(Bloomberg) -- Distressed debt firm Invictus Global Management sued one of its top financial backers, claiming that private equity investor Gatewood Capital Partners lied about the amount of support it could provide.

The lawsuit, filed in New York state court, comes less than two months after Gatewood and another investor voted to fire Invictus from its job overseeing distressed-debt funds that the specialty fund manager created and developed.

“Gatewood’s apparent modus operandi is to prey on emerging managers by making promises that it has no intention of delivering: the classic ‘bait and switch’ scheme,” Invictus said in the lawsuit.

Invictus, founded in 2019, uses investor money to buy up distressed debt and loan money to bankrupt companies, including discount retailer Tuesday Morning Corp. 

Invictus accepted $25 million from Gatewood under a deal that gave Gatewood a break on fees and limited the amount of cash that could be demanded as part of a capital call. Such onerous terms scared away other potential investors and left Invictus more reliant on Gatewood, the lawsuit alleges.

Invictus claims it accepted the terms because Gatewood promised to bring in as much as $200 million for Invictus to manage, according to the lawsuit.

The company asked a judge to throw out the funding contract Invictus signed with Gatewood in 2020.

“Gatewood considers the lawsuit filed against it to be baseless and retaliatory, and intends to vigorously defend itself,” the company said in an emailed statement.

The suit is Invictus Global Management, LLC versus Gatewood Capital Partners, LLC, Supreme Court of the State of New York. 

--With assistance from Reshmi Basu.

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