Ed J. Hershewe, individually and on behalf of all others similarly situated v. Joyy Inc. f/k/a YY Inc.; David Xueling Li; Bing Jin; and Eric He
Published: Nov. 11, 2022 | Result Date: Mar. 10, 2022 | Filing Date: Nov. 20, 2020 |Case number: 2:20-cv-10611-SB-AFM Bench Decision – Dismissal
Judge
Court
CD CA
Attorneys
Plaintiff
Reed R. Kathrein
(Hagens, Berman, Sobol & Shapiro LLP)
Lucas E. Gilmore
(Hagens, Berman, Sobol & Shapiro LLP)
Murielle J. Steven Walsh
(Pomerantz LLP)
Eric D. Gottlieb
(Pomerantz LLP)
Peretz Bronstein
(Bronstein, Gewirtz & Grossman, LLC)
Defendant
Stephen P. Blake
(Simpson, Thacher & Bartlett LLP)
James G. Kreissman
(Simpson, Thacher & Bartlett LLP)
Bo Bryan Jin
(Simpson, Thacher & Bartlett LLP)
Facts
JOYY is a social media platform that is based in Guangzhou, China. The company operates live-streaming platforms, including YY Live and Bigo Live, which offer music and dance shows, talk shows, sports, and online dating.
In November 2020, JOYY announced that the Chinese internet giant Baidu, Inc. would be acquiring their live streaming business, YY Live, in an all-cash US$3.6 billion deal. The next day, Muddy Watters Capital LLC published an investigative report alleging massive fraudulent activity by YY Live. On the same day that the report was published, JOYY's stock dropped by 26 percent.
Ed Hershewe, Gedion Demmissie and Suresh Goyal brought a class action against JOYY Inc., formally known as YY Inc.; David Xueling Li, the company's CEO; Bing Jin, the company's CFO; and Eric He, the company's former CFO.
Contentions
PLAINTIFFS' CONTENTIONS: Plaintiffs alleged that defendants engaged in a fraudulent course of conduct designed to inflate JOYY's reported number of users and financial results and enrich corporate insiders. Specifically, throughout the class period, defendants touted its rising revenues, attributing the growth to the increase in paying users. Plaintiffs contended that defendants made statements that were false and/or misleading and/or failed to disclose that a material portion of users at any given time were bots; the company used these bots to effect a roundtripping scheme that manufactured the false appearance of revenues; that as a result JOYY materially overstated its revenue, cash, performance and growth; and/or that the company's acquisition of Bigo, a company owned by defendant Li, was largely contrived to benefit corporate insiders. By failing to disclose the true state of JOYY's business and operations, defendants presented a misleading picture of JOYY's conditions and value. Shareholders invested based on these false premises.
DEFENDANTS' CONTENTIONS: Defendants denied all contentions.
Result
The court granted the defendants' motion to dismiss.
Other Information
The case is currently being appealed.
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