Past Cases

In re China Mediaexpress Holding, Inc. Shareholder Litigation

Status Past Case

Practice area Securities Litigation & Investor Protection

Court U.S. District Court, Southern District of New York

Case number 1:11-cv-00804


On January 17, 2014, Judge Victor Marrero of the United States District Court for the Southern District of New York issued a default judgment against China Mediaexpress Holdings in the amount of $535 million, having found that the Defendant knowingly violated federal securities laws. The Court also certified the class of investors who suffered losses as a result of their purchase of shares of China Mediaexpress (CME) common stock, their purchase of CME call options, and/or their sale of CME put options between October 5, 2009, and March 11, 2011.

On May 5, 2015, Plaintiffs filed an unopposed motion for preliminary approval for a $12 million all-cash settlement against co-defendant, Deloitte Touche Tohmatsu, a Hong Kong accounting firm that served as the independent auditor for China MediaExpress, Holdings Inc. Allegedly, DTT knowingly misled investors on CME’s financial health. 

On September 18, 2015, the Court issued a final judgement related to all litigation pertaining to In re China Mediaexpress Holding Shareholder Litigation, thereby binding all settlements and concluding the litigation against CME and DTT.

Separately, in 2013, the U.S. Securities and Exchange Commission filed investor fraud enforcement action, seeking to enjoin Zheng Cheng, the Chairman and CEO of CME, from holding any future role as an officer or director of any issuer with the SEC.

Cohen Milstein was court-appointed Co-Counsel for the investor class.

Case Background

At the time of the litigation, China MediaExpress, a U.S. listed company, was purported to own the largest television advertising network on buses throughout 18 of China’s regions, including Beijing. According to the complaint, the Company claims to have sold advertisements on more than 27,000 buses. However, the complaint alleged that CME made false and misleading statements, including misrepresentations about its revenues, the number of buses in its network, and the nature of its business relationships.

On January 31, 2011, analyst firm Citron Research published a report alleging that CME misrepresented the scope of the company’s operations, its financial performance, and the extent of the company’s claimed strategic partnership with a government-affiliated entity. The Citron Research report concluded that the CME “does not exist at the scale that they are reporting to the investing public.” Based on this news, CME shares dropped by more than 14% on January 31, 2011.

Three days later, on February 3, 2011, analyst firm Muddy Waters issued a detailed report echoing many of the allegations in the Citron Research report. Among other things, Muddy Waters alleged that CME “is engaging in a massive ‘pump and dump’ scheme …significantly inflating its revenue and earnings in order to pay management earn-outs and inflate the stock price so insiders can sell.” Following this news, CME shares declined by 33.23% on February 3, 2011.

On March 14, 2011, CME announced that its independent auditor, Deloitte Touche Tohmatsu (DTT), and its Chief Financial Officer Jacky Lam had resigned. According to CME, the auditor stated that it was “no longer able to rely on the representations of management.”

Plaintiffs claimed that throughout the class period, Defendants made false and/or misleading statements, and failed to disclose material adverse facts about the company’s business, operations, prospects and performance. Specifically, the company made misleading statements and/or failed to disclose: (1) that the company misrepresented the number of buses in its advertising network; (2) that the company misrepresented the nature and extent of its business relationships; (3) that, as a result, the company’s financial results were overstated during the class period; and (4), as a result of the above, that the company’s statements concerning CME’s business, operations, and prospects were materially false and misleading at all relevant times.

Plaintiffs further claimed that CME’s audit report issued by its independent auditor, DTT, was materially false and misleading because, despite DTT’s representations to the contrary, its audit did not comply with Public Company Accounting Oversight Board (PCAOB) auditing standards and CME’s financial statements did not comply with Generally Accepted Accounting Principles (GAAP). Plaintiffs further alleged that these false statements were made with the requisite scienter and caused CME to trade at artificially inflated prices during the class period.

The original case name was Rubin v. China Mediaexpress Holding, Inc., Case No. 1:11-cv-00833, United States District Court for the Southern District of New York.