Velodyne’s Graf-Backed SPAC Deal Draws Challenge From Investor

A former Velodyne Lidar Inc. shareholder sued the architects of its blank-check merger, claiming they duped investors into a doomed deal that gave insiders a huge windfall.

The lawsuit, made public Wednesday, targets hedge fund Owl Creek Asset Management LP and other backers of Graf Industrial Corp., the special purpose acquisition company that combined with Velodyne to take it public. The company, which developed autonomous driving technology, later merged with Ouster Inc., a rival also formed by a SPAC transaction.

The proposed class action echoes dozens of other cases in Delaware’s Chancery Court, the country’s premier venue for M&A fights, ...