Facts

HF Foods, formerly known as Atlantic Acquisition Corp, distributed food products to Asian restaurants located primarily in the Southeastern, Pacific, and Mountain West regions of the United States. Zhou Min Ni and Chan Sin Wong founded HF Foods' processor, HF Group Holding Corporation. In August 2018, Atlantic completed a merger with the corporation, "HP Group Holding Corporation" and began publicly trading as HF Foods. In November 2019, HF Foods completed a different merger transaction with B&R Global Holdings, Inc., a California-based Asian food distributor to create the largest distributor to Asian restaurants in the United States. Xiao Mou Zhang served as the company's Chairman and since November 2019, he and Zhou Min Ni have served as the co-Chief Executive Officers of the company. Chan Sin Wong, the other co-founder, served as the President, CEO, and Director of the company until November 2019 and served as an executive of many of the company's key operating subsidiaries. Caixuan Xu currently serves as the company's Chief Internal Control Officer and was previously its CFO and Principal Accounting Officer. Jian Ming Ni served as the company's Chief Financial Officer until April 2019. Raymond Ni is the son of Chan Sin Wong and Zhou Min Ni and owned 100% of both Revolution Industry, LLC and Revolution Automotive, LLC. The company's October 2, 2019 Schedule 14A proxy disclosed that HF Foods reported over $2 million in purchases from Revolution Industry for the year ended December 31, 2018, and about $1.6 million in purchases from Revolution Industry for the six months ended June 30, 2019. On March 23, 2020, the Hindenburg Report was posted on the internet that exposed several adverse facts about HF Foods. The same day, the company's stock price dropped $2.52 per share. On November 9, 2020, the company's stock price dropped $0.77 per share, about 9% of the share value, after the company filed its SEC quarterly filing stating that the SEC had initiated a formal, non-public investigation into the company. On December 4, 2020, Jesus Mendoza filed an amended putative securities class action complaint against HF Foods Group, Inc., and the executives of the company during the relevant time period, Zhou Min Ni, Xiao Mou Zhang, Jian Ming Ni, and Caixuan Xu. The class included other investors who acquired HF Foods securities between August 23, 2018, and November 9, 2020.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that defendants facilitated and concealed various party transactions between the company and other entities, including suspicious transactions with Revolution Industry and Revolution Automotive LLC, both owned by Raymond Ni, the son of Zhou Min Ni and Chan Sin Wong and that Zhou Min Ni had a majority ownership in NC Noodle, a company that worked with HF Group. Further, plaintiff alleged that the company's merger with B&R constituted a related party transaction because both companies were part of the same Chinese investment group for years prior to acquisition. Further, plaintiff argued that defendants failed to disclose the company's ownership of a fleet of vehicles worth nearly $1.6 million for personal, non-business use by Chan Sin Wong and Zhou Min Ni. Plaintiff also contended that defendants' calculations in the FTSE/Russell index were intentionally erroneously. Thus, plaintiff maintained that as a result of his statements and nondisclosures defendants knowingly and recklessly made materially false and misleading statements regarding the company's business, operational, and compliance policies that were intended to deceive the investing public and artificially inflate the market price of the company's securities. Moreover, defendants participated directly or indirectly in the preparation and issuance of the quarterly and annual reports, SEC filings, proxies, press releases, and other statements made to securities analysts and the media that were designed to influence the market for HF Foods securities and had actual knowledge of the false and misleading statements as a virtue of their positions at HF Foods. Plaintiff alleged that he and the other class members acquired HF Foods securities at artificially inflated prices during the class period and were damaged upon the revelation of the alleged corrective disclosures in the Hindenburg Report. Finally, plaintiff contended that as a direct and proximate result of defendants' wrongful acts and omissions and the precipitous decline in the market value of the company's securities, plaintiff and the other class members suffered significant losses and damages.

DEFENDANTS' CONTENTIONS: Defendants denied all contentions.

Result

The court granted the defendants' motion to dismiss with prejudice.