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Mealey's Securities

July 14, 2023
California Federal Judge Certifies 2 Classes In Ripple Securities Litigation

SAN FRANCISCO — Allegations an issuer of cryptocurrency tokens and its CEO violated state and federal law by failing to register as a security will proceed as a class action, a federal judge in California has ruled.
July 14, 2023
Letters From SEC, Coinbase To New York Federal Judge Prompt Hearing

NEW YORK — At a July 13 hearing before a New York federal judge, Coinbase Inc. and the Securities and Exchange Commission were given one week to clarify which motions they plan to pursue on the heels of a letter one week earlier indicating that the SEC will ask the court to strike various affirmative defenses raised by Coinbase, including invocation of the “major questions” doctrine, if the cryptocurrency company wins leave to seek judgment on the pleadings.
July 13, 2023
Nonprofit Firm, Others Support High Court Ruling On Item 303 Disclosures

WASHINGTON, D.C. — A nonprofit law firm and two business groups filed two amicus briefs in the U.S. Supreme Court supporting a petition asking the justices to decide whether the Second Circuit U.S. Court of Appeals erred when it held that a failure to make a disclosure under Item 303 of Securities and Exchange Commission Regulation S-K can support a private claim under Section 10(b) of the Securities Exchange Act.
July 13, 2023
Gap Shareholder Seeks Full Court Rehearing After Divided Ruling In Forum Dispute

SAN FRANCISCO — A shareholder in The Gap Inc. filed a petition for rehearing en banc by the full Ninth Circuit U.S. Court of Appeals in a dispute over statements made regarding diversity after the limited en banc court issued a split opinion on the proper forum for the case and ability to bring a derivative action; Public Citizen and two other nonprofits filed an amicus brief supporting the petition.
July 13, 2023
Under Ciminelli, 2 Are Acquitted Of Convictions For Wire Fraud Conspiracy

BROOKLYN, N.Y. — Citing Ciminelli v. United States, a New York federal judge on July 12 granted a judgment of acquittal on a count of conspiracy to commit wire fraud to two former hedge fund executives who were convicted of that and other crimes in the case regarding an alleged scheme involving a reinsurer; alternatively, he granted the executives a new trial on only that count.
July 13, 2023
Energy Company Overstated AI Platform’s Role In Business, Class Suit Alleges

SAN FRANCISCO — An energy storage company touted the high margins permitted by, and the desirability of, its artificial intelligence platform, only to disclose that its financial results were “dramatically worse” than the guidance it gave just a few months earlier, according to a securities class action filed in California federal court.
July 12, 2023
SEC In Amicus Brief Tells 2nd Circuit Fiduciary Breach Causes ‘Redressable Injury’

NEW YORK — A breach of fiduciary duty alone causes “redressable injury” sufficient to establish standing in a case under Section 16(b) of the Securities Exchange Act as nothing more is required to comply with TransUnion LLC v. Ramirez, the Securities and Exchange Commission argues in an amicus brief filed in the Second Circuit U.S. Court of Appeals supporting a shareholder’s allegation that a trial court wrongly determined that he lacked standing to seek disgorgement of short-swing profits accrued by the beneficial owners of more than 10% of 1-800-Flowers.com Inc.’s stock.
July 12, 2023
Municipal Bond Flippers Ask Supreme Court To Review Scope Of Brokers, Penalties

WASHINGTON, D.C. — Three municipal bond traders found to be unregistered brokers and assessed penalties they say “vastly exceed the ostensible statutory caps set by Congress” filed a petition for a writ of certiorari asking the Supreme Court justices to rule on the statutory penalty caps, the proper test for determining who are securities brokers and whether they were improperly deprived of a jury trial.
July 12, 2023
AI Drug Company Overstated Prospects, Securities Class Alleges

BRIDGEPORT, Conn. — A company harnessing artificial intelligence (AI) to identify new uses for existing medications continued to release positive statements about its upcoming drug and failed to disclose that it lacked the necessary controls and that underlying problems with clinical trials would delay the release, a securities class action in a federal Connecticut court alleges.
July 12, 2023
Worker, U.S. To High Court: Retaliatory Intent Not Needed In SOX Whistleblower Suit

WASHINGTON, D.C. — A strategist who sued his employer under the Sarbanes-Oxley Act’s (SOX) whistleblower protection provision refiled his petitioner brief in the U.S. Supreme Court on July 11 with “minor charges,” arguing that proof of “retaliatory intent” is not needed; the employee’s position was supported by a recent amicus brief filed by the United States.
July 12, 2023
11th Circuit: Pension Fund Had Standing To Sue But Failed To Show Loss Causation

ATLANTA — A trial erred when it ruled that a pension fund lacked standing to bring claims against an amniotic tissue supplier and former executives under Section 10(b) of the Securities Exchange Act but properly dismissed the putative class complaint when it determined that the former stockholder failed demonstrate loss causation as the disclosures that caused stock prices to tumble occurred after the fund sold its stock, an 11th Circuit U.S. Court of Appeals panel ruled.
July 12, 2023
Coinbase Invokes ‘Major Questions’ Doctrine In Answer To SEC Complaint

NEW YORK — In a recent filing with a federal judge in New York, Coinbase Inc. accuses the Securities and Exchange Commission of “dramatically” expanding its authority to regulate digital assets without a congressional mandate, adopting a posture Coinbase calls “untenable as a matter of law” and one that threatens due process and the separation of powers.
July 12, 2023
Panel Retains Jurisdiction Over Coinbase Petition, Defers Mandamus Ruling

PHILADELPHIA — The Third Circuit U.S. Court of Appeals has deferred ruling on a bid for mandamus in view of recent correspondence from the U.S. Securities and Exchange Commission indicating that a final recommendation on a request by Coinbase Inc. for rulemaking on cryptocurrency assets is expected within 120 days.
July 11, 2023
U.S. Chamber: Sanctions In Shareholder Derivative Action Were Warranted

DENVER — The U.S. Chamber of Commerce as amicus curiae has urged the 10th Circuit U.S. Court of Appeals to uphold a $1.5 million sanction against counsel in a “doomed to fail” shareholder derivative action, but the two law firms that represented the unsuccessful plaintiffs fired back less than a month later that the award is unwarranted and unprecedented.
July 10, 2023
Summary Judgment Sought By SEC, Digital Asset Firm In Suit Over Failure To Register

NEW YORK — Both sides moved for summary judgment in a lawsuit in a federal court in New York in which the Securities and Exchange Commission accuses a digital asset firm of offering or selling billions of units of its digital token as securities without registering them as such.
July 10, 2023
Derivative Action Against SolarWinds Executives, Directors Tossed In Texas

AUSTIN, Texas — One dozen current and former executives and directors of SolarWinds Corp. will not face allegations in Texas federal court that they were aware their flagship cybersecurity product was vulnerable to hackers yet failed to disclose as much publicly in advance of a cyberattack that caused stock prices to plummet.
July 07, 2023
United States: ‘Proof Of Retaliatory Intent’ Not Needed In SOX Whistleblower Case

WASHINGTON, D.C. — The Second Circuit U.S. Court of Appeals erred when it ruled that the “contributing factor” test used for claims under the Sarbanes-Oxley Act’s (SOX) whistleblower protection provision “requires proof of retaliatory intent,” the United States argues in an amicus curiae brief filed in the U.S. Supreme Court supporting arguments by a strategist who alleges that he was wrongly fired by his employer.
July 07, 2023
D.C. Circuit Halts Expedited Enforcement Proceeding Against Broker

WASHINGTON, D.C. — A divided District of Columbia Circuit U.S. Court of Appeals enjoined the Financial Industry Regulatory Authority (FINRA) from carrying out expedited enforcement proceedings against a securities broker, with a panel majority deeming the “stringent requirements” for an injunction pending appeal satisfied.
July 06, 2023
J&J Securities Plaintiff, Asbestos Expert Counter Need To Revisit Subpoena Issue

TRENTON, N.J. — Asbestos lawyers, an expert and plaintiffs in a securities class action told a federal judge in New Jersey that he should reject Johnson & Johnson’s untimely and unnecessary request to reconsider a ruling quashing sanctions to nonparties.
July 06, 2023
$3.5M Class Settlement Approved In Crypto Securities Case

NEW HAVEN, Conn. — A federal judge in Connecticut granted final approval of a $3.5 million settlement reached between a class of investors and the control person for two cryptocurrency companies in a case stemming from the alleged operation of a Ponzi scheme-like fraud that was slated for a new trial after a jury trial resulted in a complete defense verdict.
July 06, 2023
Asbestos Securities Plaintiff Refutes Need To Revisit J&J Third-Party Subpoenas

TRENTON, N.J. — A court need not reconsider a ruling quashing third-party subpoenas because even if Johnson & Johnson (J&J) obtained all the evidence it seeks with the subpoenas, the information discovered would not refute the statistically significant drop in stock price that happened in the wake of media reports that the company knew for decades about asbestos contamination of its talc, a plaintiff for a putative securities class told a federal judge in New Jersey in a response brief.
June 30, 2023
High Court Grants SEC’s Petition On Agency Adjudication Of Enforcement Action

WASHINGTON, D.C. — The U.S. Supreme Court this afternoon granted a petition for a writ of certiorari filed by the Securities and Exchange Commission challenging a Fifth Circuit U.S. Court of Appeals decision on the agency’s adjudication of securities fraud claims concerning a hedge fund manager and the fund’s investment adviser and denied a conditional cross-petition filed by those two parties.
June 30, 2023
Pfizer Employee, Friend Indicted, Sued For Trading On Paxlovid Insider Information

NEW YORK — An employee of drugmaker Pfizer Inc. and his friend were indicted and sued for securities fraud on June 29 for allegedly using inside information about Pfizer’s Paxlovid COVID-19 treatment to profit off a stock bump after the drug’s approval was publicly announced.
June 30, 2023
Disgorgement Recalculation, Retroactive Application Of NDAA Upheld By 2nd Circuit

NEW YORK — A trial court properly recalculated a fugitive joint venture capitalist’s disgorgement obligation related to misappropriating funds in light of 2021 amendments to the Securities Exchange Act of 1934, a Second Circuit U.S. Court of Appeals panel ruled in an opinion in which it vacated portions of the ruling concerning frozen assets challenged by the fugitive’s wife and minor children.
June 29, 2023
11th Circuit: $12.14M Judgment In Unregistered Securities Case Can’t Be Appealed

ATLANTA — A $12.14 million judgment against a participant in an unregistered, fraudulent securities scheme that ordered disgorgement of profits and other civil penalties can’t be challenged on appeal as the participant consented to a judgment of liability and issuance of a permanent injunction, with damages to be determined later, an 11th Circuit U.S. Court of Appeals panel ruled in an unpublished per curiam opinion.