The Brisbane-based investment firm was worth over $1 billion in market capitalisation at its peak in 2017. This plummeted after short-seller Glaucus reported on "wildly exaggerated" assets in the company in March 2018.
By May 2019, the firm's market capitalisation was just $14 million when receivers were brought in.
In the class action, filed in the Federal Court on Monday, Blue Sky Alternative Investments is said to have misled the public by painting an overly rosy picture of its finances from 2017 to 2019.
The firm is accused of hiding "material uncertainties" which showed its future may not have been as bright as promised.
"(Each) of the (financial reports) did not give a true and fair view of the financial position and performance of (Blue Sky)," court documents say.
Blue Sky made misleading and deceptive statements through its financial reports and announcements, and failed to release critical information to the public, the lawsuit claims.
The class action, which is being run by Shine Lawyers, also includes claims against former executive director Robert Warner Shand, former chairman John Bruce Kain and auditors Ernst & Young.
Mr Shand, Mr Kain and EY are accused of hyping up the firm's finances.
This misinformation boosted the share price of Blue Sky shares and caused investors loss when the price ultimately plummeted, the lawsuit claims.
Shine's class actions practice leader Craig Allsopp said investors were left with worthless shares once Blue Sky's true financial position was revealed.
"This was a catastrophic financial collapse which left hundreds of shareholders worse off. We'll be looking to hold those responsible to account and try to recoup as much of the losses as we can," he said.
David Furniss, the shareholder leading the class action, still holds 722 Blue Sky shares which he purchased for $13.80 per share in January 2018.
The lawsuit seeks compensation, damages, interest and legal costs.
In August, another class action was filed by shareholder R&B Investments, represented by Sydney-based law firm Banton Group, over the Blue Sky collapse.
As well as Mr Shand, Mr Kain and EY, this earlier lawsuit also targets former directors Timothy Wilson, Nicholas Dignam, Michael Gordon, Philip Hennessy, Alexander McNab, Kim Morison, Elaine Stead and Mark Sowerby.
If the two class actions cannot be run together in co-operation between Shine and Banton Group, the Federal Court may need to hold what's called a "beauty parade" to figure out which lawsuit offers the best deal to shareholders.
In January 2021, Ms Stead successfully sued the now Nine-owned Fairfax for defamation over a series of Australian Financial Review articles regarding her time at Blue Sky.
The Federal Court awarded her $280,000 in damages after AFR journalist Joe Aston referred to her as a "feminist cretin", a "stupid person" and a "prodigious destroyer of capital" in a number of Rear Window columns published in 2018 and 2019.
In his defamation judgment, Justice Michael Lee said he had not made findings on why Blue Sky collapsed or on the legal or moral appropriateness of the directors' actions.
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