Easterly Fund Litigation Update: Judge Allows Claims Related to Illiquid Investment Limits and Misleading Omissions

The judge presiding over a putative class action related to the Easterly Fund collapse recently denied a motion to dismiss the plaintiffs’ claims that the Easterly Fund exceeded its illiquid investment limits and that its managers omitted material information about securities that were in default. This is a significant development for both the plaintiffs in the litigation and other investors considering coming forward. Investors with questions should consult a securities arbitration lawyer promptly.

The firms and individuals behind the Easterly ROCMuni High Income Municipal Bond Fund (the “Easterly Fund”), which collapsed last June, are facing lawsuits and arbitration proceedings filed by investors across the country. While many investors are pursuing claims in FINRA arbitration—which allows them to seek full compensation for their investment losses—some have chosen to pursue a putative class action in federal district court.

A notable development recently occurred in the putative class action. On August 17, 2026, Judge Cote of the U.S. District Court for the Southern District of New York (SDNY) issued an order addressing multiple motions filed in the case. One of these was the defendants’ motion to dismiss the plaintiffs’ complaint in full. While Judge Cote granted the motion as to certain defendants, she denied it as to the others—and, in doing so, noted two claims in particular that the plaintiffs had “plausibly allege[d].”

Easterly Fund Defendants Allegedly Exceeded the Fund’s Illiquid Investment Limits

One of these claims involved the plaintiffs’ allegations that the Easterly Fund exceeded its self-imposed illiquid investment limit. According to the plaintiffs, the Easterly Fund’s registration statements stated that the Fund would not hold more than 15 percent of its net assets in illiquid investments. The registration statements defined “illiquid investments” in accordance with SEC Rule 22e-4 (as investments that the Fund “reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment”).

The plaintiffs alleged that the Easterly Fund failed to comply with its self-imposed illiquid investment limit from July 2022 through June 2025. According to the plaintiffs, the fund acquired several securities that “exhibited numerous characteristics that . . . are indicative of illiquidity.”

In response, the defendants asserted several arguments, including accusing the plaintiffs of “rel[ying] impermissibly on hindsight.” While Judge Cote acknowledged that the defendants’ arguments, “may ultimately bear on the weight of [the plaintiffs’] evidence,” she determined that they did not warrant pre-trial dismissal.

Easterly Fund Defendants Allegedly Omitted Information About Securities that Were in Default

The other claim that Judge Cote specifically noted was the plaintiffs’ claim related to the defendants’ failure to fully disclose securities that were in default. As explained in the August 17 order:

“The [plaintiffs] allege[] that the Fund’s 2024 semiannual and annual financial statements identified certain portfolio securities as being in default while allegedly failing to identify other securities that were likewise in default. Those financial statements were incorporated into the [Fund’s] September, October, and December 2024 registration statements. Consequently, in those registration statements, the Fund understated its exposure to distressed assets, which a reasonable investor would consider relevant in assessing the investment.”

While the defendants argued that they had disclosed the relevant defaults elsewhere, Judge Cote rejected this argument on two key grounds. First, she cited Second Circuit precedent holding that, “the mere availability elsewhere of truthful information cannot excuse untruths or misleading omissions.” Second, she noted that federal law requires registrations to be “materially accurate.” Accordingly, she allowed the plaintiffs’ allegations that the Easterly Fund failed to disclose defaulted securities to proceed.

FAQs: Seeking Compensation for Easterly Fund Investment Losses

Which investors are eligible to file claims related to the Easterly Fund collapse?

All investors who suffered losses when the Easterly Fund collapsed in June 2025 may be eligible to file damage claims. This includes investors who relied on the recommendations or discretion of brokerage firms such as Charles Schwab & Co., Oppenheimer & Co., Raymond James Financial Services, Inc., and RBC Capital Markets, LLC (click here for a complete list).

How can investors seek compensation for losses from the Easterly Fund collapse?

While some investors are pursuing class action litigation, our firm is representing defrauded investors in Financial Industry Regulatory Authority (FINRA) arbitration. Investors who file FINRA arbitration claims can seek full compensation for their losses from their brokerage firms.

What is the current status of the Easterly ROCMuni High Income Municipal Bond Fund?

The Easterly ROCMuni High Income Municipal Bond Fund is currently undergoing liquidation, though it faces challenges related to the pending putative class action lawsuit discussed above. In this case, investors stuck with Easterly Fund losses will likely be better off pursuing claims against their brokerage firms rather than pursuing claims against the Easterly Fund directly. If you need to know more, our lawyers can help you make informed decisions about your next steps.

How Zamansky LLC Can Help

Zamansky LLC is a securities fraud law firm that exclusively represents defrauded investors. If you suffered losses when the Easterly Fund collapsed, our lawyers can determine if you have a claim against your brokerage firm.

If you do, we can pursue your claim in FINRA arbitration. We have extensive experience helping investors recover losses through arbitration, and we can use that experience to seek accountability on your behalf. The statute of limitations for claims related to the Easterly Fund collapse has not yet expired, so we encourage you to contact us to discuss your claim today.

Schedule a Free Consultation with a Securities Arbitration Lawyer Today

To speak with a securities arbitration lawyer at Zamansky LLC about filing a claim related to the Easterly Fund collapse, contact us today. Call us at 212-742-1414 or tell us how we can reach you online to arrange a free, no-obligation initial consultation.