In exchange for committing capital to help launch a fund, companies that provide seed or founders’ capital are often granted special redemption rights and economic incentives such as reduced management and performance fees or a share of the fund manager’s fee income.  See “Participants at Eighth Annual Hedge Fund General Counsel Summit Discuss Terms with Institutional Investors, Seeding Arrangements and the Convergence of Mutual Funds and Hedge Funds (Part Four of Four),” Hedge Fund Law Report, Vol. 8, No. 7 (Feb. 19, 2015).  Structuring such arrangements, however, can be challenging.  A recent dispute between seed investor BlueCrest Capital Opportunities Limited (BlueCrest) and Meredith Whitney’s hedge fund management company illustrates how the interplay of fund organizational documents, seeding agreements and side letters can cause confusion even among the most sophisticated players.  In 2013, BlueCrest seeded a new Whitney fund.  The fund performed poorly, and BlueCrest demanded redemption of its entire seed stake, citing a side letter that said that BlueCrest would not be subject to any lock-ups or other limitations on redemption.  Whitney pushed back, claiming that the separate investment agreement pursuant to which BlueCrest provided seed capital mandated a two-year lockup.  BlueCrest commenced an action in New York State Supreme Court to force Whitney to pay the demanded redemption proceeds and set aside the redemption proceeds pending the litigation.  This article summarizes the background of the dispute, the provisions of the relevant agreements, BlueCrest’s complaint, court hearings with respect to BlueCrest’s requests for a temporary restraining order and preliminary injunction, and the rationale for the court’s decision on the preliminary injunction motion.