According to a press release dated May 22, 2007, the Complaint charges that Defendants Xinhua, certain officer of the Company, J.P. Morgan Securities Inc., UBS AG, CIBC World Markets Corp., and WR Hambrecht & Co., LLC made, or facilitated, misleading statements in the Company's March 8, 2007 prospectus (the "Prospectus"), issued in connection with the offering of 23,076,932 ADSs, representing 46,153,846 common shares at $13 per share.
The Complaint alleges that the Prospectus failed to disclose material information that since April 2006, prior to the Company's IPO, Shelly Singhal, the Company's CFO at the time of the IPO, was simultaneously an investment banker and stockbroker in charge of Bedrock Securities ("Bedrock"). Since April 2006, prior to the Company's IPO, Bedrock had been under a Nasdaq cease-and-desist order for violating SEC regulations. Moreover, reports also surfaced that Singhal had been fighting a private civil racketeering lawsuit in California and had previously been a major investor in AremisSoft and ACLN, companies previously sued for fraud by the SEC. This information was never disclosed in the Prospectus.
On July 26, 2007, Judge Laura Taylor Swain signed the Order consolidating several actions under lead case In re Xinhua Finance Media, Ltd. Securities Litigation, Master File No. 07 cv 3994. On August 22, 20007, the Yen-Li Group was appointed lead plaintiff and the law firms of Bernstein Liebhard & Lifshitz LLP and Kahn Gauthier Swick, LLC, were appointed co-lead counsel. On October 22, 2007, the lead plaintiffs filed a Consolidated Amended Class Action Complaint. The defendants responded by filing two motions to dismiss on December 21, 2007. On February 25, 2009, Judge Swain granted the defendants’ motions to dismiss with prejudice. The Clerk’s Judgment was entered on April 2, 2009, and the case was closed.