A consolidated class action complaint for violation of the federal securities laws filed last Friday claims that 360 DigiTech Inc., its senior executive, board chairman, and controlling shareholder failed to comply with Chinese privacy regulations and lied to investors about it. The move follows the appointment of lead plaintiff and counsel last October.
The case was filed last July when shareholders asserted that the fintech company’s stock plunged more than 21% after Chinese regulators said that the company, through its core product, the Jietiao mobile application, was over-collecting users’ personal data without their consent.
The revised, 66-page complaint avers that the company misled investors about its compliance. “Specifically, on July 8, 2021, the last day of the Class Period, Sohu Business, a major Chinese business publication, reported that ‘the relevant person in charge [at 360 DigiTech]’ admitted that the 360 Jietiao app was pulled from the market by regulators because of Defendants’ ‘illegal use of personal information.’”
The filing also faults the defendants for downplaying a data collection warning from the Chinese government that resulted in a single-digit share price drop prior to the removal of Jietiao from app stores. Instead of informing stockholders of the potential issues facing the company, DigiTech “falsely reassure[ed] investors that the Chinese government’s scrutiny was a positive for the Company,” the plaintiffs contend.
The lawsuit seeks to certify a nationwide class of all persons or entities who or which purchased or acquired publicly traded American Depositary Shares of DigiTech from Apr. 30, 2020 through July 8, 2021 and sustained a loss. The complaint states two counts for violations of the Securities Exchange Act’s anti-fraud provisions.
Labaton Sucharow LLP is lead counsel for the lead plaintiff and the proposed class.
