Dakota Labs, the HRA Group’s lab-grown diamond division, has sued Huron Capital, former owner of WD Lab Grown, claiming WD knew it wouldn’t be able to pay Dakota for cutting and polishing work that WD hired it to do.

According to a complaint filed April 9 in Michigan federal court, WD signed a contract in 2021 for Dakota to manufacture WD product. The deal required Dakota to significantly expand its facilities and purchase additional machinery, and WD pledged to pay it $109,417 per month to cut stones at its Toronto facility and another $180,000 month for use of its factory in Vietnam, the filing said.

Dakota also alleged that WD executives said their company was financially healthy, as it was backed by Huron, “a large private equity firm.” Yet by 2023, WD was no longer paying Dakota’s invoices, and in July and September of that year, Dakota filed claims against WD in British Columbia, according to the complaint.

“WD Lab Grown was severely undercapitalized,” Dakota said in its filing. “Indeed, by the time of its bankruptcy, it listed a little over $3 million in assets (much of which was in the form of accounts receivable owed to it) but more than $44.7 million in liabilities. No reasonable person could have believed that WD could pay for the services for which it was contracting with Dakota Labs.”

In November 2023, about a month after WD filed for bankruptcy, its CEO Michael Grunza and other former WD executives formed a new company, WD Advanced Materials, which Dakota’s complaint called “almost the same business with mostly the same people in control and almost the same name.”

The suit said Dakota is targeting Huron Capital, as well as Grunza, because “WD Lab Grown operated as a mere instrumentality of Huron Capital, subject to its total control. Almost every board member, including Grunza, was a Huron Capital partner or principal.”

Huron Capital declined comment. Grunza didn’t respond to a request for comment.

(Photo courtesy of WD Lab Grown)

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