(Article from Registered Funds Regulatory Update, April 2026)
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On October 29, 2025, an investor in the Wildermuth Fund, a closed-end mutual fund registered with the SEC, filed a class action lawsuit in the District Court of New Jersey against the Fund, its adviser, members of its board, its former auditor and several executives for allegedly engaging in valuation fraud. The Complaint was brought on behalf of investors who purchased shares of the Fund between November 2020 and June 2023 asserting violations of the Exchange Act and the 1940 Act. The Complaint alleges that the Fund’s financial statements were “materially false and misleading” and the Fund’s NAV was “grossly overstated” during the class period as a result of Defendants’ actions.
According to the Complaint, the Fund’s initial stated investment objective was intended to mimic that of an endowment fund. However, Defendants allege that over time, the Fund shifted its investment strategy more heavily into riskier private equity investments. Despite this, the Complaint alleges that the Fund failed to disclose to shareholders that it was almost exclusively invested in private equity. In addition, the Complaint highlights conflict-based concerns, noting that the Fund purchased interests in portfolio companies mostly benefitting the Adviser, including its owners, married couple Daniel and Carol Wildermuth. Other alleged conflicts raised in the Complaint include that Daniel Wildermuth, the former President and CEO of the Fund, served on the boards of the portfolio companies in which the Fund invested, thereby earning director compensation while simultaneously collecting the Fund’s annual advisory fees. Moreover, Carol Wildermuth also was a founder and CEO of a broker-dealer that earned Fund commissions and fees.
The Adviser and certain senior executives, including the Fund’s former CEO and CFO, and several members of the Fund’s board allegedly approved Fund valuations that did not reflect the reality of or the operational difficulties at the underlying portfolio companies. Plaintiffs allege that while “the operations and financial trajectory of the portfolio companies were in steady, persistent decline…the Fund’s NAV reflected a steady portfolio, which was simply untrue.” The Complaint notes that these portfolio companies faced declining revenue and recurring cash flow constraints, and adds that certain portfolio companies instead relied upon ongoing cash infusions from the Fund to continue operations, allegedly “propp[ing] up these portfolio companies and, in turn, artificially propp[ing] up the NAV of the Fund.” Despite these facts, the Complaint states, the Board and its valuation and fair value committees continuously approved quarterly and annual valuations without sufficient and reliable evidence to support them.
Further, the Fund’s independent auditor, WithumSmith+Brown, PC, also named in the Complaint, issued unqualified opinions on the Fund’s financial statements during the class period, reporting that the financial statements and financial highlights were presented fairly in all material respects in accordance with GAAP. Despite these assertions, the Complaint alleges that the auditor did not obtain sufficient audit evidence, referencing prior PCAOB reports related to the auditor’s inspection history, and did not apply adequate professional skepticism when reviewing the Fund’s private equity valuations. Accordingly, the Complaint asserts that the auditor “knew or was reckless in not knowing” that the Fund, and specifically Daniel and Carol Wildermuth, “lacked credible support” for the Fund’s valuations.
In June 2023, the Fund announced a plan of liquidation, adopted based on the recommendations of the Adviser and the Board. In connection with this, investors were notified that there were no issues with the underlying investments held by the Fund. Thereafter, in November 2023, Plaintiffs described a shift in valuation outcomes following the resignation of Daniel and Carol Wildermuth from the Fund and the termination of the Adviser, which was replaced by BW Asset Management, a subsidiary of Kroll, as the new adviser. BWAM conducted an independent assessment of the Fund’s private equity holdings, which “told a completely different story” than previous annual reports and public disclosures. For example, BWAM reported that the Fund’s NAV declined sharply as a result portfolio company underperformance, rather than the a loss of certain tax advantages as previously suggested by Defendants. BWAM’s findings included a comparison of reported values in March 2022 and October 2024 and found that the Fund’s investments and NAV had declined by 63.6% and 73.7%, respectively. By 2024, the Fund’s NAV had been reduced to less than $2.00 per share, an 80% reduction in NAV per share. In light of these facts, the Complaint asserts that Defendants knew the Fund’s NAV was grossly overstated, resulting in the Adviser receiving excessive fees based on the Fund’s overstated NAV.
The Complaint asserts claims under the anti-fraud provisions under the Exchange Act, alleging that the Fund and its officers, investment adviser, and the Board defrauded investors by, among other actions, making material misstatements and omissions in periodic SEC filings in order to systematically overstate the value of the Fund’s holdings and artificially maintain inflated prices for the Fund’s securities. The Complaint also brings control person liability claims against the adviser, officers, and a trustee for violations committed under the Exchange Act, as well as a derivative excessive-fee claim against the adviser and the Board under the 1940 Act. The auditor is also alleged to have violated the anti-fraud provisions of the Exchange Act by issuing unqualified audit opinions despite the absence of credible support for portfolio valuations.
Complaint, Cramer v. WithumSmith+Brown, PC et al. (D.N.J. Oct. 29, 2025).