Embattled expatriate rich-lister Eric Watson's global legal wrangles have widened further after investors in his Bendon underwear company filed suit in New York courts alleging "an age-old sleight of hand".

According to a complaint filed in Southern District of New York courts, venture capital firm Alrai, founded by Vinjay Menda, bought a $12m stake in Bendon in April last year as the underwear company readied for a public float.

The complaint alleged this purchase was based on representations that Alrai would, after Bendon listed on the Nasdaq following a reverse-merger with minnow Naked Brands, own 7.6 per cent of the new company.

Instead, Alrai has claimed, after the float in June it received only 78 per cent of its share entitlement and it was seeking the courts to award a restoration of its shareholdings and $6.8m in damages.


"At the root of the scheme was an age-old sleight of hand, in which the [Naked Brand Group] sought to deceive Alrai into believing that it was receiving 9,600,000 ordinary shares in the merger ... when, in fact, Alrai would not be recorded that number of shares," the complaint read.

The complaint describes Watson as a "highly publicised New Zealand entrepreneur" who - through various trusts and holding companies - owned more than 80 per cent of Bendon prior to the share sale and float and details meetings between him and Menda discussing Alrai's investment.

Naked Brand Group, named in the suit as defendant, has yet to file a defence to the action, and questions about the case sent to Watson's spokeswoman this week went unanswered.

The complaint said Alrai had received "varied and shifting" explanation for the dilution and believed calculations provided by the company to support the lesser amount were "utterly contrived and indefensible".

Alrai claimed the dispute over its shareholding resulted in the company refusing to register its shares, making it lose the opportunity to sell before the company's share price tanked.

Immediately after the float in June 2018 Naked shares were trading at USD8.50, but in the months since has had a rocky ride and this week the company's shares were changing hands for less than USD4.

The complaint contrasts a bullish investor memo issued to promote the merger in early 2017 with subsequent financial disclosures.

"Not included in the investment memo was Bendon's poor financial performance over the prior few years, which had left the business in serious need of cash that it was otherwise unable to generate through its money-losing operations," the complaint said.


Subsequent filings to the SEC show Bendon had been making eight-figure losses in each of the past three years, including posting accounts showing it was $37m in the red for the year to January 2018.

Comment has been sought from Watson.

The New York court action represents a deepening of Watson's legal mire, running parallel to separate long-running and high-stakes struggles with former business partner Sir Owen Glenn and New Zealand's Commissioner of Inland Revenue.

Last month English courts sided decisively with Glenn in ruling Watson had engaged in deceit in a joint-venture between the pair. The decision - which Watson has signalled he would appeal - saw Glenn regain control of the £129m he had contributed to the venture.

And in a case, separate to other action involving Watson, the High Court in Auckland is currently hearing a challenge by his Cullen Group to Inland Revenue assessments its complex Cayman Islands restructuring in 2002 amounted to $112m in tax avoidance.​ [see covering email]