The meltdown in pharmaceutical firm Valeant over the last few months has had major repercussions on Wall Street. A number of well-known investors and hedge funds, including Bill Ackman’s Pershing Square, had large positions in the beleaguered drug maker, and have suffered huge losses as the stock is down almost 70% since August. Things have only gotten worse recently, as VRX has lost more than 20% of its market cap in the last three days trading. Related to this, the firm that runs the Sequoia Fund has been sued by shareholders who are arguing the fund managers recklessly took a huge stake in embattled drug company Valeant Pharmaceuticals, leading to over $2 billion in losses for the fund.

Valeant (VRX) Sequoia

More on shareholder lawsuit against Sequoia Fund

In the lawsuit, investment firm Ruane, Cunniff & Goldfarb; portfolio managers Robert Goldfarb and David Poppe; and two directors were accused of gross negligence for letting Sequoia amass a Valeant stake that peaked at 32 percent of its portfolio in August.

Additional defendants in the lawsuit include Roger Lowenstein, who chairs the board at the Sequoia Fund, and BoD director Robert Swiggett. The lawsuit is looking for damages and return of management fees to reimburse the fund.

The complaint filed was filed last Friday in a New York state court in Manhattan, and alleges that the defendants intentionally ignored Sequoia’s policy of not investing more than 25% of assets in a single sector.

Sequoia ended up with a loss of 7.3% in 2015. The fund does, however, remains in the top percentile of like funds over a 15 year period, according to data from Morningstar.

Excerpts from the complaint in Sequoia lawsuit

The complaint referred to the huge stake in risky Valeant as the “antithesis” of Sequoia’s supposed strategy of seeking value investments such as Buffett’s Berkshire Hathaway, its second-biggest holding.

Valeant shares have tumbled over 65% since mi-summer with worries regardin its drug pricing policies, merger spree and the firm’s relationship with a shady mail-order pharmacy.

According to the complaint, Sequoia’s investment in Valeant “is akin to a gambler at the race track betting more than one quarter of his net worth on a fast horse with a history of maladies and with improbably high odds.”

The court filing goes on to note: “Just as it should come as no surprise to the gambler when the horse pulls up lame, the same holds equally true for the defendants.”