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

Mealey's 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.
May 02, 2024
2nd Circuit Largely Finds Bank Can’t Bring Claims Over Mortgage-Backed Securities

NEW YORK — A panel of the Second Circuit U.S. Court of Appeals narrowly agreed with a German banking organization that appealed multiple orders from federal judges in New York in its suit claiming that another banking organization mishandled residential mortgage-backed securities (RMBS), finding that no action clauses in agreements for the securities do not preclude the bank from filing claims.
April 30, 2024
5th Circuit Vacates Class Certification In Oil Company Securities Suit

NEW ORLEANS — A Fifth Circuit U.S. Court of Appeals panel vacated a class certification order issued by a federal judge in Texas in a securities action brought by investors against a petroleum corporation and certain of its executives, finding that the judge erred by not allowing the petroleum company to file a sur-reply after the investors included evidence for the first time in a reply brief.
April 30, 2024
Shareholders To 3rd Circuit: Revive Securities Case Against Reinsurer, Execs

PHILADELPHIA — Arguing in part that one holding “invented a ‘total eclipse’ standard lacking any basis in” Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, shareholders filed an appellant brief challenging discovery and summary judgment rulings in a suit over allegations that a reinsurer and some of its former executives violated federal securities laws.
April 30, 2024
Investors: Facebook Mischaracterizes 9th Circuit Ruling In High Court Petition

WASHINGTON, D.C. — Investors who brought a securities putative class complaint against the social media giant formerly known as Facebook Inc. tell the U.S. Supreme Court in an April 29 opposition brief that the Ninth Circuit U.S. Court of Appeals did not create a circuit split when it partly revived the complaint, saying Facebook is wrong to say the Ninth Circuit held that companies must disclose events that pose no risk of business harm.
April 29, 2024
High Court Won’t Consider Constitutionality Of Musk Consent Judgment With SEC

WASHINGTON, D.C. — The U.S. Supreme Court on April 29 denied a petition for a writ of certiorari from Elon Musk, who argued that the Securities and Exchange Commission violated his constitutional rights by imposing prior restraint as a condition for a consent judgment he signed with the SEC.
April 26, 2024
7th Circuit Revives Some ERISA Claims In Suit Over Company’s Valuation

CHICAGO — A Seventh Circuit U.S. Court of Appeals panel upheld dismissal of all federal securities and state law claims in a sprawling suit involving an employee stock ownership plan (ESOP) and alleged price inflation but reversed and remanded on some Employee Retirement Income Security Act claims against the selling company’s directors and officers and the ESOP’s independent trustees.