anti-slapp-strategy-memo.docx

1033-00006 · Redstone Gaming Corp · Pleadings & Motions

anti-slapp-strategy-memo.docx DOCUMENT Litigation

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MEMORANDUM

To: Francesca Morano, Partner

From: Carlos Espinoza, Associate

Date: April 15, 2024

Re: Strategy for Opposing Defendants' Anti-SLAPP Special Motion to Strike — Redstone Gaming Corp. v. Grizzly Peak Research LLC et al., Case No. 24STCV-01892, Superior Court of California, County of Los Angeles

Client: Redstone Gaming Corp.

I. Executive Summary

On April 12, 2024, Defendants Grizzly Peak Research LLC ("GPR"), Grizzly Peak Capital Partners LP ("GPCP"), and Tobias Fenchurch ("Fenchurch") (collectively, "Defendants") filed a Special Motion to Strike pursuant to California Code of Civil Procedure Section 425.16 — the anti-SLAPP statute — seeking dismissal of all four causes of action asserted in Redstone Gaming Corporation's ("RGC" or "the Company") First Amended Complaint ("FAC"), which was filed on March 18, 2024. The Defendants contend that the claims arise from protected speech on a matter of public interest, namely the publication of three short-seller research reports concerning RGC, a Nasdaq-listed gaming company traded under the ticker symbol RDGM.

This memorandum provides a comprehensive analysis of the Defendants' arguments, identifies key weaknesses in their motion, and proposes the legal strategy and evidentiary framework for our opposition brief. The memorandum also sets forth a timeline and action items to ensure we meet our filing obligations.

Our opposition is due on May 10, 2024. The motion is currently assigned to the Honorable Patricia Yamamoto, Department 14, of the Superior Court of California, County of Los Angeles. Based on Judge Yamamoto's typical scheduling practices, we anticipate a hearing date in late May or early June 2024.

Bottom Line: The Defendants' anti-SLAPP motion is vulnerable on both prongs of the statutory analysis. On Prong One, the Defendants' public-interest argument is substantially undermined by the commercial-speech nature of GPR's reports — these were not disinterested acts of investigative journalism, but commercially motivated publications designed to depress the price of RDGM stock and thereby generate trading profits for GPR and its affiliated hedge fund. On Prong Two, our probability-of-prevailing showing is strong. The evidence of actual malice is compelling and includes: (i) GPR's substantial pre-existing short position of 680,000 shares, representing a notional value of approximately $62.66 million at the pre-publication closing price of $92.14 per share; (ii) internal Brightmoor Data Systems among GPR personnel demonstrating that key analysts harbored doubts about the factual basis for the reports' allegations and that Fenchurch directed publication before verification was complete; and (iii) the subsequent independent clearances by both Pinnacle Audit & Advisory LLP ("Pinnacle") and the Nevada Gaming Control Board ("NGCB"), which have definitively refuted the core factual allegations in the GPR reports. We recommend opposing the motion aggressively and building a robust evidentiary record that will also serve as a preview of our case for trial purposes and inform the parties' respective settlement postures.

II. Background: The Defamatory Publications and the Litigation

A. The Three GPR Reports

Between February 7, 2024, and February 21, 2024, GPR published three detailed research reports targeting RGC on its website, grizzlypeakresearch.com, and distributed notice of each publication via its X (formerly Fenmore Solutions) account, @GrizzlyPeakRes, which had approximately 142,000 followers at the time of publication. Each report contained incendiary allegations concerning the integrity of RGC's financial reporting, operations, and management, and each carried a standard disclosure at the end of the report stating that GPR and/or its affiliates held short positions in the subject company's securities. The three reports are as follows:

Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings" — Published February 7, 2024, this report is 48 pages in length. Report 1 alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. The report purported to identify specific subsidiary entities through which the alleged fabricated revenue was routed and included charts and tables designed to give the appearance of rigorous forensic accounting analysis. The report concluded that RGC's stock was worth less than $30 per share — a figure approximately 67% below the pre-publication closing price — and characterized the Company's management as perpetrators of "one of the largest earnings fabrication schemes in the gaming industry's history."

Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" — Published February 14, 2024, this report is 36 pages in length. Report 2 alleged that RGC had manipulated the random-number-generator ("RNG") software embedded in its proprietary slot machines in order to inflate payout statistics reported to the Nevada Gaming Control Board. Specifically, the report claimed that RGC's engineering team had inserted hidden code that produced artificially favorable payout ratios during testing environments while reverting to less favorable parameters in live operation. The report alleged that this constituted a material violation of Nevada gaming regulations and could result in the revocation of RGC's gaming licenses. The report included excerpts of purported source code and technical diagrams, which, as discussed below, the NGCB has since determined to be inaccurate or misleading.

Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game" — Published February 21, 2024, this report is 29 pages in length. Report 3 alleged that CEO Marcus J. Calloway had engaged in a series of undisclosed related-party transactions with a purported shell entity called Vermilion Holdings LLC. The report claimed that Vermilion was beneficially owned or controlled by Calloway and that funds were being diverted from RGC to Vermilion through consulting agreements, equipment leases, and software licensing arrangements that were not properly disclosed in RGC's public filings. The report urged RGC's board of directors and the Securities and Exchange Commission to investigate these purported dealings.

Each of the three reports was published in PDF format on GPR's website and was available for free download. GPR also promoted each report via social media posts that included sensationalized headlines and provocative commentary. The reports were authored primarily by Ava Lin, GPR's senior analyst and co-author, under the editorial supervision of Fenchurch, who is GPR's managing member.

B. Stock-Price Impact

The impact of the GPR reports on the price of RDGM stock was immediate, dramatic, and sustained throughout the publication period. The following table summarizes the stock-price trajectory:

At the time of publication of Report 1, RGC had approximately 73.8 million shares of common stock outstanding. RGC's pre-publication market capitalization was therefore approximately $6.8 billion ($92.14 × 73.8 million shares). At the trough following Report 3, RGC's market capitalization had declined to approximately $4.95 billion ($72.80 × 73.8 million shares), representing an aggregate market-capitalization loss of approximately $1.427 billion.

The price decline was closely correlated with each publication event, with the largest single-day decline occurring on February 7, 2024 — the day Report 1 was published — when RDGM stock fell 8.4% on approximately 4.2 times its average daily trading volume. The pattern of successive declines upon publication of each subsequent report is consistent with the hypothesis that the GPR reports, rather than legitimate market forces, drove the decline.

Notably, GPR held a short position of 680,000 shares of RDGM prior to the publication of Report 1. Based on publicly available trading data and GPR's own disclosures, GPR appears to have closed its short position by mid-March 2024 at an estimated average price of approximately $72.80 per share. Assuming GPR opened its short position near the pre-publication closing price of $92.14, the estimated gross profit on the short trade is approximately $13.15 million (680,000 shares × ($92.14 - $72.80) = $13,151,200). The precise timing and prices of GPR's trades will be a subject of discovery, but the magnitude of the profit motive is evident even from publicly available information.

C. Falsity of the Allegations Established

Subsequent events have conclusively or substantially refuted each of the three core allegations contained in the GPR reports:

Revenue-Fabrication Allegation (Report 1): Pinnacle Audit & Advisory LLP, RGC's independent external auditor since 2019, has issued clean audit opinions for RGC's consolidated financial statements for fiscal years 2021 through 2023. The engagement partner, Walter Ng, CPA, has confirmed that Pinnacle's audit of RGC's FY 2023 financial statements — which reflected revenue of $3.42 billion and EBITDA of $812 million (an EBITDA margin of approximately 23.7%) — was conducted in accordance with generally accepted auditing standards ("GAAS") and Public Company Accounting Oversight Board ("PCAOB") standards and found no evidence of the approximately $410 million in fabricated revenue alleged by GPR. Pinnacle's audit procedures included substantive testing of intercompany transactions, the very mechanism through which GPR alleged the fabrication occurred. Mr. Ng has expressed willingness to provide a supporting declaration for the opposition, as discussed in Section V.B.1 below.

RNG-Manipulation Allegation (Report 2): The Nevada Gaming Control Board completed an independent audit of RGC's random-number-generator systems on March 29, 2024. The audit was initiated in response to the allegations in Report 2 and involved examination by the Board's Technology Division of the source code, testing protocols, and live-operation parameters of RGC's proprietary slot-machine software. The Board cleared RGC of any irregularity and confirmed that the Company's RNG systems operated in compliance with applicable Nevada gaming regulations, including the requirements of Nevada Gaming Commission Regulation 14.040. The Board's findings directly contradict the central allegations of Report 2.

Related-Party/Vermilion Holdings Allegation (Report 3): The related-party allegations in Report 3 were based on incomplete and misleading information. While it is true that an entity called Vermilion Holdings LLC has had certain business dealings with RGC, the characterization of these dealings as undisclosed related-party transactions involving CEO Calloway is inaccurate. RGC's General Counsel, Derek Olafson, has confirmed that all transactions between RGC and Vermilion Holdings LLC were conducted at arm's length and were properly disclosed in RGC's periodic SEC filings to the extent required by applicable accounting standards and SEC regulations. The SEC opened an informal inquiry into the related-party allegations in March 2024, which remains pending as of the date of this memorandum. (Note: this inquiry was subsequently closed with no action on August 16, 2024, further confirming the baselessness of GPR's allegations.)

D. Procedural Posture

RGC initiated this action by filing its Original Complaint on February 5, 2024 — two days before the publication of Report 1 — as a preemptive measure based on intelligence suggesting that GPR was preparing to publish defamatory material about the Company. The Original Complaint named only Grizzly Peak Research LLC as a defendant and asserted three causes of action: (1) trade libel under California Civil Code Section 46(3); (2) intentional interference with prospective economic advantage; and (3) unfair business practices under California Business and Professions Code Section 17200.

Following the publication of the three GPR reports and additional investigation into the identities and roles of the individuals and entities behind the publications, RGC filed its First Amended Complaint on March 18, 2024. The FAC added Grizzly Peak Capital Partners LP and Tobias Fenchurch individually as defendants, reflecting the discovery that Fenchurch was both the managing member of GPR and the sole managing member of Grizzly Peak Capital GP LLC, the general partner of GPCP, and that the short position from which GPR profited was held through GPCP's trading accounts. The FAC also added a fourth cause of action for negligent misrepresentation, expanding the theory of liability to encompass GPR's failure to exercise reasonable care in the research and publication of the reports.

Defendants are represented by Caldwell, Tseng & Barrow LLP, with lead partner Raymond Caldwell and senior associate Natalie Orenstein handling the case. Defendants' counsel is located at 555 California Street, Suite 3100, San Francisco, California 94104. Caldwell is a well-known anti-SLAPP practitioner with a strong track record of successfully invoking the statute on behalf of media defendants and other speakers. His involvement signals that the Defendants intend to pursue the anti-SLAPP motion vigorously.

The Defendants filed their Special Motion to Strike under Section 425.16 on April 12, 2024. Our opposition is due May 10, 2024.

III. The Anti-SLAPP Framework: Two-Prong Analysis

A. Overview of Cal. Code Civ. Proc. § 425.16

California's anti-SLAPP statute, codified at Code of Civil Procedure Section 425.16, provides a procedural mechanism for the early dismissal of lawsuits that arise from a defendant's exercise of the constitutional rights of free speech and petition. The statute reflects a legislative determination that "there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." Cal. Code Civ. Proc. § 425.16(a). The statute is construed broadly to effectuate this protective purpose. Briggs v. Eden Council for Hope & Opportunity, 19 Cal. 4th 1106, 1119-20 (1999).

The anti-SLAPP analysis proceeds through a well-established two-prong framework:

Prong One (Defendant's Burden): The defendant must make a threshold showing that the challenged claims arise from acts in furtherance of the defendant's right of petition or free speech "in connection with a public issue or an issue of public interest." Cal. Code Civ. Proc. § 425.16(b)(1). Section 425.16(e) defines "acts in furtherance of a person's right of petition or free speech" to include, among other things: (1) statements made before a legislative, executive, or judicial proceeding; (2) statements made in connection with an issue under consideration or review by a legislative, executive, or judicial body; (3) statements made in a public forum in connection with an issue of public interest; and (4) any other conduct in furtherance of the exercise of the constitutional right of petition or free speech in connection with a public issue or an issue of public interest. The defendant's burden at this stage is not heavy — the defendant need only show that the challenged activity falls within the broad categories of protected speech or petition. Equilon Enterprises v. Consumer Cause, Inc., 29 Cal. 4th 53, 67 (2002).

Prong Two (Plaintiff's Burden): If the defendant satisfies Prong One, the burden shifts to the plaintiff to demonstrate a "probability of prevailing" on its claims. Cal. Code Civ. Proc. § 425.16(b)(1). At this stage, the plaintiff must state and substantiate a legally sufficient claim. Navellier v. Sletten, 29 Cal. 4th 82, 88-89 (2002). The plaintiff's burden has been described as requiring a showing of "minimal merit" — that is, the plaintiff's evidence must be sufficient to sustain a favorable judgment if the evidence submitted by the plaintiff is credited. Oasis West Realty, LLC v. Goldman, 51 Cal. 4th 811, 820 (2011). The court does not weigh the evidence or resolve factual disputes; rather, it determines whether the plaintiff has demonstrated that the claims have at least minimal merit based on the declarations and other competent evidence submitted. Soukup v. Law Offices of Herbert Hafif, 39 Cal. 4th 260, 291 (2006).

If the plaintiff meets the Prong Two burden, the motion is denied and the case proceeds to discovery and trial. If the plaintiff fails to meet the Prong Two burden on any cause of action, that cause of action is stricken.

Importantly, if the anti-SLAPP motion is denied in its entirety, the defendant is liable for the plaintiff's attorneys' fees and costs incurred in opposing the motion under Section 425.16(c)(1). This fee-shifting provision further incentivizes us to build the strongest possible record at the opposition stage.

B. The Commercial Speech Exception

A critical argument in our arsenal is the commercial speech exception to anti-SLAPP protection, which has been recognized by California courts in a series of cases beginning with Demetriades v. Yelp, Inc., 228 Cal. App. 4th 294 (2014), and more fully developed in FilmOn.com Inc. v. DoubleVerify Inc., 7 Cal. 5th 133 (2019). In FilmOn.com, the California Supreme Court held that speech made in connection with the speaker's commercial interests does not automatically qualify as speech on a "public issue or an issue of public interest" for purposes of Section 425.16(e)(4). Rather, the court must evaluate whether the speech genuinely contributes to the public discourse on a matter of public concern, or whether it is primarily commercial in character and designed to advance the speaker's private economic interests.

The commercial speech exception is directly applicable here. GPR's reports were not disinterested acts of public-interest journalism or whistleblowing. They were commercial speech designed to generate trading profits for GPR and its affiliated hedge fund, Grizzly Peak Capital Partners LP. The fund's estimated assets under management are approximately $185 million, and the short position in RDGM — 680,000 shares with a notional value of approximately $62.66 million at the pre-publication closing price — represented a substantial concentration of the fund's capital. GPR closed its position by mid-March 2024 at an estimated average of approximately $72.80 per share, yielding an estimated gross profit of approximately $13.15 million. The direct, quantifiable financial benefit that GPR and its affiliated fund derived from the stock-price decline caused by the reports distinguishes these publications from the kind of genuine public-interest speech that the anti-SLAPP statute was designed to protect.

The commercial speech exception may operate to remove the reports from anti-SLAPP protection entirely, effectively defeating the motion at Prong One without the need to proceed to the Prong Two probability-of-prevailing analysis. Alternatively, even if the court determines that the commercial speech exception does not apply categorically, the commercial nature of the speech substantially undercuts the Defendants' Prong One showing and provides important context for the Prong Two analysis, particularly on the issues of malice and motive.

IV. Analysis of Defendants' Prong One Arguments

A. Defendants' Claimed Basis for Protected Activity

The Defendants' anti-SLAPP motion rests on the argument that GPR's short-seller research reports constitute statements made "in connection with a public issue or an issue of public interest" within the meaning of Section 425.16(e)(3) and (e)(4). Specifically, the Defendants argue that:

First, the reports address a matter of significant public interest — namely, the integrity of the public securities markets and the accuracy of financial disclosures by RGC, a Nasdaq-listed company with a pre-publication market capitalization of approximately $6.8 billion. Defendants contend that the investing public has a direct and substantial interest in the truthfulness of financial reporting by publicly traded companies, and that speech exposing alleged fraud or misrepresentation in financial disclosures is precisely the kind of public-interest speech that the anti-SLAPP statute was enacted to protect.

Second, the Defendants characterize the GPR reports as a form of investigative journalism or financial watchdog activity aimed at protecting public investors from potential fraud. The motion draws parallels to traditional investigative journalism and argues that short sellers play a valuable role in the securities markets by identifying and exposing corporate misconduct that might otherwise go undetected by regulators and auditors.

Third, Defendants point to their standard disclaimers — which disclose GPR's short position in RDGM stock — as evidence of transparency and good faith. They argue that the inclusion of these disclaimers demonstrates that GPR was not attempting to deceive the market about its financial interests, but rather was engaged in legitimate financial commentary coupled with appropriate disclosures.

Fourth, Defendants cite the fact that the reports were published on a public website and distributed via social media, making them accessible to the general public and furthering a public dialogue about the integrity of RGC's operations and financial reporting.

Defendants will likely cite a number of cases in which short-seller speech or critical financial commentary has been afforded anti-SLAPP protection. We should anticipate citations to cases such as Piping Rock Partners, Inc. v. David Lerner Associates, Inc., 946 F. Supp. 2d 957 (N.D. Cal. 2013), and similar decisions holding that public commentary on the business practices of publicly traded companies implicates issues of public interest.

B. Weaknesses in Defendants' Prong One Showing

We believe the Defendants' Prong One showing is deficient for several overlapping and mutually reinforcing reasons. The following analysis identifies the principal vulnerabilities in their argument.

1. Reports Were Commercially Motivated, Not Public-Interest Driven. The most fundamental weakness in the Defendants' Prong One argument is that the GPR reports were not principally motivated by any concern for the public interest. They were motivated by GPR's and GPCP's financial interests — specifically, the desire to profit from a substantial pre-existing short position in RDGM stock. This commercial motive is not incidental or tangential; it is the central purpose of the publications and pervades every aspect of the reports' preparation, timing, and distribution.

The evidence of commercial motivation is overwhelming. GPR held a short position of 680,000 shares of RDGM prior to the publication of Report 1, representing a notional value of approximately $62.66 million at the pre-publication closing price of $92.14 per share. The profits that GPR and its affiliated fund stood to realize — and did, in fact, realize — were directly proportional to the degree of stock-price decline caused by the reports. Every dollar by which the stock price fell represented a gain of $680,000 to the short position. By the time GPR appears to have closed its position in mid-March 2024, the estimated gross profit was approximately $13.15 million. This is not the profit model of a disinterested journalist or civic watchdog; it is the profit model of a trader whose economic interests are aligned with the destruction of the subject company's market value.

The structural conflicts of interest further underscore the commercial character of the publications. Tobias Fenchurch is simultaneously the managing member of GPR (the entity that authored and published the reports) and the sole managing member of Grizzly Peak Capital GP LLC, which is the general partner of GPCP (the entity that held the short position). These are not separate, independent organizations with divergent interests; they are controlled by a single individual — Fenchurch — who had a direct and personal financial stake in the stock-price decline that the reports were designed to precipitate. The financial motive is not merely undeniable; it is structural and systemic.

Under the FilmOn.com framework, this level of commercial motivation should be sufficient to invoke the commercial speech exception and deny the motion at Prong One. The reports were not contributions to a public debate about corporate governance or securities regulation; they were instruments of a trading strategy designed to enrich their author at the expense of RGC and its shareholders.

2. The Publications Are Not Contributions to Public Debate. The Defendants' characterization of the GPR reports as investigative journalism or civic engagement is contradicted by the manner in which the reports were prepared and distributed. Several features of the publications are inconsistent with genuine public-interest speech:

Failure to refer concerns to regulators: If GPR genuinely believed that RGC was engaged in the kind of large-scale fraud described in the reports — the fabrication of $410 million in revenue, the manipulation of RNG software to defraud regulators, and undisclosed related-party transactions involving the CEO — the natural and responsible course of action would have been to refer these concerns to the relevant regulatory authorities: the SEC, the Nevada Gaming Control Board, or both. GPR did neither. There is no evidence that GPR referred any of its purported concerns to any regulatory body before publishing the reports. This failure is particularly telling given the severity of the allegations. The RNG-manipulation allegation, if true, would have constituted a criminal violation of Nevada gaming law. A genuine civic watchdog confronted with evidence of such conduct would be expected to alert the relevant regulatory authorities. GPR's decision to publish the allegations on its website and via social media — without any prior regulatory referral — is consistent with a strategy designed to maximize market impact and trading profit, not a strategy designed to protect the public interest.

Failure to contact the company: GPR never contacted RGC for comment or verification before publishing any of the three reports. Standard journalistic practice — and indeed, basic due diligence — would require seeking a response from the subject of serious fraud allegations before publication. GPR's failure to do so is further evidence that the reports were not prepared with the care and objectivity that characterize genuine public-interest journalism, but rather were designed to maximize their surprise impact on the market.

Analyst's failure to contact regulators: Ava Lin, GPR's senior analyst and the primary author of the reports, did not contact the Nevada Gaming Control Board about the RNG allegations prior to publication. This is particularly significant because Report 2 alleged that RGC was actively defrauding the Board — a claim that, if sincerely held, would presumably have prompted an analyst of good faith to verify the allegation with the regulatory body most directly affected. Lin's failure to contact the Board further evidences that the purpose of the reports was market impact rather than public protection.

Distribution to subscription audience and social media followers: While the reports were technically available to the general public via GPR's website, the primary distribution channel was GPR's subscriber list and social media following — an audience of approximately 142,000 followers on X, many of whom were presumably active traders and investors likely to act on the reports' negative conclusions by selling or shorting RDGM stock. The distribution strategy was designed to maximize the speed and magnitude of the stock-price decline, not to foster a measured public dialogue about corporate governance.

3. Distinguishing Cases. We anticipate that the Defendants will cite a number of cases in which short-seller speech or critical financial commentary was afforded anti-SLAPP protection. We should be prepared to distinguish those cases on several grounds.

First, the present case is distinguishable because the GPR reports contained fabricated or materially misleading allegations — not merely unflattering opinions, aggressive analysis, or subjective characterizations. The revenue-fabrication allegation has been refuted by Pinnacle's audit; the RNG-manipulation allegation has been definitively disproved by the NGCB's independent audit; and the related-party allegation was based on incomplete information and was misleading. The prior case law extending anti-SLAPP protection to short-seller speech typically involved situations where the challenged statements were opinions, predictions, or aggressive-but-plausible interpretations of publicly available data. That is not this case. Here, the GPR reports made specific, verifiable factual claims that have been proven false.

Second, the present case involves a specific, quantifiable profit motive of extraordinary magnitude. The estimated gross profit of $13.15 million on a 680,000-share short position is not a speculative or attenuated financial interest; it is a direct, dollar-for-dollar benefit derived from the stock-price decline that the reports caused. This distinguishes the present case from situations where the speaker had a generalized or indirect financial interest in the subject of the speech.

Third, the structural overlap between GPR and GPCP — both controlled by Fenchurch — creates a level of conflict of interest that is not present in typical short-seller cases. In many prior cases, the short seller and the analyst were either independent of each other or the financial interest was disclosed and treated as a collateral matter. Here, the analyst, the publisher, and the trader are effectively the same person operating through closely related entities.

We should research and prepare distinguishing analyses for any specific cases cited in Defendants' motion when we receive their memorandum of points and authorities.

V. Strategy for Prong Two: Demonstrating Probability of Prevailing

A. Overview. Even if the court finds that the Defendants have satisfied their burden on Prong One — which we will vigorously contest — we are well-positioned to demonstrate a probability of prevailing on all four causes of action asserted in the FAC. As noted above, the Prong Two standard requires only a showing of "minimal merit" — a threshold that is more than de minimis but significantly less than a preponderance of the evidence. The court does not weigh the evidence, assess credibility, or resolve competing factual inferences; it merely determines whether the plaintiff has presented sufficient evidence to sustain a favorable judgment if the plaintiff's evidence is credited. Navellier v. Sletten, 29 Cal. 4th at 88-89; Oasis West Realty, LLC v. Goldman, 51 Cal. 4th at 820.

We have substantial and compelling evidence on each element of each cause of action. The following sections organize this evidence by topic and describe the declarations and documentary exhibits we intend to submit in support of the opposition.

B. Evidence of Falsity

The cornerstone of our case on all four causes of action is the falsity of the core factual allegations contained in the three GPR reports. We have three independent sources of evidence establishing falsity, corresponding to the three principal allegations.

1. Pinnacle Audit & Advisory LLP — Declaration of Walter Ng, CPA. We will submit a declaration from Walter Ng, CPA, the engagement partner at Pinnacle Audit & Advisory LLP who supervised the audit of RGC's consolidated financial statements for fiscal years 2021 through 2023. Mr. Ng's firm is located at 400 South 4th Street, Suite 600, Las Vegas, Nevada 89101, and has served as RGC's independent external auditor since 2019.

Mr. Ng's declaration will address the following points:

• Pinnacle issued unqualified (clean) audit opinions for RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023, confirming that the financial statements were presented fairly, in all material respects, in accordance with generally accepted accounting principles ("GAAP").

• Pinnacle's audit of RGC's FY 2023 financial statements confirmed that RGC's reported revenue of $3.42 billion and EBITDA of $812 million (an EBITDA margin of approximately 23.7%) were fairly stated and supported by adequate documentation and substantive evidence.

• Pinnacle's audit procedures included specific substantive testing of intercompany transactions — the mechanism through which GPR alleged the approximately $410 million in revenue was fabricated. These procedures found no evidence of fictitious intercompany transactions or fabricated revenue.

• Pinnacle's audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB") and included risk assessments, walkthroughs, control testing, and substantive procedures tailored to the specific risks of the gaming industry.

Mr. Ng's declaration directly rebuts the central allegation of Report 1 ("House of Cards: Redstone Gaming's Manufactured Earnings"). We have already made initial contact with Mr. Ng through RGC's General Counsel, and Mr. Ng has expressed his willingness to provide a supporting declaration. We should finalize the declaration request and begin drafting by April 19, 2024, as discussed in the timeline below.

Additionally, following the publication of the GPR reports, RGC engaged Pinnacle to conduct a supplemental forensic audit focused specifically on the allegations raised in Report 1. The cost of this supplemental engagement was $1.46 million. The supplemental audit confirmed Pinnacle's original findings and found no evidence supporting GPR's allegations. While the supplemental audit report itself may contain information subject to work-product or other privilege considerations, the fact that it was conducted and the cost incurred are relevant to our damages showing.

2. Nevada Gaming Control Board RNG Audit. The Nevada Gaming Control Board completed its independent audit of RGC's random-number-generator systems on March 29, 2024. The audit was conducted by the Board's Technology Division, which has exclusive jurisdiction over the testing and certification of electronic gaming devices and their associated software in Nevada. The Board's audit involved a comprehensive examination of the source code, testing protocols, and live-operation parameters of RGC's proprietary slot-machine software — the very systems that Report 2 alleged had been manipulated.

The Board's findings cleared RGC of any irregularity and confirmed that the Company's RNG systems operated in full compliance with Nevada Gaming Commission Regulation 14.040 and all other applicable regulations. The Board found no evidence of hidden code, dual-mode operation, or any other manipulation of the type alleged in Report 2.

We will submit a certified copy of the Board's findings, or reference the publicly available record of the Board's determination, as evidence rebutting Report 2 ("Rigged Reels: How Redstone's Slot Software Cheats the Regulators"). The Board's clearance is particularly powerful evidence because it comes from the very regulatory body that GPR alleged RGC was defrauding. The independence and credibility of the NGCB's Technology Division are well-established, and its findings should carry significant weight with the court.

We should obtain the certified copy of the Board's findings by April 22, 2024, to ensure adequate time for incorporation into the opposition brief.

3. Vermilion Holdings LLC / Related-Party Allegation. The related-party allegation in Report 3 ("Double Down on Fraud: Redstone's Related-Party Shell Game") was based on incomplete information and presented a materially misleading picture of the relationship between RGC and Vermilion Holdings LLC. While Vermilion Holdings LLC does exist and has had certain business dealings with RGC, the characterization of these dealings as undisclosed, improper, or fraudulent related-party transactions involving CEO Marcus J. Calloway is inaccurate.

We will present evidence rebutting this allegation through a declaration from Derek Olafson, RGC's General Counsel. Mr. Olafson's declaration will address:

• The nature and extent of any business dealings between RGC and Vermilion Holdings LLC.

• The fact that all such dealings were conducted at arm's length, on commercially reasonable terms, and were properly disclosed in RGC's periodic SEC filings to the extent required by GAAP (specifically, ASC 850 — Related Party Disclosures) and SEC Regulation S-K.

• The fact that CEO Calloway does not have an undisclosed beneficial ownership interest in Vermilion Holdings LLC, contrary to GPR's allegations.

• The fact that the SEC opened an informal inquiry into the related-party allegations in March 2024 but has not taken any enforcement action. (As noted above, this inquiry was subsequently closed with no action on August 16, 2024.)

The combination of Mr. Olafson's declaration and the absence of any SEC enforcement action (or, if the court considers post-briefing developments, the closure of the inquiry with no action) substantially undermines the factual basis for Report 3.

C. Evidence of Actual Malice

As RGC is a publicly traded company, the actual-malice standard articulated in New York Times Co. v. Sullivan, 376 U.S. 254 (1964), and its progeny applies to the trade libel and related claims. Under this standard, RGC must show that the Defendants published the false statements with knowledge of their falsity or with reckless disregard for whether they were true or false. Reader's Digest Ass'n v. Superior Court, 37 Cal. 3d 244, 256 (1984); Khawar v. Globe Int'l, Inc., 19 Cal. 4th 254, 275 (1998). We have strong evidence on this element, and the evidence is drawn from multiple independent sources, providing a mutually reinforcing web of circumstantial and direct proof.

1. GPR Internal Meridian Solutions Messages. We have obtained, through informal channels — likely produced during early informal exchanges between the parties or available through a cooperating source with access to GPR's internal communications — a set of internal Meridian Solutions messages among GPR personnel that constitute powerful direct evidence of actual malice. These messages were exchanged in the period leading up to the publication of the three reports and include communications among Tobias Fenchurch, Ava Lin, and other GPR personnel.

The Meridian Solutions messages are significant for at least two reasons:

First, the messages show that Ava Lin, GPR's senior analyst and the primary author of the reports, expressed doubts about the factual basis for the related-party allegations in Report 3 before the report was published. Specifically, Lin indicated in messages to Fenchurch that she had been unable to confirm the alleged connection between CEO Calloway and Vermilion Holdings LLC and that the evidence supporting the allegation was "circumstantial at best." Despite Lin's expressed reservations, the report was published with the related-party allegations intact and presented as established fact.

Second, the messages reveal that Fenchurch was aware that Pinnacle Audit & Advisory had issued clean audit opinions on RGC's financial statements for FY 2021-2023 and that Pinnacle's audits included testing of intercompany transactions. Despite this awareness — which directly undercut the central premise of Report 1 — Fenchurch directed publication of the revenue-fabrication allegations regardless. In one message, Fenchurch appears to have dismissed the significance of Pinnacle's clean audit opinions, suggesting that the audit firm had been "captured" by the company and that the clean opinions were therefore unreliable. This cavalier dismissal of contradictory evidence from a reputable PCAOB-registered audit firm is precisely the kind of conduct that constitutes reckless disregard for truth under the actual-malice standard.

These Meridian Solutions messages are the single most important piece of evidence in our opposition. They provide direct proof that the Defendants were aware of serious factual deficiencies in their reports and chose to publish anyway, motivated by the desire to profit from their short position. We should prioritize the authentication and presentation of these messages in the opposition.

Authentication and Admissibility: We anticipate that the Defendants may challenge the authenticity and admissibility of the informally obtained Meridian Solutions messages. We should authenticate them through a declaration from a person with personal knowledge of the messages — ideally, the cooperating source through whom they were obtained, or, if that is not feasible, through circumstantial indicia of authenticity (metadata, formatting, contextual details consistent with known facts, etc.). At the anti-SLAPP stage, the evidentiary standard is permissive. The court considers all competent evidence, including evidence that would be admissible at trial, and the standard for presenting evidence at this stage is the declaration — not formal discovery responses or deposition testimony. Sweetwater Union High School District v. Gilbane Building Co., 6 Cal. 5th 931, 948-49 (2019). We should argue that the Meridian Solutions messages are competent evidence when presented through a declaration establishing their foundation and authenticity, and that any objections to their admissibility go to weight rather than competency at this stage.

If the Defendants successfully challenge the admissibility of the Meridian Solutions messages at the anti-SLAPP stage, we should be prepared to argue, in the alternative, that the remaining evidence — including the short-position profit motive, the failure to contact RGC or regulators before publishing, and the demonstrable falsity of the allegations — is independently sufficient to establish a probability of prevailing on the actual-malice element. However, our strong preference is to get the Meridian Solutions messages before the court, as they provide the most compelling evidence of reckless disregard.

2. Fenchurch's Instructions to Publish Before Verification. Beyond the general import of the Meridian Solutions messages discussed above, specific communications within the message set indicate that Fenchurch instructed the GPR team to publish the Vermilion Holdings allegations in Report 3 before completing verification of the underlying factual claims. Specifically, the messages indicate that Fenchurch set a publication deadline for Report 3 of February 21, 2024, and directed the team to proceed with publication on that date regardless of whether the verification process for the related-party allegations had been completed. The messages suggest that Fenchurch's concern was maintaining the momentum of the three-report publication sequence — which had been generating significant stock-price declines with each successive report — rather than ensuring the accuracy of the allegations.

This is textbook reckless disregard under the actual-malice standard. The concept of reckless disregard "cannot be fully encompassed in one infallible definition," but it includes situations where the defendant "in fact entertained serious doubts as to the truth of his publication" or where there are "obvious reasons to doubt the veracity of the informant or the accuracy of his reports." St. Amant v. Thompson, 390 U.S. 727, 732 (1968). Fenchurch's decision to publish serious fraud allegations before completing basic verification — particularly in the face of his senior analyst's expressed doubts — falls squarely within this standard.

3. The Short Position as Circumstantial Evidence of Malice. GPR's 680,000-share short position in RDGM, with a notional value of approximately $62.66 million at the pre-publication closing price, and the estimated gross profit of approximately $13.15 million realized from the stock-price decline, constitute powerful circumstantial evidence of malice and motive. While financial motive alone does not prove actual malice as a matter of law, the California Supreme Court has recognized that evidence of motive is relevant to the actual-malice inquiry and may, in combination with other evidence, support a finding of reckless disregard. Reader's Digest Ass'n v. Superior Court, 37 Cal. 3d at 258.

Here, the financial motive is not merely a background consideration; it is the animating force behind the entire publication scheme. The chronology is telling: GPR established its short position before publishing the reports, published the reports in a carefully sequenced three-week campaign designed to maximize cumulative price impact, and closed its position after the stock price had declined to its trough. This is not the behavior of a disinterested analyst; it is the behavior of a trader executing a strategy in which the publications are the mechanism for generating trading profits.

The financial motive evidence is particularly compelling when combined with the Meridian Solutions messages showing that Fenchurch was aware of contradictory evidence (Pinnacle's clean audit opinions) and that Lin expressed doubts about the related-party allegations. The combination of a massive financial incentive to publish false information, actual awareness of contrary evidence, and documented internal doubts about the accuracy of the allegations paints a picture of reckless disregard that should readily satisfy the minimal-merit standard at Prong Two.

4. Declaration of CFO Priya Ramaswaran. We will submit a declaration from Priya Ramaswaran, Chief Financial Officer of Redstone Gaming Corp., addressing several topics relevant to the Prong Two analysis. Ms. Ramaswaran's declaration will attest to the following:

Accuracy of Financial Statements: Ms. Ramaswaran will confirm the accuracy of RGC's consolidated financial statements for FY 2023, including the reported revenue of $3.42 billion and EBITDA of $812 million. She will attest that she is not aware of any fabricated revenue, fictitious intercompany transactions, or other irregularities in RGC's financial reporting, and that the company's financial statements were prepared in accordance with GAAP and reviewed by Pinnacle Audit & Advisory LLP.

Failure to Contact RGC: Ms. Ramaswaran will confirm that GPR never contacted RGC — through her office, through the investor relations department, through the General Counsel's office, or through any other channel — for comment or verification before publishing any of the three reports. This fact is significant both as evidence of actual malice (failure to investigate or verify before publishing serious allegations) and as evidence undermining the Defendants' characterization of the reports as responsible investigative journalism.

Damages: Ms. Ramaswaran's declaration will provide evidence of the damages suffered by RGC as a result of the GPR reports, including:

• Stock-price decline: Cumulative decline of 21.0% from $92.14 to $72.80 per share; aggregate market-capitalization loss at trough of approximately $1.427 billion.

• Crisis-communications costs: RGC retained Crestline Equity Partners Group Inc. (contact: Simone Arecchi) to manage the communications response to the GPR reports, including press releases, investor calls, analyst briefings, and media monitoring. The total cost of the Ashgrove Equity Partners engagement was $2.18 million.

• Supplemental forensic audit costs: As noted above, RGC engaged Pinnacle to conduct a supplemental forensic audit focused on the allegations in Report 1. The cost of this engagement was $1.46 million.

• Regulatory-response legal fees: RGC retained Hargrove & Sato LLP, its Nevada gaming regulatory counsel, to manage the Company's response to inquiries from the Nevada Gaming Control Board triggered by Report 2, including cooperating with the Board's independent RNG audit. The cost of the Hargrove & Sato engagement was $987,000.

• Total out-of-pocket costs: $4.627 million ($2.18 million + $1.46 million + $987,000).

Ms. Ramaswaran will also describe the broader impact of the GPR reports on RGC's business operations, investor relations, and regulatory standing, including disruption to ongoing business development activities, the diversion of management time and attention to crisis response, damage to RGC's relationships with institutional investors, and the reputational harm associated with being publicly accused of large-scale fraud.

D. Evidence of Damages (for Trade Libel Claim Specifically)

The first cause of action in the FAC — trade libel under California Civil Code Section 46(3) — requires proof of "special damages," meaning pecuniary losses that flow directly from the defendant's false publication and are capable of being identified with specificity. ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1010 (2001). This is a more demanding damages standard than applies to the other causes of action, and we anticipate that the Defendants will challenge the adequacy of our special-damages showing as part of their Prong Two argument.

We will present evidence of special damages through two principal categories:

Stock-price decline: The cumulative 21.0% decline in RDGM stock from $92.14 to $72.80 per share, representing an aggregate market-capitalization loss of approximately $1.427 billion at the trough, constitutes direct pecuniary harm to RGC and its shareholders that is attributable to the GPR reports. The close temporal correlation between the publication of each report and the corresponding stock-price decline provides a strong basis for attributing the decline to the false publications. We acknowledge that the Defendants may argue that market-capitalization loss is too attenuated or diffuse to satisfy the special-damages requirement, and we address this anticipated argument in Section VII.C below.

Out-of-pocket costs: The $4.627 million in out-of-pocket costs documented in the Ramaswaran declaration — comprising crisis-communications costs ($2.18 million with Crestline Equity Partners Group Inc.), supplemental forensic audit costs ($1.46 million with Pinnacle Audit & Advisory LLP), and regulatory-response legal fees ($987,000 with Hargrove & Sato LLP) — constitute specific, identifiable pecuniary losses that flow directly from the GPR reports and independently satisfy the special-damages requirement for trade libel. These are expenses that RGC would not have incurred but for the publication of the false allegations.

Damages Expert: We have retained Dr. Elena Vostrikova of Meridian Forensic Economics LLC, located at 1901 Avenue of the Stars, Suite 900, Los Angeles, California 90067, as our damages expert. Dr. Vostrikova specializes in securities fraud damages analysis and event studies, and she will be able to provide a rigorous, econometric analysis of the stock-price impact attributable to the GPR reports, distinguishing the effect of the reports from any confounding market factors. Her engagement was formalized on July 1, 2024, which is after the anti-SLAPP briefing deadline. Accordingly, at the anti-SLAPP stage, we will rely on preliminary damage estimates presented through the Ramaswaran declaration rather than a formal expert report. For anti-SLAPP purposes, a preliminary showing of special damages via declaration should be sufficient to satisfy the minimal-merit standard, and we can reserve Dr. Vostrikova's full analysis for later stages of the litigation.

VI. Proposed Structure of the Opposition Brief

Based on the foregoing analysis, we propose the following structure for our opposition brief, which will be filed on or before May 10, 2024:

A. Introduction. The introduction will frame the case in terms most favorable to our position: GPR is not a journalist, civic watchdog, or public-interest advocate. It is a profit-driven short seller that published fabricated allegations about a publicly traded company — Redstone Gaming Corp. — in order to drive down the stock price and extract profits from a pre-existing 680,000-share short position. The reports did not contribute to public debate; they constituted a coordinated campaign of market manipulation that destroyed approximately $1.427 billion in shareholder value and caused millions of dollars in out-of-pocket costs to RGC. The anti-SLAPP statute was not designed to protect this kind of conduct, and the Defendants' motion should be denied.

B. Statement of Facts

The statement of facts will provide a detailed narrative account of the relevant events, organized chronologically. It will cover:

• The establishment of GPR's short position prior to publication.

• The publication of the three reports (February 7, 14, and 21, 2024), including a description of the core allegations in each report.

• The stock-price decline following each publication, with specific price data and volume information.

• The subsequent debunking of each allegation: Pinnacle's audit confirmation, the NGCB's RNG clearance, and the status of the SEC inquiry into the related-party allegations.

• GPR's closing of its short position by mid-March 2024 and the estimated gross profit of approximately $13.15 million.

• GPR's failure to contact RGC or any regulatory body before publishing the reports.

• The internal Meridian Solutions messages reflecting doubts about the factual basis for the allegations and Fenchurch's direction to publish before verification.

C. Legal Argument — Prong One

The Prong One section will present two arguments in the alternative:

Primary argument: The commercial speech exception applies, and the GPR reports are not protected activity within the meaning of Section 425.16. The reports were commercial speech designed to generate trading profits, not genuine contributions to public debate. Under FilmOn.com Inc. v. DoubleVerify Inc., the commercial nature of the speech removes it from the scope of the anti-SLAPP statute, and the motion should be denied without reaching Prong Two.

Alternative argument: Even if the commercial speech exception does not apply categorically, the Defendants' Prong One showing is insufficient because the reports were not made "in connection with" a genuine "public issue" within the meaning of Section 425.16(e). The reports were not part of a public dialogue about corporate governance, securities regulation, or gaming industry integrity; they were instruments of a private trading strategy. The Defendants' attempts to frame the reports as public-interest journalism are belied by the evidence of commercial motivation, the failure to refer concerns to regulators, and the failure to contact RGC for comment. The reports lack the hallmarks of genuine public-interest speech and should not receive anti-SLAPP protection.

D. Legal Argument — Prong Two

The Prong Two section will present our probability-of-prevailing evidence, organized by each cause of action:

1. Trade Libel (Cal. Civ. Code § 46(3)): We will demonstrate minimal merit on each element: (a) the publication of false statements of fact concerning RGC's business (the three reports); (b) publication with actual malice — knowledge of falsity or reckless disregard for truth (the Meridian Solutions messages, the short-position profit motive, and the failure to verify); and (c) special damages (the stock-price decline and out-of-pocket costs totaling $4.627 million).

2. Intentional Interference with Prospective Economic Advantage: We will demonstrate minimal merit on each element: (a) an economic relationship between RGC and its investors, business partners, and regulators; (b) Defendants' knowledge of this relationship; (c) wrongful conduct — the publication of fabricated allegations — designed and intended to interfere with these relationships; (d) actual disruption of RGC's business relationships; and (e) damages.

3. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200): We will demonstrate that the Defendants' conduct constitutes unlawful, unfair, and fraudulent business acts within the meaning of Section 17200. The unlawful prong is satisfied by the underlying torts (trade libel and intentional interference); the unfair prong is satisfied by the Defendants' systematic campaign to profit from the dissemination of false information; and the fraudulent prong is satisfied by the deceptive nature of the reports, which presented fabricated allegations as the product of rigorous investigative research.

4. Negligent Misrepresentation (added in FAC): We will demonstrate minimal merit on the elements of negligent misrepresentation: (a) Defendants owed a duty to exercise reasonable care in the research and dissemination of financial information about a publicly traded company; (b) Defendants breached this duty by publishing allegations that they had not adequately verified and that were, in fact, false; (c) the market relied on the reports, as evidenced by the immediate and substantial stock-price decline following each publication; and (d) RGC suffered damages as a result.

E. Evidentiary Appendix Plan

The opposition brief will be supported by the following evidentiary submissions:

1. Declaration of Walter Ng, CPA (Pinnacle Audit & Advisory LLP) — Establishing the accuracy of RGC's FY 2023 financial statements and the absence of fabricated revenue, and describing the audit procedures employed.

2. Declaration of Priya Ramaswaran (CFO, Redstone Gaming Corp.) — Establishing the accuracy of RGC's financial statements, the failure of GPR to contact RGC before publication, and the damages suffered by RGC, including out-of-pocket costs of $4.627 million.

3. Certified copy of Nevada Gaming Control Board RNG audit clearance (dated March 29, 2024) — Establishing that the NGCB cleared RGC of any RNG irregularity and that the allegations in Report 2 are false.

4. GPR internal Meridian Solutions messages (authenticated via declaration) — Establishing that Fenchurch was aware of contradictory evidence and directed publication regardless, and that Lin expressed doubts about the factual basis for the related-party allegations.

5. Exhibits:

• Copies of the three GPR reports (Reports 1, 2, and 3), with key passages highlighted.

• RDGM stock-price charts showing the correlation between publication dates and stock-price declines.

• GPR's short-position disclosures from each report.

• Public filings and disclosures demonstrating the information available to GPR about Pinnacle's audit opinions and RGC's financial reporting.

We may also consider submitting a declaration from Derek Olafson, RGC's General Counsel, addressing the Vermilion Holdings LLC allegations, depending on the scope of the information that can be disclosed at this stage without prejudicing the pending SEC informal inquiry.

VII. Potential Defendants' Reply Arguments and Our Counter-Strategies

We must anticipate the arguments that the Defendants are likely to raise in their reply brief and prepare responsive strategies for each.

A. First Amendment Defense

Anticipated argument: The Defendants will argue that short-seller research is core protected speech under the First Amendment and that the anti-SLAPP statute reflects California's commitment to protecting the free and open exchange of ideas about matters of public concern, including the financial health and corporate governance of publicly traded companies. Defendants may argue that allowing this lawsuit to proceed would chill legitimate short-seller research and undermine an important market discipline function.

Our counter: The First Amendment does not protect knowingly false statements of fact. New York Times Co. v. Sullivan, 376 U.S. at 279-80; Gertz v. Robert Welch, Inc., 418 U.S. 323, 340 (1974). The constitutional guarantee of free speech has never been understood to immunize speakers who

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT PROTECTED BY ATTORNEY-CLIENT PRIVILEGE AND WORK-PRODUCT DOCTRINE DO NOT DISTRIBUTE, COPY, OR FORWARD WITHOUT EXPRESS AUTHORIZATION
MEMORANDUM
To: Francesca Morano, Partner
From: Carlos Espinoza, Associate
Date: April 15, 2024
Re: Strategy for Opposing Defendants' Anti-SLAPP Special Motion to Strike — Redstone Gaming Corp. v. Grizzly Peak Research LLC et al., Case No. 24STCV-01892, Superior Court of California, County of Los Angeles
Client: Redstone Gaming Corp.
I. Executive Summary
On April 12, 2024, Defendants Grizzly Peak Research LLC ("GPR"), Grizzly Peak Capital Partners LP ("GPCP"), and Tobias Fenchurch ("Fenchurch") (collectively, "Defendants") filed a Special Motion to Strike pursuant to California Code of Civil Procedure Section 425.16 — the anti-SLAPP statute — seeking dismissal of all four causes of action asserted in Redstone Gaming Corporation's ("RGC" or "the Company") First Amended Complaint ("FAC"), which was filed on March 18, 2024. The Defendants contend that the claims arise from protected speech on a matter of public interest, namely the publication of three short-seller research reports concerning RGC, a Nasdaq-listed gaming company traded under the ticker symbol RDGM.
This memorandum provides a comprehensive analysis of the Defendants' arguments, identifies key weaknesses in their motion, and proposes the legal strategy and evidentiary framework for our opposition brief. The memorandum also sets forth a timeline and action items to ensure we meet our filing obligations.
Our opposition is due on May 10, 2024. The motion is currently assigned to the Honorable Patricia Yamamoto, Department 14, of the Superior Court of California, County of Los Angeles. Based on Judge Yamamoto's typical scheduling practices, we anticipate a hearing date in late May or early June 2024.
Bottom Line: The Defendants' anti-SLAPP motion is vulnerable on both prongs of the statutory analysis. On Prong One, the Defendants' public-interest argument is substantially undermined by the commercial-speech nature of GPR's reports — these were not disinterested acts of investigative journalism, but commercially motivated publications designed to depress the price of RDGM stock and thereby generate trading profits for GPR and its affiliated hedge fund. On Prong Two, our probability-of-prevailing showing is strong. The evidence of actual malice is compelling and includes: (i) GPR's substantial pre-existing short position of 680,000 shares, representing a notional value of approximately $62.66 million at the pre-publication closing price of $92.14 per share; (ii) internal Brightmoor Data Systems among GPR personnel demonstrating that key analysts harbored doubts about the factual basis for the reports' allegations and that Fenchurch directed publication before verification was complete; and (iii) the subsequent independent clearances by both Pinnacle Audit & Advisory LLP ("Pinnacle") and the Nevada Gaming Control Board ("NGCB"), which have definitively refuted the core factual allegations in the GPR reports. We recommend opposing the motion aggressively and building a robust evidentiary record that will also serve as a preview of our case for trial purposes and inform the parties' respective settlement postures.
II. Background: The Defamatory Publications and the Litigation
A. The Three GPR Reports
Between February 7, 2024, and February 21, 2024, GPR published three detailed research reports targeting RGC on its website, grizzlypeakresearch.com, and distributed notice of each publication via its X (formerly Fenmore Solutions) account, @GrizzlyPeakRes, which had approximately 142,000 followers at the time of publication. Each report contained incendiary allegations concerning the integrity of RGC's financial reporting, operations, and management, and each carried a standard disclosure at the end of the report stating that GPR and/or its affiliates held short positions in the subject company's securities. The three reports are as follows:
Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings" — Published February 7, 2024, this report is 48 pages in length. Report 1 alleged that RGC had fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions. The report purported to identify specific subsidiary entities through which the alleged fabricated revenue was routed and included charts and tables designed to give the appearance of rigorous forensic accounting analysis. The report concluded that RGC's stock was worth less than $30 per share — a figure approximately 67% below the pre-publication closing price — and characterized the Company's management as perpetrators of "one of the largest earnings fabrication schemes in the gaming industry's history."
Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" — Published February 14, 2024, this report is 36 pages in length. Report 2 alleged that RGC had manipulated the random-number-generator ("RNG") software embedded in its proprietary slot machines in order to inflate payout statistics reported to the Nevada Gaming Control Board. Specifically, the report claimed that RGC's engineering team had inserted hidden code that produced artificially favorable payout ratios during testing environments while reverting to less favorable parameters in live operation. The report alleged that this constituted a material violation of Nevada gaming regulations and could result in the revocation of RGC's gaming licenses. The report included excerpts of purported source code and technical diagrams, which, as discussed below, the NGCB has since determined to be inaccurate or misleading.
Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game" — Published February 21, 2024, this report is 29 pages in length. Report 3 alleged that CEO Marcus J. Calloway had engaged in a series of undisclosed related-party transactions with a purported shell entity called Vermilion Holdings LLC. The report claimed that Vermilion was beneficially owned or controlled by Calloway and that funds were being diverted from RGC to Vermilion through consulting agreements, equipment leases, and software licensing arrangements that were not properly disclosed in RGC's public filings. The report urged RGC's board of directors and the Securities and Exchange Commission to investigate these purported dealings.
Each of the three reports was published in PDF format on GPR's website and was available for free download. GPR also promoted each report via social media posts that included sensationalized headlines and provocative commentary. The reports were authored primarily by Ava Lin, GPR's senior analyst and co-author, under the editorial supervision of Fenchurch, who is GPR's managing member.
B. Stock-Price Impact
The impact of the GPR reports on the price of RDGM stock was immediate, dramatic, and sustained throughout the publication period. The following table summarizes the stock-price trajectory:
At the time of publication of Report 1, RGC had approximately 73.8 million shares of common stock outstanding. RGC's pre-publication market capitalization was therefore approximately $6.8 billion ($92.14 × 73.8 million shares). At the trough following Report 3, RGC's market capitalization had declined to approximately $4.95 billion ($72.80 × 73.8 million shares), representing an aggregate market-capitalization loss of approximately $1.427 billion.
The price decline was closely correlated with each publication event, with the largest single-day decline occurring on February 7, 2024 — the day Report 1 was published — when RDGM stock fell 8.4% on approximately 4.2 times its average daily trading volume. The pattern of successive declines upon publication of each subsequent report is consistent with the hypothesis that the GPR reports, rather than legitimate market forces, drove the decline.
Notably, GPR held a short position of 680,000 shares of RDGM prior to the publication of Report 1. Based on publicly available trading data and GPR's own disclosures, GPR appears to have closed its short position by mid-March 2024 at an estimated average price of approximately $72.80 per share. Assuming GPR opened its short position near the pre-publication closing price of $92.14, the estimated gross profit on the short trade is approximately $13.15 million (680,000 shares × ($92.14 - $72.80) = $13,151,200). The precise timing and prices of GPR's trades will be a subject of discovery, but the magnitude of the profit motive is evident even from publicly available information.
C. Falsity of the Allegations Established
Subsequent events have conclusively or substantially refuted each of the three core allegations contained in the GPR reports:
Revenue-Fabrication Allegation (Report 1): Pinnacle Audit & Advisory LLP, RGC's independent external auditor since 2019, has issued clean audit opinions for RGC's consolidated financial statements for fiscal years 2021 through 2023. The engagement partner, Walter Ng, CPA, has confirmed that Pinnacle's audit of RGC's FY 2023 financial statements — which reflected revenue of $3.42 billion and EBITDA of $812 million (an EBITDA margin of approximately 23.7%) — was conducted in accordance with generally accepted auditing standards ("GAAS") and Public Company Accounting Oversight Board ("PCAOB") standards and found no evidence of the approximately $410 million in fabricated revenue alleged by GPR. Pinnacle's audit procedures included substantive testing of intercompany transactions, the very mechanism through which GPR alleged the fabrication occurred. Mr. Ng has expressed willingness to provide a supporting declaration for the opposition, as discussed in Section V.B.1 below.
RNG-Manipulation Allegation (Report 2): The Nevada Gaming Control Board completed an independent audit of RGC's random-number-generator systems on March 29, 2024. The audit was initiated in response to the allegations in Report 2 and involved examination by the Board's Technology Division of the source code, testing protocols, and live-operation parameters of RGC's proprietary slot-machine software. The Board cleared RGC of any irregularity and confirmed that the Company's RNG systems operated in compliance with applicable Nevada gaming regulations, including the requirements of Nevada Gaming Commission Regulation 14.040. The Board's findings directly contradict the central allegations of Report 2.
Related-Party/Vermilion Holdings Allegation (Report 3): The related-party allegations in Report 3 were based on incomplete and misleading information. While it is true that an entity called Vermilion Holdings LLC has had certain business dealings with RGC, the characterization of these dealings as undisclosed related-party transactions involving CEO Calloway is inaccurate. RGC's General Counsel, Derek Olafson, has confirmed that all transactions between RGC and Vermilion Holdings LLC were conducted at arm's length and were properly disclosed in RGC's periodic SEC filings to the extent required by applicable accounting standards and SEC regulations. The SEC opened an informal inquiry into the related-party allegations in March 2024, which remains pending as of the date of this memorandum. (Note: this inquiry was subsequently closed with no action on August 16, 2024, further confirming the baselessness of GPR's allegations.)
D. Procedural Posture
RGC initiated this action by filing its Original Complaint on February 5, 2024 — two days before the publication of Report 1 — as a preemptive measure based on intelligence suggesting that GPR was preparing to publish defamatory material about the Company. The Original Complaint named only Grizzly Peak Research LLC as a defendant and asserted three causes of action: (1) trade libel under California Civil Code Section 46(3); (2) intentional interference with prospective economic advantage; and (3) unfair business practices under California Business and Professions Code Section 17200.
Following the publication of the three GPR reports and additional investigation into the identities and roles of the individuals and entities behind the publications, RGC filed its First Amended Complaint on March 18, 2024. The FAC added Grizzly Peak Capital Partners LP and Tobias Fenchurch individually as defendants, reflecting the discovery that Fenchurch was both the managing member of GPR and the sole managing member of Grizzly Peak Capital GP LLC, the general partner of GPCP, and that the short position from which GPR profited was held through GPCP's trading accounts. The FAC also added a fourth cause of action for negligent misrepresentation, expanding the theory of liability to encompass GPR's failure to exercise reasonable care in the research and publication of the reports.
Defendants are represented by Caldwell, Tseng & Barrow LLP, with lead partner Raymond Caldwell and senior associate Natalie Orenstein handling the case. Defendants' counsel is located at 555 California Street, Suite 3100, San Francisco, California 94104. Caldwell is a well-known anti-SLAPP practitioner with a strong track record of successfully invoking the statute on behalf of media defendants and other speakers. His involvement signals that the Defendants intend to pursue the anti-SLAPP motion vigorously.
The Defendants filed their Special Motion to Strike under Section 425.16 on April 12, 2024. Our opposition is due May 10, 2024.
III. The Anti-SLAPP Framework: Two-Prong Analysis
A. Overview of Cal. Code Civ. Proc. § 425.16
California's anti-SLAPP statute, codified at Code of Civil Procedure Section 425.16, provides a procedural mechanism for the early dismissal of lawsuits that arise from a defendant's exercise of the constitutional rights of free speech and petition. The statute reflects a legislative determination that "there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." Cal. Code Civ. Proc. § 425.16(a). The statute is construed broadly to effectuate this protective purpose. Briggs v. Eden Council for Hope & Opportunity, 19 Cal. 4th 1106, 1119-20 (1999).
The anti-SLAPP analysis proceeds through a well-established two-prong framework:
Prong One (Defendant's Burden): The defendant must make a threshold showing that the challenged claims arise from acts in furtherance of the defendant's right of petition or free speech "in connection with a public issue or an issue of public interest." Cal. Code Civ. Proc. § 425.16(b)(1). Section 425.16(e) defines "acts in furtherance of a person's right of petition or free speech" to include, among other things: (1) statements made before a legislative, executive, or judicial proceeding; (2) statements made in connection with an issue under consideration or review by a legislative, executive, or judicial body; (3) statements made in a public forum in connection with an issue of public interest; and (4) any other conduct in furtherance of the exercise of the constitutional right of petition or free speech in connection with a public issue or an issue of public interest. The defendant's burden at this stage is not heavy — the defendant need only show that the challenged activity falls within the broad categories of protected speech or petition. Equilon Enterprises v. Consumer Cause, Inc., 29 Cal. 4th 53, 67 (2002).
Prong Two (Plaintiff's Burden): If the defendant satisfies Prong One, the burden shifts to the plaintiff to demonstrate a "probability of prevailing" on its claims. Cal. Code Civ. Proc. § 425.16(b)(1). At this stage, the plaintiff must state and substantiate a legally sufficient claim. Navellier v. Sletten, 29 Cal. 4th 82, 88-89 (2002). The plaintiff's burden has been described as requiring a showing of "minimal merit" — that is, the plaintiff's evidence must be sufficient to sustain a favorable judgment if the evidence submitted by the plaintiff is credited. Oasis West Realty, LLC v. Goldman, 51 Cal. 4th 811, 820 (2011). The court does not weigh the evidence or resolve factual disputes; rather, it determines whether the plaintiff has demonstrated that the claims have at least minimal merit based on the declarations and other competent evidence submitted. Soukup v. Law Offices of Herbert Hafif, 39 Cal. 4th 260, 291 (2006).
If the plaintiff meets the Prong Two burden, the motion is denied and the case proceeds to discovery and trial. If the plaintiff fails to meet the Prong Two burden on any cause of action, that cause of action is stricken.
Importantly, if the anti-SLAPP motion is denied in its entirety, the defendant is liable for the plaintiff's attorneys' fees and costs incurred in opposing the motion under Section 425.16(c)(1). This fee-shifting provision further incentivizes us to build the strongest possible record at the opposition stage.
B. The Commercial Speech Exception
A critical argument in our arsenal is the commercial speech exception to anti-SLAPP protection, which has been recognized by California courts in a series of cases beginning with Demetriades v. Yelp, Inc., 228 Cal. App. 4th 294 (2014), and more fully developed in FilmOn.com Inc. v. DoubleVerify Inc., 7 Cal. 5th 133 (2019). In FilmOn.com, the California Supreme Court held that speech made in connection with the speaker's commercial interests does not automatically qualify as speech on a "public issue or an issue of public interest" for purposes of Section 425.16(e)(4). Rather, the court must evaluate whether the speech genuinely contributes to the public discourse on a matter of public concern, or whether it is primarily commercial in character and designed to advance the speaker's private economic interests.
The commercial speech exception is directly applicable here. GPR's reports were not disinterested acts of public-interest journalism or whistleblowing. They were commercial speech designed to generate trading profits for GPR and its affiliated hedge fund, Grizzly Peak Capital Partners LP. The fund's estimated assets under management are approximately $185 million, and the short position in RDGM — 680,000 shares with a notional value of approximately $62.66 million at the pre-publication closing price — represented a substantial concentration of the fund's capital. GPR closed its position by mid-March 2024 at an estimated average of approximately $72.80 per share, yielding an estimated gross profit of approximately $13.15 million. The direct, quantifiable financial benefit that GPR and its affiliated fund derived from the stock-price decline caused by the reports distinguishes these publications from the kind of genuine public-interest speech that the anti-SLAPP statute was designed to protect.
The commercial speech exception may operate to remove the reports from anti-SLAPP protection entirely, effectively defeating the motion at Prong One without the need to proceed to the Prong Two probability-of-prevailing analysis. Alternatively, even if the court determines that the commercial speech exception does not apply categorically, the commercial nature of the speech substantially undercuts the Defendants' Prong One showing and provides important context for the Prong Two analysis, particularly on the issues of malice and motive.
IV. Analysis of Defendants' Prong One Arguments
A. Defendants' Claimed Basis for Protected Activity
The Defendants' anti-SLAPP motion rests on the argument that GPR's short-seller research reports constitute statements made "in connection with a public issue or an issue of public interest" within the meaning of Section 425.16(e)(3) and (e)(4). Specifically, the Defendants argue that:
First, the reports address a matter of significant public interest — namely, the integrity of the public securities markets and the accuracy of financial disclosures by RGC, a Nasdaq-listed company with a pre-publication market capitalization of approximately $6.8 billion. Defendants contend that the investing public has a direct and substantial interest in the truthfulness of financial reporting by publicly traded companies, and that speech exposing alleged fraud or misrepresentation in financial disclosures is precisely the kind of public-interest speech that the anti-SLAPP statute was enacted to protect.
Second, the Defendants characterize the GPR reports as a form of investigative journalism or financial watchdog activity aimed at protecting public investors from potential fraud. The motion draws parallels to traditional investigative journalism and argues that short sellers play a valuable role in the securities markets by identifying and exposing corporate misconduct that might otherwise go undetected by regulators and auditors.
Third, Defendants point to their standard disclaimers — which disclose GPR's short position in RDGM stock — as evidence of transparency and good faith. They argue that the inclusion of these disclaimers demonstrates that GPR was not attempting to deceive the market about its financial interests, but rather was engaged in legitimate financial commentary coupled with appropriate disclosures.
Fourth, Defendants cite the fact that the reports were published on a public website and distributed via social media, making them accessible to the general public and furthering a public dialogue about the integrity of RGC's operations and financial reporting.
Defendants will likely cite a number of cases in which short-seller speech or critical financial commentary has been afforded anti-SLAPP protection. We should anticipate citations to cases such as Piping Rock Partners, Inc. v. David Lerner Associates, Inc., 946 F. Supp. 2d 957 (N.D. Cal. 2013), and similar decisions holding that public commentary on the business practices of publicly traded companies implicates issues of public interest.
B. Weaknesses in Defendants' Prong One Showing
We believe the Defendants' Prong One showing is deficient for several overlapping and mutually reinforcing reasons. The following analysis identifies the principal vulnerabilities in their argument.
1. Reports Were Commercially Motivated, Not Public-Interest Driven.  The most fundamental weakness in the Defendants' Prong One argument is that the GPR reports were not principally motivated by any concern for the public interest. They were motivated by GPR's and GPCP's financial interests — specifically, the desire to profit from a substantial pre-existing short position in RDGM stock. This commercial motive is not incidental or tangential; it is the central purpose of the publications and pervades every aspect of the reports' preparation, timing, and distribution.
The evidence of commercial motivation is overwhelming. GPR held a short position of 680,000 shares of RDGM prior to the publication of Report 1, representing a notional value of approximately $62.66 million at the pre-publication closing price of $92.14 per share. The profits that GPR and its affiliated fund stood to realize — and did, in fact, realize — were directly proportional to the degree of stock-price decline caused by the reports. Every dollar by which the stock price fell represented a gain of $680,000 to the short position. By the time GPR appears to have closed its position in mid-March 2024, the estimated gross profit was approximately $13.15 million. This is not the profit model of a disinterested journalist or civic watchdog; it is the profit model of a trader whose economic interests are aligned with the destruction of the subject company's market value.
The structural conflicts of interest further underscore the commercial character of the publications. Tobias Fenchurch is simultaneously the managing member of GPR (the entity that authored and published the reports) and the sole managing member of Grizzly Peak Capital GP LLC, which is the general partner of GPCP (the entity that held the short position). These are not separate, independent organizations with divergent interests; they are controlled by a single individual — Fenchurch — who had a direct and personal financial stake in the stock-price decline that the reports were designed to precipitate. The financial motive is not merely undeniable; it is structural and systemic.
Under the FilmOn.com framework, this level of commercial motivation should be sufficient to invoke the commercial speech exception and deny the motion at Prong One. The reports were not contributions to a public debate about corporate governance or securities regulation; they were instruments of a trading strategy designed to enrich their author at the expense of RGC and its shareholders.
2. The Publications Are Not Contributions to Public Debate.  The Defendants' characterization of the GPR reports as investigative journalism or civic engagement is contradicted by the manner in which the reports were prepared and distributed. Several features of the publications are inconsistent with genuine public-interest speech:
Failure to refer concerns to regulators: If GPR genuinely believed that RGC was engaged in the kind of large-scale fraud described in the reports — the fabrication of $410 million in revenue, the manipulation of RNG software to defraud regulators, and undisclosed related-party transactions involving the CEO — the natural and responsible course of action would have been to refer these concerns to the relevant regulatory authorities: the SEC, the Nevada Gaming Control Board, or both. GPR did neither. There is no evidence that GPR referred any of its purported concerns to any regulatory body before publishing the reports. This failure is particularly telling given the severity of the allegations. The RNG-manipulation allegation, if true, would have constituted a criminal violation of Nevada gaming law. A genuine civic watchdog confronted with evidence of such conduct would be expected to alert the relevant regulatory authorities. GPR's decision to publish the allegations on its website and via social media — without any prior regulatory referral — is consistent with a strategy designed to maximize market impact and trading profit, not a strategy designed to protect the public interest.
Failure to contact the company: GPR never contacted RGC for comment or verification before publishing any of the three reports. Standard journalistic practice — and indeed, basic due diligence — would require seeking a response from the subject of serious fraud allegations before publication. GPR's failure to do so is further evidence that the reports were not prepared with the care and objectivity that characterize genuine public-interest journalism, but rather were designed to maximize their surprise impact on the market.
Analyst's failure to contact regulators: Ava Lin, GPR's senior analyst and the primary author of the reports, did not contact the Nevada Gaming Control Board about the RNG allegations prior to publication. This is particularly significant because Report 2 alleged that RGC was actively defrauding the Board — a claim that, if sincerely held, would presumably have prompted an analyst of good faith to verify the allegation with the regulatory body most directly affected. Lin's failure to contact the Board further evidences that the purpose of the reports was market impact rather than public protection.
Distribution to subscription audience and social media followers: While the reports were technically available to the general public via GPR's website, the primary distribution channel was GPR's subscriber list and social media following — an audience of approximately 142,000 followers on X, many of whom were presumably active traders and investors likely to act on the reports' negative conclusions by selling or shorting RDGM stock. The distribution strategy was designed to maximize the speed and magnitude of the stock-price decline, not to foster a measured public dialogue about corporate governance.
3. Distinguishing Cases.  We anticipate that the Defendants will cite a number of cases in which short-seller speech or critical financial commentary was afforded anti-SLAPP protection. We should be prepared to distinguish those cases on several grounds.
First, the present case is distinguishable because the GPR reports contained fabricated or materially misleading allegations — not merely unflattering opinions, aggressive analysis, or subjective characterizations. The revenue-fabrication allegation has been refuted by Pinnacle's audit; the RNG-manipulation allegation has been definitively disproved by the NGCB's independent audit; and the related-party allegation was based on incomplete information and was misleading. The prior case law extending anti-SLAPP protection to short-seller speech typically involved situations where the challenged statements were opinions, predictions, or aggressive-but-plausible interpretations of publicly available data. That is not this case. Here, the GPR reports made specific, verifiable factual claims that have been proven false.
Second, the present case involves a specific, quantifiable profit motive of extraordinary magnitude. The estimated gross profit of $13.15 million on a 680,000-share short position is not a speculative or attenuated financial interest; it is a direct, dollar-for-dollar benefit derived from the stock-price decline that the reports caused. This distinguishes the present case from situations where the speaker had a generalized or indirect financial interest in the subject of the speech.
Third, the structural overlap between GPR and GPCP — both controlled by Fenchurch — creates a level of conflict of interest that is not present in typical short-seller cases. In many prior cases, the short seller and the analyst were either independent of each other or the financial interest was disclosed and treated as a collateral matter. Here, the analyst, the publisher, and the trader are effectively the same person operating through closely related entities.
We should research and prepare distinguishing analyses for any specific cases cited in Defendants' motion when we receive their memorandum of points and authorities.
V. Strategy for Prong Two: Demonstrating Probability of Prevailing
A. Overview.  Even if the court finds that the Defendants have satisfied their burden on Prong One — which we will vigorously contest — we are well-positioned to demonstrate a probability of prevailing on all four causes of action asserted in the FAC. As noted above, the Prong Two standard requires only a showing of "minimal merit" — a threshold that is more than de minimis but significantly less than a preponderance of the evidence. The court does not weigh the evidence, assess credibility, or resolve competing factual inferences; it merely determines whether the plaintiff has presented sufficient evidence to sustain a favorable judgment if the plaintiff's evidence is credited. Navellier v. Sletten, 29 Cal. 4th at 88-89; Oasis West Realty, LLC v. Goldman, 51 Cal. 4th at 820.
We have substantial and compelling evidence on each element of each cause of action. The following sections organize this evidence by topic and describe the declarations and documentary exhibits we intend to submit in support of the opposition.
B. Evidence of Falsity
The cornerstone of our case on all four causes of action is the falsity of the core factual allegations contained in the three GPR reports. We have three independent sources of evidence establishing falsity, corresponding to the three principal allegations.
1. Pinnacle Audit & Advisory LLP — Declaration of Walter Ng, CPA.  We will submit a declaration from Walter Ng, CPA, the engagement partner at Pinnacle Audit & Advisory LLP who supervised the audit of RGC's consolidated financial statements for fiscal years 2021 through 2023. Mr. Ng's firm is located at 400 South 4th Street, Suite 600, Las Vegas, Nevada 89101, and has served as RGC's independent external auditor since 2019.
Mr. Ng's declaration will address the following points:
•  Pinnacle issued unqualified (clean) audit opinions for RGC's consolidated financial statements for fiscal years 2021, 2022, and 2023, confirming that the financial statements were presented fairly, in all material respects, in accordance with generally accepted accounting principles ("GAAP").
•  Pinnacle's audit of RGC's FY 2023 financial statements confirmed that RGC's reported revenue of $3.42 billion and EBITDA of $812 million (an EBITDA margin of approximately 23.7%) were fairly stated and supported by adequate documentation and substantive evidence.
•  Pinnacle's audit procedures included specific substantive testing of intercompany transactions — the mechanism through which GPR alleged the approximately $410 million in revenue was fabricated. These procedures found no evidence of fictitious intercompany transactions or fabricated revenue.
•  Pinnacle's audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB") and included risk assessments, walkthroughs, control testing, and substantive procedures tailored to the specific risks of the gaming industry.
Mr. Ng's declaration directly rebuts the central allegation of Report 1 ("House of Cards: Redstone Gaming's Manufactured Earnings"). We have already made initial contact with Mr. Ng through RGC's General Counsel, and Mr. Ng has expressed his willingness to provide a supporting declaration. We should finalize the declaration request and begin drafting by April 19, 2024, as discussed in the timeline below.
Additionally, following the publication of the GPR reports, RGC engaged Pinnacle to conduct a supplemental forensic audit focused specifically on the allegations raised in Report 1. The cost of this supplemental engagement was $1.46 million. The supplemental audit confirmed Pinnacle's original findings and found no evidence supporting GPR's allegations. While the supplemental audit report itself may contain information subject to work-product or other privilege considerations, the fact that it was conducted and the cost incurred are relevant to our damages showing.
2. Nevada Gaming Control Board RNG Audit.  The Nevada Gaming Control Board completed its independent audit of RGC's random-number-generator systems on March 29, 2024. The audit was conducted by the Board's Technology Division, which has exclusive jurisdiction over the testing and certification of electronic gaming devices and their associated software in Nevada. The Board's audit involved a comprehensive examination of the source code, testing protocols, and live-operation parameters of RGC's proprietary slot-machine software — the very systems that Report 2 alleged had been manipulated.
The Board's findings cleared RGC of any irregularity and confirmed that the Company's RNG systems operated in full compliance with Nevada Gaming Commission Regulation 14.040 and all other applicable regulations. The Board found no evidence of hidden code, dual-mode operation, or any other manipulation of the type alleged in Report 2.
We will submit a certified copy of the Board's findings, or reference the publicly available record of the Board's determination, as evidence rebutting Report 2 ("Rigged Reels: How Redstone's Slot Software Cheats the Regulators"). The Board's clearance is particularly powerful evidence because it comes from the very regulatory body that GPR alleged RGC was defrauding. The independence and credibility of the NGCB's Technology Division are well-established, and its findings should carry significant weight with the court.
We should obtain the certified copy of the Board's findings by April 22, 2024, to ensure adequate time for incorporation into the opposition brief.
3. Vermilion Holdings LLC / Related-Party Allegation.  The related-party allegation in Report 3 ("Double Down on Fraud: Redstone's Related-Party Shell Game") was based on incomplete information and presented a materially misleading picture of the relationship between RGC and Vermilion Holdings LLC. While Vermilion Holdings LLC does exist and has had certain business dealings with RGC, the characterization of these dealings as undisclosed, improper, or fraudulent related-party transactions involving CEO Marcus J. Calloway is inaccurate.
We will present evidence rebutting this allegation through a declaration from Derek Olafson, RGC's General Counsel. Mr. Olafson's declaration will address:
•  The nature and extent of any business dealings between RGC and Vermilion Holdings LLC.
•  The fact that all such dealings were conducted at arm's length, on commercially reasonable terms, and were properly disclosed in RGC's periodic SEC filings to the extent required by GAAP (specifically, ASC 850 — Related Party Disclosures) and SEC Regulation S-K.
•  The fact that CEO Calloway does not have an undisclosed beneficial ownership interest in Vermilion Holdings LLC, contrary to GPR's allegations.
•  The fact that the SEC opened an informal inquiry into the related-party allegations in March 2024 but has not taken any enforcement action. (As noted above, this inquiry was subsequently closed with no action on August 16, 2024.)
The combination of Mr. Olafson's declaration and the absence of any SEC enforcement action (or, if the court considers post-briefing developments, the closure of the inquiry with no action) substantially undermines the factual basis for Report 3.
C. Evidence of Actual Malice
As RGC is a publicly traded company, the actual-malice standard articulated in New York Times Co. v. Sullivan, 376 U.S. 254 (1964), and its progeny applies to the trade libel and related claims. Under this standard, RGC must show that the Defendants published the false statements with knowledge of their falsity or with reckless disregard for whether they were true or false. Reader's Digest Ass'n v. Superior Court, 37 Cal. 3d 244, 256 (1984); Khawar v. Globe Int'l, Inc., 19 Cal. 4th 254, 275 (1998). We have strong evidence on this element, and the evidence is drawn from multiple independent sources, providing a mutually reinforcing web of circumstantial and direct proof.
1. GPR Internal Meridian Solutions Messages.  We have obtained, through informal channels — likely produced during early informal exchanges between the parties or available through a cooperating source with access to GPR's internal communications — a set of internal Meridian Solutions messages among GPR personnel that constitute powerful direct evidence of actual malice. These messages were exchanged in the period leading up to the publication of the three reports and include communications among Tobias Fenchurch, Ava Lin, and other GPR personnel.
The Meridian Solutions messages are significant for at least two reasons:
First, the messages show that Ava Lin, GPR's senior analyst and the primary author of the reports, expressed doubts about the factual basis for the related-party allegations in Report 3 before the report was published. Specifically, Lin indicated in messages to Fenchurch that she had been unable to confirm the alleged connection between CEO Calloway and Vermilion Holdings LLC and that the evidence supporting the allegation was "circumstantial at best." Despite Lin's expressed reservations, the report was published with the related-party allegations intact and presented as established fact.
Second, the messages reveal that Fenchurch was aware that Pinnacle Audit & Advisory had issued clean audit opinions on RGC's financial statements for FY 2021-2023 and that Pinnacle's audits included testing of intercompany transactions. Despite this awareness — which directly undercut the central premise of Report 1 — Fenchurch directed publication of the revenue-fabrication allegations regardless. In one message, Fenchurch appears to have dismissed the significance of Pinnacle's clean audit opinions, suggesting that the audit firm had been "captured" by the company and that the clean opinions were therefore unreliable. This cavalier dismissal of contradictory evidence from a reputable PCAOB-registered audit firm is precisely the kind of conduct that constitutes reckless disregard for truth under the actual-malice standard.
These Meridian Solutions messages are the single most important piece of evidence in our opposition. They provide direct proof that the Defendants were aware of serious factual deficiencies in their reports and chose to publish anyway, motivated by the desire to profit from their short position. We should prioritize the authentication and presentation of these messages in the opposition.
Authentication and Admissibility: We anticipate that the Defendants may challenge the authenticity and admissibility of the informally obtained Meridian Solutions messages. We should authenticate them through a declaration from a person with personal knowledge of the messages — ideally, the cooperating source through whom they were obtained, or, if that is not feasible, through circumstantial indicia of authenticity (metadata, formatting, contextual details consistent with known facts, etc.). At the anti-SLAPP stage, the evidentiary standard is permissive. The court considers all competent evidence, including evidence that would be admissible at trial, and the standard for presenting evidence at this stage is the declaration — not formal discovery responses or deposition testimony. Sweetwater Union High School District v. Gilbane Building Co., 6 Cal. 5th 931, 948-49 (2019). We should argue that the Meridian Solutions messages are competent evidence when presented through a declaration establishing their foundation and authenticity, and that any objections to their admissibility go to weight rather than competency at this stage.
If the Defendants successfully challenge the admissibility of the Meridian Solutions messages at the anti-SLAPP stage, we should be prepared to argue, in the alternative, that the remaining evidence — including the short-position profit motive, the failure to contact RGC or regulators before publishing, and the demonstrable falsity of the allegations — is independently sufficient to establish a probability of prevailing on the actual-malice element. However, our strong preference is to get the Meridian Solutions messages before the court, as they provide the most compelling evidence of reckless disregard.
2. Fenchurch's Instructions to Publish Before Verification.  Beyond the general import of the Meridian Solutions messages discussed above, specific communications within the message set indicate that Fenchurch instructed the GPR team to publish the Vermilion Holdings allegations in Report 3 before completing verification of the underlying factual claims. Specifically, the messages indicate that Fenchurch set a publication deadline for Report 3 of February 21, 2024, and directed the team to proceed with publication on that date regardless of whether the verification process for the related-party allegations had been completed. The messages suggest that Fenchurch's concern was maintaining the momentum of the three-report publication sequence — which had been generating significant stock-price declines with each successive report — rather than ensuring the accuracy of the allegations.
This is textbook reckless disregard under the actual-malice standard. The concept of reckless disregard "cannot be fully encompassed in one infallible definition," but it includes situations where the defendant "in fact entertained serious doubts as to the truth of his publication" or where there are "obvious reasons to doubt the veracity of the informant or the accuracy of his reports." St. Amant v. Thompson, 390 U.S. 727, 732 (1968). Fenchurch's decision to publish serious fraud allegations before completing basic verification — particularly in the face of his senior analyst's expressed doubts — falls squarely within this standard.
3. The Short Position as Circumstantial Evidence of Malice.  GPR's 680,000-share short position in RDGM, with a notional value of approximately $62.66 million at the pre-publication closing price, and the estimated gross profit of approximately $13.15 million realized from the stock-price decline, constitute powerful circumstantial evidence of malice and motive. While financial motive alone does not prove actual malice as a matter of law, the California Supreme Court has recognized that evidence of motive is relevant to the actual-malice inquiry and may, in combination with other evidence, support a finding of reckless disregard. Reader's Digest Ass'n v. Superior Court, 37 Cal. 3d at 258.
Here, the financial motive is not merely a background consideration; it is the animating force behind the entire publication scheme. The chronology is telling: GPR established its short position before publishing the reports, published the reports in a carefully sequenced three-week campaign designed to maximize cumulative price impact, and closed its position after the stock price had declined to its trough. This is not the behavior of a disinterested analyst; it is the behavior of a trader executing a strategy in which the publications are the mechanism for generating trading profits.
The financial motive evidence is particularly compelling when combined with the Meridian Solutions messages showing that Fenchurch was aware of contradictory evidence (Pinnacle's clean audit opinions) and that Lin expressed doubts about the related-party allegations. The combination of a massive financial incentive to publish false information, actual awareness of contrary evidence, and documented internal doubts about the accuracy of the allegations paints a picture of reckless disregard that should readily satisfy the minimal-merit standard at Prong Two.
4. Declaration of CFO Priya Ramaswaran.  We will submit a declaration from Priya Ramaswaran, Chief Financial Officer of Redstone Gaming Corp., addressing several topics relevant to the Prong Two analysis. Ms. Ramaswaran's declaration will attest to the following:
Accuracy of Financial Statements: Ms. Ramaswaran will confirm the accuracy of RGC's consolidated financial statements for FY 2023, including the reported revenue of $3.42 billion and EBITDA of $812 million. She will attest that she is not aware of any fabricated revenue, fictitious intercompany transactions, or other irregularities in RGC's financial reporting, and that the company's financial statements were prepared in accordance with GAAP and reviewed by Pinnacle Audit & Advisory LLP.
Failure to Contact RGC: Ms. Ramaswaran will confirm that GPR never contacted RGC — through her office, through the investor relations department, through the General Counsel's office, or through any other channel — for comment or verification before publishing any of the three reports. This fact is significant both as evidence of actual malice (failure to investigate or verify before publishing serious allegations) and as evidence undermining the Defendants' characterization of the reports as responsible investigative journalism.
Damages: Ms. Ramaswaran's declaration will provide evidence of the damages suffered by RGC as a result of the GPR reports, including:
•  Stock-price decline: Cumulative decline of 21.0% from $92.14 to $72.80 per share; aggregate market-capitalization loss at trough of approximately $1.427 billion.
•  Crisis-communications costs: RGC retained Crestline Equity Partners Group Inc. (contact: Simone Arecchi) to manage the communications response to the GPR reports, including press releases, investor calls, analyst briefings, and media monitoring. The total cost of the Ashgrove Equity Partners engagement was $2.18 million.
•  Supplemental forensic audit costs: As noted above, RGC engaged Pinnacle to conduct a supplemental forensic audit focused on the allegations in Report 1. The cost of this engagement was $1.46 million.
•  Regulatory-response legal fees: RGC retained Hargrove & Sato LLP, its Nevada gaming regulatory counsel, to manage the Company's response to inquiries from the Nevada Gaming Control Board triggered by Report 2, including cooperating with the Board's independent RNG audit. The cost of the Hargrove & Sato engagement was $987,000.
•  Total out-of-pocket costs: $4.627 million ($2.18 million + $1.46 million + $987,000).
Ms. Ramaswaran will also describe the broader impact of the GPR reports on RGC's business operations, investor relations, and regulatory standing, including disruption to ongoing business development activities, the diversion of management time and attention to crisis response, damage to RGC's relationships with institutional investors, and the reputational harm associated with being publicly accused of large-scale fraud.
D. Evidence of Damages (for Trade Libel Claim Specifically)
The first cause of action in the FAC — trade libel under California Civil Code Section 46(3) — requires proof of "special damages," meaning pecuniary losses that flow directly from the defendant's false publication and are capable of being identified with specificity. ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1010 (2001). This is a more demanding damages standard than applies to the other causes of action, and we anticipate that the Defendants will challenge the adequacy of our special-damages showing as part of their Prong Two argument.
We will present evidence of special damages through two principal categories:
Stock-price decline: The cumulative 21.0% decline in RDGM stock from $92.14 to $72.80 per share, representing an aggregate market-capitalization loss of approximately $1.427 billion at the trough, constitutes direct pecuniary harm to RGC and its shareholders that is attributable to the GPR reports. The close temporal correlation between the publication of each report and the corresponding stock-price decline provides a strong basis for attributing the decline to the false publications. We acknowledge that the Defendants may argue that market-capitalization loss is too attenuated or diffuse to satisfy the special-damages requirement, and we address this anticipated argument in Section VII.C below.
Out-of-pocket costs: The $4.627 million in out-of-pocket costs documented in the Ramaswaran declaration — comprising crisis-communications costs ($2.18 million with Crestline Equity Partners Group Inc.), supplemental forensic audit costs ($1.46 million with Pinnacle Audit & Advisory LLP), and regulatory-response legal fees ($987,000 with Hargrove & Sato LLP) — constitute specific, identifiable pecuniary losses that flow directly from the GPR reports and independently satisfy the special-damages requirement for trade libel. These are expenses that RGC would not have incurred but for the publication of the false allegations.
Damages Expert: We have retained Dr. Elena Vostrikova of Meridian Forensic Economics LLC, located at 1901 Avenue of the Stars, Suite 900, Los Angeles, California 90067, as our damages expert. Dr. Vostrikova specializes in securities fraud damages analysis and event studies, and she will be able to provide a rigorous, econometric analysis of the stock-price impact attributable to the GPR reports, distinguishing the effect of the reports from any confounding market factors. Her engagement was formalized on July 1, 2024, which is after the anti-SLAPP briefing deadline. Accordingly, at the anti-SLAPP stage, we will rely on preliminary damage estimates presented through the Ramaswaran declaration rather than a formal expert report. For anti-SLAPP purposes, a preliminary showing of special damages via declaration should be sufficient to satisfy the minimal-merit standard, and we can reserve Dr. Vostrikova's full analysis for later stages of the litigation.
VI. Proposed Structure of the Opposition Brief
Based on the foregoing analysis, we propose the following structure for our opposition brief, which will be filed on or before May 10, 2024:
A. Introduction.  The introduction will frame the case in terms most favorable to our position: GPR is not a journalist, civic watchdog, or public-interest advocate. It is a profit-driven short seller that published fabricated allegations about a publicly traded company — Redstone Gaming Corp. — in order to drive down the stock price and extract profits from a pre-existing 680,000-share short position. The reports did not contribute to public debate; they constituted a coordinated campaign of market manipulation that destroyed approximately $1.427 billion in shareholder value and caused millions of dollars in out-of-pocket costs to RGC. The anti-SLAPP statute was not designed to protect this kind of conduct, and the Defendants' motion should be denied.
B. Statement of Facts
The statement of facts will provide a detailed narrative account of the relevant events, organized chronologically. It will cover:
•  The establishment of GPR's short position prior to publication.
•  The publication of the three reports (February 7, 14, and 21, 2024), including a description of the core allegations in each report.
•  The stock-price decline following each publication, with specific price data and volume information.
•  The subsequent debunking of each allegation: Pinnacle's audit confirmation, the NGCB's RNG clearance, and the status of the SEC inquiry into the related-party allegations.
•  GPR's closing of its short position by mid-March 2024 and the estimated gross profit of approximately $13.15 million.
•  GPR's failure to contact RGC or any regulatory body before publishing the reports.
•  The internal Meridian Solutions messages reflecting doubts about the factual basis for the allegations and Fenchurch's direction to publish before verification.
C. Legal Argument — Prong One
The Prong One section will present two arguments in the alternative:
Primary argument: The commercial speech exception applies, and the GPR reports are not protected activity within the meaning of Section 425.16. The reports were commercial speech designed to generate trading profits, not genuine contributions to public debate. Under FilmOn.com Inc. v. DoubleVerify Inc., the commercial nature of the speech removes it from the scope of the anti-SLAPP statute, and the motion should be denied without reaching Prong Two.
Alternative argument: Even if the commercial speech exception does not apply categorically, the Defendants' Prong One showing is insufficient because the reports were not made "in connection with" a genuine "public issue" within the meaning of Section 425.16(e). The reports were not part of a public dialogue about corporate governance, securities regulation, or gaming industry integrity; they were instruments of a private trading strategy. The Defendants' attempts to frame the reports as public-interest journalism are belied by the evidence of commercial motivation, the failure to refer concerns to regulators, and the failure to contact RGC for comment. The reports lack the hallmarks of genuine public-interest speech and should not receive anti-SLAPP protection.
D. Legal Argument — Prong Two
The Prong Two section will present our probability-of-prevailing evidence, organized by each cause of action:
1. Trade Libel (Cal. Civ. Code § 46(3)): We will demonstrate minimal merit on each element: (a) the publication of false statements of fact concerning RGC's business (the three reports); (b) publication with actual malice — knowledge of falsity or reckless disregard for truth (the Meridian Solutions messages, the short-position profit motive, and the failure to verify); and (c) special damages (the stock-price decline and out-of-pocket costs totaling $4.627 million).
2. Intentional Interference with Prospective Economic Advantage: We will demonstrate minimal merit on each element: (a) an economic relationship between RGC and its investors, business partners, and regulators; (b) Defendants' knowledge of this relationship; (c) wrongful conduct — the publication of fabricated allegations — designed and intended to interfere with these relationships; (d) actual disruption of RGC's business relationships; and (e) damages.
3. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200): We will demonstrate that the Defendants' conduct constitutes unlawful, unfair, and fraudulent business acts within the meaning of Section 17200. The unlawful prong is satisfied by the underlying torts (trade libel and intentional interference); the unfair prong is satisfied by the Defendants' systematic campaign to profit from the dissemination of false information; and the fraudulent prong is satisfied by the deceptive nature of the reports, which presented fabricated allegations as the product of rigorous investigative research.
4. Negligent Misrepresentation (added in FAC): We will demonstrate minimal merit on the elements of negligent misrepresentation: (a) Defendants owed a duty to exercise reasonable care in the research and dissemination of financial information about a publicly traded company; (b) Defendants breached this duty by publishing allegations that they had not adequately verified and that were, in fact, false; (c) the market relied on the reports, as evidenced by the immediate and substantial stock-price decline following each publication; and (d) RGC suffered damages as a result.
E. Evidentiary Appendix Plan
The opposition brief will be supported by the following evidentiary submissions:
1.  Declaration of Walter Ng, CPA (Pinnacle Audit & Advisory LLP) — Establishing the accuracy of RGC's FY 2023 financial statements and the absence of fabricated revenue, and describing the audit procedures employed.
2.  Declaration of Priya Ramaswaran (CFO, Redstone Gaming Corp.) — Establishing the accuracy of RGC's financial statements, the failure of GPR to contact RGC before publication, and the damages suffered by RGC, including out-of-pocket costs of $4.627 million.
3.  Certified copy of Nevada Gaming Control Board RNG audit clearance (dated March 29, 2024) — Establishing that the NGCB cleared RGC of any RNG irregularity and that the allegations in Report 2 are false.
4.  GPR internal Meridian Solutions messages (authenticated via declaration) — Establishing that Fenchurch was aware of contradictory evidence and directed publication regardless, and that Lin expressed doubts about the factual basis for the related-party allegations.
5.  Exhibits:
•  Copies of the three GPR reports (Reports 1, 2, and 3), with key passages highlighted.
•  RDGM stock-price charts showing the correlation between publication dates and stock-price declines.
•  GPR's short-position disclosures from each report.
•  Public filings and disclosures demonstrating the information available to GPR about Pinnacle's audit opinions and RGC's financial reporting.
We may also consider submitting a declaration from Derek Olafson, RGC's General Counsel, addressing the Vermilion Holdings LLC allegations, depending on the scope of the information that can be disclosed at this stage without prejudicing the pending SEC informal inquiry.
VII. Potential Defendants' Reply Arguments and Our Counter-Strategies
We must anticipate the arguments that the Defendants are likely to raise in their reply brief and prepare responsive strategies for each.
A. First Amendment Defense
Anticipated argument: The Defendants will argue that short-seller research is core protected speech under the First Amendment and that the anti-SLAPP statute reflects California's commitment to protecting the free and open exchange of ideas about matters of public concern, including the financial health and corporate governance of publicly traded companies. Defendants may argue that allowing this lawsuit to proceed would chill legitimate short-seller research and undermine an important market discipline function.
Our counter: The First Amendment does not protect knowingly false statements of fact. New York Times Co. v. Sullivan, 376 U.S. at 279-80; Gertz v. Robert Welch, Inc., 418 U.S. 323, 340 (1974). The constitutional guarantee of free speech has never been understood to immunize speakers who

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