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

Mealey's Securities

October 24, 2023
Federal Judge Can’t Say Trader Is Investment Adviser, Denies SEC Summary Judgment

CHARLOTTE, N.C. — A federal judge in North Carolina dismissed a request for partial summary judgment filed by the Securities and Exchange Commission in its case against a trader it accuses of making fraudulent conflict-of-interest transactions with a private fund he managed, saying the court cannot determine at the current stage of proceedings whether the trader qualifies as an investment adviser under the Investment Advisers Act of 1940.
October 24, 2023
1st Circuit Revives Investors’ Suit Claiming Falsehoods About Alzheimer’s Drug

BOSTON — A panel of the First Circuit U.S. Court of Appeals partly reversed a federal judge’s dismissal of a complaint brought by a group of investors who claimed that a pharmaceutical manufacturer and certain of its executives concealed data about an Alzheimer’s disease drug’s clinical trials, finding that the investors adequately alleged scienter regarding a single claim allegedly made by one of the executives.
October 20, 2023
West Virginia, Others Say In Amicus Brief SEC ALJs Wield Unsupervised Power

WASHINGTON, D.C. — The Securities and Exchange Commission’s use of administrative law judges (ALJs) with protections from for-cause removal is a “trifecta” of violations of articles in the U.S. Constitution, according to West Virginia and 17 other states who filed an amicus brief before the U.S. Supreme Court in support of a hedge fund manager who appealed an SEC enforcement action against him.
October 17, 2023
9th Circuit Denies Rehearing For Man Who Sold Fake Cannabis Securities

SAN FRANCISCO — The Ninth Circuit U.S. Court of Appeals rejected a petition for rehearing or rehearing en banc filed by a man who was found to have defrauded investors through the sale of unregistered and fictitious securities in a cannabis company after the panel upheld a lower court’s award of $654,042.83 against the man.
October 16, 2023
Split 9th Circuit Panel Rules Investor Not A Party, Lacks Jurisdiction For Appeal

SAN FRANCISCO — A split panel of the Ninth Circuit U.S. Court of Appeals dismissed an appeal of an investor who filed the initial complaint alleging that a digital health care company and three of its former executives made misleading statements about a new product, finding that the investor lacked jurisdiction as he was no longer a party to the complaint after a retirement fund was named the lead plaintiff.
October 16, 2023
Supreme Court Grants Certiorari In 2nd Challenge To Chevron Deference

WASHINGTON, D.C. — The U.S. Supreme Court on Oct. 13 granted a petition for a writ of certiorari in a second case challenging the doctrine of Chevron deference and ordered that it be briefed on a schedule allowing argument “in tandem” with a pending case pertaining to the same issue, both of which involve challenges to regulations that require fishing vessels to pay federal monitors.
October 13, 2023
FTX Investor Says Competitor’s Tweets Caused ‘Collapse’ In Value

OAKLAND, Calif. — An investor in FTX Trading Ltd. filed a putative class action in California federal court accusing Binance Holdings Ltd., a competing cryptocurrency exchange, its affiliates and its CEO of violating securities laws and California’s unfair competition law (UCL) by selling off FTX tokens and tweeting negative statements about FTX that allegedly contributed to FTX’s “collapse.”
October 12, 2023
SEC Says Trustees Misread Liquidity Rule In Opposition To Complaint

SYRACUSE, N.Y. — The Securities and Exchange Commission filed a surreply in a New York federal court saying that a mutual fund’s trustees incorrectly argue that the SEC previously said it could not adopt a new liquidity rule; the argument first appeared in the trustees’ reply brief in support of their motion to dismiss the SEC’s civil complaint alleging that the fund and its principals violated the Liquidity Rule by having more than 15% of its assets in illiquid investments.
October 12, 2023
Hedge Fund Manager Tells High Court SEC ALJs Violate Constitutional Rights

WASHINGTON, D.C. — A hedge fund manager says the Fifth Circuit U.S. Court of Appeals was correct to vacate a Securities and Exchange Commission enforcement action against him, arguing in an Oct. 11 respondent brief before the U.S. Supreme Court that the SEC’s use of administrative law judges (ALJs) to adjudicate enforcement actions violates multiple provisions of the U.S. Constitution.
October 12, 2023
NVIDIA Calls 9th Circuit Opinion A ‘Gutting’ Of Securities Rules, Seeks Rehearing

SAN FRANCISCO — Computer manufacturer NVIDIA Corp. filed a petition for rehearing en banc before the Ninth Circuit U.S. Court of Appeals, arguing that the appeals court created a “gaping loophole” for plaintiffs to bypass the Private Securities Litigation Reform Act of 1995 (PLSRA) by partially reversing the dismissal of a complaint filed by shareholders who accused the company and certain of its executives of making misleading statements about the impact of cryptocurrency-related sales on the company.
October 12, 2023
Federal Judge Dismisses Investor’s Complaint Over Alleged Online Misstatements

LOS ANGELES — A federal judge in California dismissed with prejudice the second amended complaint filed by a late investor’s daughter who continued to argue that a real estate company misled investors while seeking crowdfunding through social media statements after the investor’s death, finding that the daughter had failed to adequately plead falsity and that amending the complaint would be futile.
October 12, 2023
11th Circuit Won’t Rehear Tupperware Securities Fraud Case, Denies Investor Petition

ATLANTA — The 11th Circuit U.S. Court of Appeals denied a petition for rehearing en banc filed by an investor in Tupperware Brands Corp. who argued that the court’s affirming of the dismissal of the complaint against the company and certain of its former executives for allegedly misrepresenting its financial results conflicts with 11th Circuit and Supreme Court precedent regarding scienter.
October 12, 2023
Investor, Brewer Spar Over Falsity, Scienter In Seltzer Misstatement Case

NEW YORK — The Second Circuit U.S. Court of Appeals granted a motion to take judicial notice of a newly found slide containing sales analysis of a hard seltzer brand in a case brought by an investor who claims that the drink’s manufacturer made misleading statements about the growth of the product to investors.
October 11, 2023
SEC Seeks To Compel Musk’s Testimony In Twitter Investigation

SAN FRANCISCO — The Securities and Exchange Commission filed an application in the U.S. District Court for the Northern District of California for an order to compel Elon Musk to testify as part of an SEC investigation into his 2022 purchase of stock in Twitter Inc., saying Musk refused to comply with an administrative subpoena in September after having agreed to testify in May and called the subpoena harassment.
October 10, 2023
U.S. High Court Hears Arguments From Parties, U.S. In SOX Whistleblower Suit

WASHINGTON, D.C. — A worker suing under the Sarbanes-Oxley Act’s (SOX) whistleblower protection provision needs to show only “that his protected conduct was a contributing factor in the unfavorable personnel action,” the attorney representing a man who alleges that he was wrongfully fired after reporting fraud told the U.S. Supreme Court Oct. 10 during oral arguments.
October 06, 2023
Federal Judge Rejects SEC Bid For Interlocutory Appeal In Crypto Suit

NEW YORK — A New York federal judge denied a request from the Securities and Exchange Commission for interlocutory appeal in a case brought by the commission against a crypto asset firm it accused of selling cryptocurrencies without registering them as a security, finding that the SEC did not show that there was a substantial ground for difference of opinion
October 06, 2023
SEC Says Court Should Reject Coinbase’s Motion For Judgment On Crypto Case

NEW YORK — The Securities and Exchange Commission says that Coinbase Inc.’s motion for a judgment on the pleadings should be denied, arguing in a memorandum of law that Coinbase is asking the U.S. District Court for the Southern District of New York to rule that sales of cryptocurrency on its platform can never involve an investment contract because the SEC says this runs afoul of established tests to determine whether a product is a security.
October 06, 2023
Company ‘Improperly’ Disputes Class Certification In Fraud Case, Investors Say

HOUSTON — Shareholders in a class action against a hydraulic fracturing company and three of its senior executives filed a sur-reply brief in Texas federal court arguing that the fracking operator seeks to “improperly turn class certification into summary judgment on an incomplete record by repeatedly filing selective excerpts of deposition testimony on disputed factual issues that have no bearing on whether a class may be certified.”
October 06, 2023
Capital Management Firm Says District Court Finding Does Not Narrow Securities Law

NEW YORK — A federal magistrate judge in New York was right to find that a shareholder lacked standing to file his shareholder derivative complaint seeking disgorgement of short-swing profits earned by a capital management company that owned more than a 10% stake in 1-800-Flowers.com, the capital management company argues in a brief before the Second Circuit U.S. Court of Appeals by the capital management company and contrary to the arguments in filings from the shareholder and the Securities and Exchange Commission as an amicus curiae.
October 06, 2023
Investors Call Gaming CEO’s Scienter ‘Straightforward’ In Appeal To 9th Circuit

SAN FRANCISCO — Shareholders of video game development company Activision Blizzard Inc. maintain in a reply to the company’s appellee brief before the Ninth Circuit U.S. Court of Appeals that the shareholders adequately established in their putative class complaint that certain of the company’s executives knowingly made false or misleading statements about the company’s allegedly toxic workplace culture, saying the company is incorrect to characterize investigations brought by both federal and California authorities as “‘routine.’”
October 05, 2023
6th Circuit Finds Welfare Fund Fails To Plead Scienter In Terminix Fraud Complaint

CINCINNATI — A panel of judges in the Sixth Circuit U.S. Court of Appeals found that a federal judge in Tennessee was correct to dismiss a putative class complaint filed by a welfare fund against a pest control company and certain of its executives it accused of making misleading statements about its growth and concealing a legal battle over a destructive type of termite, with the panel agreeing that the welfare fund failed to present a strong inference of scienter.
October 05, 2023
Federal Judge Partially Dismisses Twitter Stock Takeover Suit Against Musk

NEW YORK — A federal judge in New York largely denied a motion from Elon Musk to dismiss a complaint filed against him and a trust in his name by a pension fund that alleges that Musk illegally concealed his growing ownership stake in the company formerly called Twitter Inc., finding that the pension fund had adequately pleaded scienter and loss causation; the judge dismissed only a claim of insider trading against Musk.
October 03, 2023
Judge: Statements That AI Lending Platform Is ‘Magical’ Were Optimistic, Puffery

CINCINNATI — Claims that a lending platform’s artificial intelligence’s “magical” abilities would “shine” during periods of risk are nothing more than optimistic statements and puffery, while claims that its model could approve more loans at lower rates than traditional systems during such times are verifiable and actionable, a federal judge in Ohio said in partly granting motions to dismiss a securities class action.
October 02, 2023
High Court Won’t Hear Case On Extraterritoriality Of Commodities Law

WASHINGTON, D.C. — The U.S. Supreme Court on Oct. 2 denied a petition for a writ of certiorari filed by a trader who argued that the Second Circuit U.S. Court of Appeals erred in holding that his Commodity Exchange Act (CEA) claims were extraterritorial, even though his trades took place on a U.S. commodities exchange, because he alleged that the banks’ actions in manipulating the prices of the futures contracts took place outside the United States.
October 02, 2023
Certiorari Denied For Real Estate Company Accused Of Misleading Investors

WASHINGTON, D.C. — The U.S. Supreme Court on Oct. 2 denied a petition for a writ of certiorari filed by a real estate company after the Ninth Circuit U.S. Court of Appeals found that an investor had sufficiently pleaded that the company and its CEO engaged in the solicitation of investments by means of a series of allegedly misleading social media statements.