After winning a sizeable default judgment against China-based Longtop Financial Technologies Limited and its CEO, in only the 14th securities class action to go to trial and reach a verdict since the enactment of the PSLRA in 1995, Kessler Topaz secured a jury verdict against Longtop’s former CFO.
We alleged that Longtop was a complete fraud from its initial public offering in October 2007 through the day the New York Stock Exchange permanently delisted Longtop in August 2011, saddling investors with hundreds of millions of dollars in losses and worthless American Depositary Shares (ADS). Plaintiffs claimed that Longtop publically reported false revenues, artificially inflated cash balances, failed to disclose tens of millions of dollars in loan obligations, and falsely reported quarterly profits.
In February 2010, the market began questioning the legitimacy of Longtop’s financial statements, causing the value of Longtop ADSs to decline. Then in May 2011, Longtop stunned investors when it announced that its outside auditor had abruptly resigned, describing in its resignation letter various fraudulent activities that Longtop had undertaken. Longtop ADSs, which reached an all-time high of over $42 per ADS, became worthless.
When defendants Longtop and its CEO failed to appear in the action, Kessler Topaz obtained a default judgment which found them jointly and severally liable to pay damages of $882.3 million plus 9% interest on such amount from February 21, 2008 to the date of payment. When the company’s former CFO denied that he had any part in the securities fraud, Kessler Topaz took him to trial where a jury unanimously found otherwise. In a rare verdict among securities class actions (only 13 other securities class actions have reached a verdict since the enactment of the PSLRA in 1995), the jury found that Longtop’s CFO was reckless in making untrue statements or omitting facts about the company.