A Manhattan federal judge on Monday brushed off an attempt by financial technology startup GreenSky Inc. to kill off claims that it misled investors ahead of its billion-dollar initial public offering, but undeterred, GreenSky tried its arguments on a state court judge in a parallel case on Tuesday.
Investors say that GreenSky, which employs a mobile app to provide on-the-spot credit for big-ticket consumer purchases, raised a billion dollars in an upsized IPO in May 2018 but did so in violation of federal securities laws that require disclosure of significant business risks, which led GreenSky's stock to drop 60% just months after the IPO.
In his Monday bench ruling, U.S. District Judge Alvin K. Hellerstein largely sided with the investors, sweeping aside the fintech company's attempts to kill off the lawsuit and even expressing skepticism that the startup lender's disclosures were sufficient. The judge did, however, eject one of the three investor plaintiffs, the Baton Rouge employees' retirement fund, because it bought and sold the stock the same day.
Judge Hellerstein homed in on the investors' claim that GreenSky failed to adequately inform investors how its shift away from highly profitable loans for solar panel purchases would impact its bottom line.
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"We're pleased by Judge Hellerstein's ruling and look forward to the case moving forward in discovery," Steven Toll, counsel for the investors, told Law360.
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The investors in the federal case are represented by Alice Buttrick, Ji Eun Kim, S. Douglas Bunch and Steven Jeffrey Toll of Cohen Milstein Sellers & Toll PLLC and Max Raphael Schwartz of Scott & Scott LLP.
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