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Investment research firm Muddy Waters LLC and its founder Carson Block will face a lawsuit alleging they withheld a former partner’s share of a $14 million whistleblower award from the U.S. Securities and Exchange Commission (SEC), following a decision by a federal judge in New York.

Chief U.S. District Judge Laura Taylor Swain on Monday denied a motion to dismiss filed by Muddy Waters and Block, affirming the court’s jurisdiction over the case. The judge cited evidence of multiple business meetings between the parties in Manhattan and noted the defendants’ purposeful engagement in New York in connection with the business activities underlying the lawsuit.

The suit, originally filed by former JPMorgan financial professional Kevin Barnes, alleges that he and Block entered into an oral partnership in 2011 to collaborate on research projects exposing inflated stock prices of certain U.S.-listed Chinese companies, including Focus Media Holding Ltd. Barnes claims he provided research and financial analysis while Muddy Waters was responsible for publicizing the findings.

After the publication of their report in November 2021, the SEC launched an investigation that led to a $55.6 million settlement with Focus Media in 2015. Barnes alleges that Block applied for a whistleblower award without including him and ultimately received $14 million from the SEC, while Barnes’ own application was denied.

Judge Swain ruled that Barnes’ claims, including unjust enrichment and breach of fiduciary duty, have sufficient basis to proceed. However, a separate claim for constructive trust was dismissed without prejudice pending further developments.

The court has ordered Block and Muddy Waters to respond to the complaint within 21 days, with the case now referred to a magistrate judge for pretrial management.

Counsel for the parties have not commented on the ruling.