EVW Secures Dismissal of $45 Million Federal Securities Fraud Claim

EVW Partner Lawrence Steckman obtained a with prejudice dismissal of class plaintiffs’ amended pleading, which alleged Rule 10b-5 securities fraud claims against an auditor of a China reverse merger company.

The pleading claimed that the audit firm recklessly failed to include a subsequent events disclosure regarding alleged, improper, related-party loans rendering its GAAP and PCAOB compliance opinion fraudulent under Rule 10b-5.

By Memorandum Order dated July 16, 2015, the court dismissed plaintiffs’ claim seeking in excess of $45 million. Judge Rakoff held that even if the court were to consider various allegations that plaintiffs had taken from an SEC complaint in a different matter against other parties, they still failed to properly plead a strong inference of knowing falsity under the Reform Act, requiring dismissal.