replied:
"We don't have time. The position is open and we need to keep momentum." (Tr. at 115:6–8.)
This exchange is extraordinarily damaging to the defendants. Lin recognized the need for expert review of the highly technical RNG-manipulation allegation — the precise deficiency identified in Section VI above. Fenchurch rejected the suggestion on two grounds, both of which are damning: (1) time pressure, and (2) the open short position. The phrase "the position is open" is an explicit reference to GPCP's short position in RDGM, and the phrase "we need to keep momentum" indicates that the publication schedule was being driven not by the state of the research but by the desire to sustain downward pressure on the stock price while the short position remained open. (Tr. at 115:10–118:4.)
These exchanges are highly probative of actual malice under New York Times Co. v. Sullivan, 376 U.S. 254 (1964), and its progeny. They demonstrate that Fenchurch was aware of serious doubts about the accuracy of GPR's allegations — doubts raised by his own co-author — and chose to proceed with publication regardless, motivated at least in part by the financial incentives created by GPCP's open short position.
B. Editorial Control
Fenchurch confirmed during the deposition that he exercised final editorial control over all three reports. While Ava Lin could suggest changes, make edits, and express concerns — as the Meridian Solutions messages demonstrate she did — Fenchurch held sole authority to approve or reject any editorial change and sole authority to authorize publication. (Tr. at 119:1–120:10.)
Fenchurch reviewed and approved the final drafts of all three reports before they were posted to grizzlypeakresearch.com and promoted via the @GrizzlyPeakRes social media account. He acknowledged that he read each final draft in its entirety before giving the instruction to publish. This testimony eliminates any potential argument that Fenchurch was unaware of the specific content of the reports or that publication decisions were made without his knowledge or involvement. (Tr. at 120:12–121:18.)
IX. Post-Publication Conduct
The final substantive area of examination addressed GPR's post-publication conduct. Fenchurch confirmed that GPR did not publish any correction, retraction, or update to any of the three reports after their initial publication. This is true despite the occurrence of three significant exonerating developments:
1. The Nevada Gaming Control Board completed an independent RNG audit on March 29, 2024, and cleared RGC's systems of the very manipulation that Report 2 alleged.
2. The U.S. Securities and Exchange Commission closed its informal inquiry on August 16, 2024, without taking any enforcement action against RGC.
3. Pinnacle Audit & Advisory LLP reaffirmed its unqualified audit opinions on RGC's consolidated financial statements.
(Tr. at 124:1–126:4.)
When asked why GPR had not published any correction or update in light of these developments, Fenchurch stated that GPR "stands by its research" and saw no need to issue corrections. He characterized the NGCB clearance, the SEC closure, and Pinnacle's reaffirmation as "not dispositive" of the accuracy of GPR's allegations. He did not explain what additional evidence would, in his view, be dispositive. (Tr. at 126:6–127:14.)
Fenchurch further acknowledged that all three reports remain posted on grizzlypeakresearch.com as of the date of the deposition, August 20, 2024. They are publicly accessible without subscription and continue to be indexed by search engines. No disclaimer, editor's note, or update has been appended to any of the reports to reflect the subsequent exonerating developments. (Tr. at 127:16–128:8.)
This post-publication conduct is relevant both to the actual-malice inquiry and to damages. The refusal to issue corrections despite overwhelming exonerating evidence demonstrates a continuing disregard for the truth and supports an inference that the reports were never intended as good-faith investigative journalism but rather as tools to drive down RDGM's stock price for the financial benefit of GPCP and its principals, including Fenchurch personally.
X. Exhibits Marked During Deposition
The following key exhibits were referenced and/or marked during the Fenchurch deposition:
Additional exhibits were marked during the deposition but are of secondary significance and are not individually catalogued in this summary. A complete exhibit list will be appended to the final certified transcript.
XI. Key Admissions — Summary for Litigation Use
The following is a consolidated summary of the most significant admissions obtained during the Fenchurch deposition, organized for efficient reference in opposing the defendants' anticipated motion for summary judgment and for use at trial:
1. No contact with RGC or its auditor before publication. Fenchurch admitted that GPR did not contact RGC, any of its officers (CEO Marcus J. Calloway, CFO Priya Ramaswaran, General Counsel Derek Olafson, VP of Investor Relations Janelle Hu), or Pinnacle Audit & Advisory LLP (engagement partner Walter Ng, CPA) before publishing any of the three reports. GPR made no effort to seek comment, verify factual allegations, or allow the target company to respond prior to publication.
2. Awareness of clean audit opinions. Fenchurch acknowledged that he knew, before GPR published Report 1, that Pinnacle Audit & Advisory LLP had issued unqualified ("clean") audit opinions on RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023. Despite this knowledge, he proceeded to publish an allegation of $410 million in fabricated revenue without any evidence that Pinnacle's audits were deficient.
3. No independent expert on RNG systems. GPR had no in-house gaming technology or statistical expertise. Neither Fenchurch nor co-author Ava Lin had any qualifications in RNG systems, software engineering, or gaming regulation. GPR retained no independent expert to review the RNG-manipulation allegation in Report 2 before publication.
4. Incomplete verification of Vermilion Holdings allegation. Fenchurch admitted under oath that GPR published Report 3 before completing verification of the central related-party allegation — specifically, before confirming that CEO Marcus Calloway had any ownership interest in or control over Vermilion Holdings LLC. Fenchurch's instruction to publish was driven in part by concern about "market" timing, as evidenced by his statement that GPR wanted to publish "before the market moved further."
5. Financial motive linked to timing. Fenchurch's statement about wanting to publish Report 3 "before the market moved further," combined with the fact that GPCP held a 680,000-share short position in RDGM with a notional value of approximately $62.66 million, constitutes strong evidence of actual malice. The publication schedule was driven by the profitability of the short position, not by the completion of the research process.
6. Internal doubts expressed by co-author. Meridian Solutions messages (Exhibit 5) show that Ava Lin expressly questioned the accuracy of the revenue-fabrication figures ("I'm not sure the revenue numbers add up the way we're presenting them. Their auditor would have caught a $410M gap.") and recommended expert review of the RNG allegations ("We should probably have someone with gaming tech expertise review the RNG section."). Fenchurch overruled both concerns. With respect to the revenue numbers, he instructed Lin to "[s]tick with the thesis." With respect to the RNG review, he stated: "We don't have time. The position is open and we need to keep momentum."
7. No corrections issued. GPR published no corrections, retractions, or updates to any of the three reports despite three significant exonerating developments: the Nevada Gaming Control Board's clearance of RGC's RNG systems (March 29, 2024); the SEC's closure of its informal inquiry without action (August 16, 2024); and Pinnacle Audit & Advisory LLP's reaffirmation of its clean audit opinions. All three reports remain publicly posted on grizzlypeakresearch.com without amendment.
8. No written research methodology standards. GPR operates without written research methodology guidelines, a standards manual, a compliance function, a fact-checking department, or pre-publication legal review for the accuracy of factual assertions. The sole "review" process consists of Fenchurch and Lin reading each other's drafts.
XII. Assessment and Recommendations
Fenchurch's deposition testimony significantly strengthens RGC's case on the actual-malice element, which represents the highest evidentiary hurdle for a public-company trade-libel and defamation plaintiff. Under New York Times Co. v. Sullivan and its California progeny, a public-figure plaintiff must demonstrate by clear and convincing evidence that the defendant published defamatory statements with knowledge of their falsity or with reckless disregard for whether they were true or false. Fenchurch's testimony — particularly his admissions regarding the incomplete Vermilion Holdings verification, his awareness of clean audit opinions, and his rejection of Ava Lin's internal concerns — goes directly to this standard.
The Meridian Solutions messages (Exhibit 5), combined with Fenchurch's own testimony about publishing Report 3 before verification was complete, provide compelling evidence of reckless disregard for truth or falsity. The exchange in which Fenchurch instructed Lin to "[s]tick with the thesis" despite her doubts about the revenue figures is particularly powerful, as it suggests that the conclusions of the reports were predetermined and that contrary evidence was suppressed. The exchange in which Fenchurch rejected expert review of the RNG allegations because "the position is open" explicitly links editorial decisions to the profitability of the short trade.
We recommend using Fenchurch's admissions prominently in opposing the defendants' anticipated motion for summary judgment. Based on our understanding of the case schedule, the defendants' MSJ is expected to be filed on or around October 22, 2024. The admissions catalogued in Section XI above, combined with the Meridian Solutions messages and brokerage records, should be sufficient to create at minimum a triable issue of material fact on actual malice, and we believe the evidence rises to the level necessary to survive a motion for summary judgment even under the clear-and-convincing standard.
Fenchurch's testimony also supports the damages analysis being prepared by Dr. Elena Vostrikova of Meridian Forensic Economics LLC. Specifically, the testimony establishes the causal link between GPR's publications and the RDGM stock-price decline by demonstrating that: (a) the reports were published in a deliberate sequence designed to sustain downward pressure on the stock; (b) each publication was followed by a measurable price decline; and (c) the publication timing was driven by financial motives tied to the short position. The event-study-adjusted damages of $327.6 million, as calculated by Dr. Vostrikova, are supported by the timeline of report publications and corresponding RDGM price declines ($92.14 → $84.37 → $78.52 → $72.80).
RGC's out-of-pocket costs — totaling $4.627 million in crisis communications expenses, the supplemental forensic audit engagement, and regulatory-response legal fees paid to Hargrove & Sato LLP — are further buttressed by Fenchurch's admissions regarding GPR's deficient methodology. The fact that GPR published without contacting RGC, without consulting the auditor, without retaining any experts, and without completing basic verification necessitated RGC's expenditure of millions of dollars to defend its reputation, respond to regulatory inquiries, and commission a supplemental forensic audit to rebut GPR's allegations. These costs are directly traceable to GPR's reckless conduct.
Next Steps:
The deposition of Ava Lin is scheduled for August 29, 2024. Based on the Fenchurch testimony, we recommend focusing Lin's examination on the following areas:
(a) Her internal doubts about the revenue-fabrication figures, as reflected in the January 30, 2024 Meridian Solutions exchange, and the extent to which she communicated those doubts to Fenchurch beyond the messages already produced;
(b) Her role in drafting the RNG-manipulation allegations in Report 2, her qualifications (or lack thereof) to analyze RNG systems, and her recommendation that an independent expert be retained;
(c) Her knowledge of the incomplete Vermilion Holdings verification at the time Report 3 was published, and whether she expressed any objection to Fenchurch's decision to proceed with publication;
(d) Her awareness of GPCP's short position and the extent to which she understood that publication timing was being influenced by the open position;
(e) Any communications with the confidential sources referenced by Fenchurch, to the extent she can provide information not covered by the asserted journalist privilege.
We further recommend sharing this summary with co-counsel at Hargrove & Sato LLP, 300 South 4th Street, Suite 1800, Las Vegas, Nevada 89101, for coordination on regulatory matters arising from the NGCB inquiry and any ongoing communications with Nevada gaming regulators. Additionally, this summary should be shared with Crestline Equity Partners Group Inc. (Simone Arecchi) for alignment of the crisis-communications strategy with the litigation posture reflected in the deposition testimony.
XIII. Distribution
This memorandum constitutes privileged attorney work product prepared in anticipation of litigation and is protected from disclosure under the attorney work-product doctrine, the attorney-client privilege, and applicable state and federal law. The contents of this memorandum reflect the mental impressions, conclusions, opinions, and legal theories of counsel.
Distribution of this memorandum is strictly limited to the following individuals:
• Calderwood & Harkness LLP Engagement Team: Francesca Morano, Samuel Eklund, Carlos Espinoza, Hannah Brinkley
• Authorized Client Representative: Derek Olafson, General Counsel, Redstone Gaming Corp.
This memorandum may not be forwarded, copied, or distributed to any other individual or entity without the prior written approval of Francesca Morano, lead engagement partner.
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT. This memorandum was prepared by Calderwood & Harkness LLP in anticipation of litigation and is not intended for distribution beyond the individuals identified above. Unauthorized disclosure may result in waiver of applicable privileges.
Exhibit No. | Description
Exhibit 1 | Report 1, "House of Cards: Redstone Gaming's Manufactured Earnings" (Feb. 7, 2024, 48 pages)
Exhibit 2 | Report 2, "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" (Feb. 14, 2024, 36 pages)
Exhibit 3 | Report 3, "Double Down on Fraud: Redstone's Related-Party Shell Game" (Feb. 21, 2024, 29 pages)
Exhibit 4 | GPCP brokerage records showing establishment and closing of 680,000-share short position in RDGM (various dates, Jan.–Mar. 2024)
Exhibit 5 | Internal Meridian Solutions messages between Fenchurch and Ava Lin (various dates, Jan.–Feb. 2024)
Exhibit 6 | Pinnacle Audit & Advisory LLP unqualified audit opinion for RGC FY 2023
Exhibit 7 | RDGM stock-price chart, January 1 – March 31, 2024
Exhibit 8 | GPR standard short-position disclaimers (appended to each of the three reports)

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

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