A New York federal judge has preliminarily approved a $27.5 million proposed settlement of GreenSky investors' allegations that the lending technology company made misleading statements ahead of its initial public offering, after parties to the two-year litigation reached a deal last month.
The deal was reached in May between GreenSky and a group of investors led by Northeast Carpenters Annuity Fund, El Paso Firemen & Policemen's Pension Fund, and the Employees' Retirement System of the City of Baton Rouge and Parish of East Baton Rouge.
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Steven J. Toll of Cohen Milstein Sellers & Toll PLLC, representing the investors, told Law360 that he is pleased the court granted preliminary approval authorizing counsel to send notice to the class, adding that he looks forward to the final approval hearing in October.
"The settlement represents a substantial portion of the potential provable damages suffered by the class," the investors said in a May filing, adding that the agreement was reached in mediation and "only after the settling parties and co-lead counsel were well informed as to the strengths and weaknesses of the claims and defenses."
The deal includes a $27.5 million cash settlement, and the investors' co-lead counsel will seek up to 25% of the settlement fund for attorney fees, plus reimbursement for litigation costs.
The claims center on GreenSky Inc.'s disclosures in the run-up to its May 2018 IPO, which ultimately brought in over $1 billion. GreenSky's mobile app allows consumers to apply for "on-the-spot" financing for major purchases, according to its website. Much of its revenue comes from charging upfront fees to merchants when consumers make a purchase, court documents show.
According to the investors' November 2018 complaint, GreenSky failed to adequately disclose that it was moving away from the more profitable solar energy loans, where it was able to charge higher upfront transaction fees, and toward industries with lower fees.
An updated, consolidated complaint filed in June 2019 described the shift as "core financial information" that had a "seismic effect" on the company's earnings, profitability and growth prospects.
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The investors are represented by Steven J. Toll, S. Douglas Bunch, Jan Messerschmidt, Jessica (Ji Eun) Kim and Manuel J. Dominguez of Cohen Milstein Sellers & Toll PLLC, and Max Schwartz and Tom Laughlin of Scott + Scott Attorneys At Law LLP.
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