Mealey's Securities : Mealey's : Legal News & Analysis

Mealey's Securities

May 30, 2024
Judge Enters Judgment Against CEO Of Investment Firm SEC Says Misstated Assets

NEW YORK — A federal judge in New York granted the Securities and Exchange Commission’s request to enter judgment against a man who had agreed to settle claims the commission brought against him alleging that he signed off on false claims issued by the investment adviser firm he co-owns substantially overstating the assets the fund managed.
May 29, 2024
Federal Judge Dismisses Case In Which SEC Used False Info For Restraining Order

SALT LAKE CITY — A federal judge in Utah on May 28 dismissed without prejudice the Securities and Exchange Commission’s case against several defendants it accused of using a cryptocurrency scheme to defraud investors out of at least $49 million at the SEC’s request after imposing sanctions on the SEC for using false information when applying for a temporary restraining order (TRO), telling the crypto entities that dismissing the case with prejudice would amount to an additional sanction.
May 24, 2024
Federal Judge: No Personal Jurisdiction Over Activist Shareholder Sued By Exxon

FORT WORTH, Texas — A federal judge in Texas dismissed one of two activist shareholder groups from a suit brought by Exxon Mobil Corp. seeking a declaration that a climate change proposal made by the groups can be left off the company’s proxy statement, determining that the court does not have personal jurisdiction over the entity.
May 24, 2024
5th Circuit Hears Arguments In Rehearing Over SEC Disclosure Rule

NEW ORLEANS — On the day before the Fifth Circuit U.S. Court of Appeals heard oral arguments in an en banc rehearing for two petitioners who question whether the Securities and Exchange Commission had the right to approve a rule implemented by Nasdaq Stock Market LLC that requires companies listed on the exchange to publicly disclose information about the race and gender identity of their board members, one of the petitioners again said in a supplemental brief that the SEC did not show that it had the authority to approve the rule.
May 23, 2024
11th Circuit Affirms Disgorgement From Man Who Violated SEC Order

ATLANTA — A man accused by the Securities and Exchange Commission of violating an agreement with the commission by continuing to promote penny stocks after being ordered not to will be required to pay more than $700,000 in disgorgement and penalties after a panel of the 11th Circuit U.S. Court of Appeals ruled that a Florida federal judge did not abuse his discretion when determining the amount to be disgorged.
May 23, 2024
Federal Judge OKs Attorney Fees In Suit Over FriendFinder Shares

NEW YORK — Two investment firms that accused the founder of a social networking website of attempting to force the firms to sell their stake in the company at a discount will pay more than half a million dollars in attorney fees after a New York federal judge found May 22 that the firms brought their suit despite unambiguous terms of the firms’ purchase of securities.
May 23, 2024
Federal Judge Partly Grants SEC Request For Judgment Against Crypto Influencer

AUSTIN, Texas — A federal judge in Texas on May 22 found that a crypto asset influencer sold an unregistered security by selling crypto tokens to investors from a pool he controlled, partially granting a motion for summary judgment from the Securities and Exchange Commission and denying a motion for summary judgment filed by the influencer.
May 14, 2024
COMMENTARY: The Risk In Disclosing Risk Factors

By Jordan Eth and Jocelyn Greer
May 22, 2024
Bankruptcy Judge OKs Crypto Company’s $2B Settlement With New York AG

WHITE PLAINS, N.Y. — A federal bankruptcy judge in New York approved a settlement between bankrupt cryptocurrency platforms and the New York Attorney General’s Office (NYAG) that will resolve claims that the platforms defrauded investors out of billions of dollars; the settlement creates a victim’s fund that will receive up to $2 billion of the platforms’ remaining assets.
May 22, 2024
Counsel Withdrawal Hearing Continued In SEC Suit Against Insolvent Insurers’ Owner

WINSTON-SALEM, N.C. — A North Carolina federal magistrate judge granted, in part, a joint motion to appear remotely at a hearing scheduled in the U.S. Securities and Exchange Commission’s suit alleging that an advisory services company, its former executive and its former owner, who also owned now-insolvent insurers, defrauded clients of more than $75 million, continuing the hearing and requiring the parties to file a joint status report by May 23.
May 22, 2024
Federal Judge OKs SEC Subpoena Over Musk’s Claims Of ‘Harassment’

SAN FRANCISCO — A federal judge in California ordered the enforcement of a Securities and Exchange Commission subpoena targeting Elon Musk as part of an investigation into Musk’s 2022 purchase of stock in the company formerly known as Twitter Inc., finding that the “SEC’s actions were constitutional, and the subpoena reasonably seeks information relevant to the SEC’s investigation.”
May 21, 2024
Ohio Federal Judge ‘Reluctantly’ Tosses Shareholder Claims Related To Bribery

AKRON, Ohio — A federal judge in Ohio “reluctantly granted” a joint motion to dismiss a shareholder derivative lawsuit stemming from the alleged involvement of an energy company’s board of directors in a massive bribery, racketeering and pay-to-play scheme with Ohio legislators after the Sixth Circuit U.S. Court of Appeals affirmed a settlement of a parallel shareholder derivative complaint filed in another Ohio federal court.
May 21, 2024
2nd Circuit: Filing Of Amended Securities Disclosures Moots Claims

NEW YORK — A panel of the Second Circuit U.S. Court of Appeals on May 20 found that a New York federal judge was correct to dismiss a 3D-printing company’s suit alleging that hedge funds did not show on disclosure forms that they were acting as a group when purchasing more than 5% of the company’s shares, finding that the claims were mooted by the funds’ filing of amended disclosure forms.
May 21, 2024
3rd Circuit Won’t Review Class Certification In Suit Related To FCA Violations

PHILADELPHIA — The Third Circuit U.S. Court of Appeals denied a petition seeking interlocutory review of a district court’s order granting class certification in a suit alleging that Teva Pharmaceuticals Industries Ltd. and its executives violated the Securities Exchange Act by artificially raising the price of its stock and concealing information about the multiple sclerosis drug Copaxone, the subject of a False Claims Act (FCA) suit alleging that Teva engaged in a kickback scheme that increased the price of the drug, finding that “interlocutory review is not appropriate” at the class certification stage as to a merits review of the Securities Exchange Act.
May 21, 2024
7th Circuit: Investors, Not Fund Are Priority In Ponzi Asset Liquidation

CHICAGO — A panel of the Seventh Circuit U.S. Court of Appeals upheld an Illinois federal judge’s decision to award priority to individual investors over a private lender to receive proceeds from the liquidation of assets related to a Ponzi scheme, finding that the Illinois Mortgage Act establishes that payment cannot extinguish a preexisting security interest without a valid release, which did not occur.
May 16, 2024
Missouri Officials Win Deposition Dispute In Row Over ESG Factor Rules

JEFFERSON CITY, Mo. — A trade association lost a discovery dispute in its challenge to new Missouri rules that it says require “a state-authored script” for “incorporating a social or nonfinancial objective into investment advice,” with a Missouri federal judge on May 15 rejecting its request to depose Missouri Secretary of State John R. Ashcroft.
May 15, 2024
Federal Judge Narrowly Vacates Securities Claims Dismissal After Reconsideration

PHOENIX — A federal judge in Arizona on May 14 vacated portions of a previous order dismissing a putative securities class complaint brought by retirement funds alleging that an online home-selling company made false statements about its artificial-intelligence-powered pricing algorithm, finding that the retirement funds adequately showed that an allegedly misleading statement about the algorithm relates to the funds’ alleged losses.
May 14, 2024
5th Circuit: States Lack Standing For Review Of SEC Vote Disclosure Rule

NEW ORLEANS — A panel of judges in the Fifth Circuit U.S. Court of Appeals dismissed without prejudice a request by four states to review a Securities and Exchange Commission rule that will require investment funds to disclose proxy voting records on issues related to environmental, social and governance (ESG) matters, determining that the states lack standing because they failed to show how investors in their states would suffer an economic injury as a result of the rule.
May 13, 2024
11th Circuit: Liquidators Untimely Appealed Distribution Plan In SEC Enforcement

ATLANTA — The 11th Circuit U.S. Court of Appeals denied a petition for rehearing filed by the joint official liquidators of an investment fund named as a relief defendant in an enforcement action brought by the Securities and Exchange Commission who requested that the appeals court reconsider its determination that the liquidators untimely appealed a Florida federal judge’s approval of a distribution plan.
May 10, 2024
$6M Fracking Securities Deal Gets Final Approval From Ohio Federal Judge

YOUNGSTOWN, Ohio — A federal judge in Ohio on May 9 granted final approval to a $6 million settlement in a securities fraud case pertaining to a hydraulic fracturing company, ruling that the relief that shareholders in the company will receive passes the test for “fairness, reasonableness, and adequacy of the settlement.”
May 09, 2024
Magistrate Denies Motion For Indicative Relief In FCA Suit Alleging Overcharging

SAN FRANCISCO — A California federal magistrate judge denied a relator’s motion for an indicative ruling that pursuant to the Ninth Circuit U.S. Court of Appeals’ decision in United States ex rel. Silbersher v. Valeant Pharms. Int’l, Inc., a similar False Claims Act (FCA) suit brought by the same relator, the magistrate judge should grant the relator “relief” from the judgment on appeal to the Ninth Circuit after dismissing his claims that pharmaceutical companies overcharged the federal government and states under Medicare and Medicaid.
May 07, 2024
9th Circuit: Judge Failed To Consider Investors’ Arguments When Staying Claims

SAN FRANCISCO — A panel of judges in the Ninth Circuit U.S. Court of Appeals reversed a California federal judge’s decision to stay all proceedings in a putative securities class action brought against an energy company over alleged misstatements about its wildfire safety protocols before a series of large fires in California, certain of its executives, directors and bond underwriters after the company’s bankruptcy, finding that the judge failed to consider whether the stay would cause hardships that outweigh any benefits.
May 07, 2024
Parties Reach Agreement In Principle To Settle Fracking Securities Litigation

HOUSTON — A federal judge in Texas has issued an order directing the parties in a shareholder lawsuit against a hydraulic fracturing operator and three of its senior executives to file a settlement agreement and a motion for preliminary approval in light of the parties’ joint motion notifying the district court that they have reached an agreement in principle to settle the case. The parties did not provide details related to the agreement.
May 07, 2024
3rd Circuit: De Novo Review Must Be Used For Shareholders’ Demand Futility Appeals

PHILADELPHIA — The Third District U.S. Court of Appeals determined in an en banc opinion that de novo review, and not abuse-of-discretion review, should be the standard of review when the court reviews a federal judge’s decision to dismiss a shareholder derivative complaint for a plaintiff’s failure to plead demand futility, overturning precedent that has been in place in the Third Circuit since 1992.
May 03, 2024
Delaware Supreme Court Revives Investor Derivative Suit Against Tech Company

WILMINGTON, Del. — The Delaware Supreme Court reversed a decision from the Delaware Court of Chancery dismissing a derivative shareholder putative class complaint brought by investors against a technology company and certain of its executives challenging the acquisition of the company by a private equity firm, finding that the Court of Chancery erred in holding that minority stockholders were adequately informed about the merger.