Riskified Wins Dismissal of Securities Class Action Over IPO Disclosures

Paul, Weiss secured the dismissal, with prejudice, of a putative securities class action against our client Riskified Ltd. and its officers and directors based on purported omissions and misleading statements issued in connection with Riskified’s July 2021 IPO.

Riskified is a technology company that offers fraud detection services to merchants in a variety of industries. A key feature of Riskified’s product is its Chargeback Guarantee, by which it reimburses merchant customers for chargebacks due to any fraudulent transactions that Riskified’s software fails to detect. In their May 2022 complaint in the Southern District of New York alleging claims under the Securities Act, plaintiffs alleged that Riskified’s IPO registration statement failed to disclose that it had been taking on riskier customers with higher chargeback rates, allegedly leading to an increased chargeback-to-billings (CTB) ratio and lower gross profit margins.

Echoing our arguments, U.S. District Judge Denise Cote rejected the plaintiffs’ claims, holding that the second amended complaint failed to adequately plead that a trend of shifting of merchant mix towards a greater proportion of riskier customers existed at the time of the IPO, and that Riskified’s disclosures with respect to the issue were “robust.” Judge Cote also held that statements Riskified made about fluctuations in CTB ratio and gross profits margins, the company’s attempts to control exposure to chargeback expenses, and the impact of Covid-19 on its business were not misleading when read in context.

The Paul, Weiss team included litigation partner Audra Soloway and counsel Daniel Sinnreich.