Canaan IPO Underwriters Win Dismissal of Securities Fraud Claims

Paul, Weiss won the dismissal of securities fraud claims brought against our clients, underwriters of an IPO by China-based company Canaan Inc., which manufactures computer hardware used for mining Bitcoin.

In their putative securities class action, filed in March 2020 in the District of Oregon and transferred to the Southern District of New York, the plaintiffs alleged that Canaan’s registration statement failed to disclose certain related party transactions that were later disclosed in a short-seller report, leading to a drop in Canaan’s stock price. The plaintiffs asserted claims against Canaan, its officers and directors, and the underwriters of Canaan’s November 2019 IPO under Sections 10(b) and 20(a) of the Securities Exchange Act and Sections 11 and 15 of the Securities Act.

In July 2021, the court granted the defendants’ motion to dismiss the claims, holding that the plaintiffs failed to adequately plead loss causation concerning two of the alleged omissions and materiality concerning the third alleged omission. The court, however, dismissed the claims without prejudice, and in August 2021, the plaintiffs sought leave to amend the complaint, which our clients opposed. On March 31, the court issued an order denying the plaintiffs’ motion for leave to amend and dismissing their claims with prejudice. The court agreed with the defendants that the plaintiffs’ attempted reframing of their claims based on two of the three alleged omissions suffered from the same defects as their initial complaint. Claims against Canaan, represented by co-defense counsel, were also dismissed.

The Paul, Weiss team included litigation partners Susanna Buergel, Yahonnes Cleary and Audra Soloway.