Yes, the shareholders' case is strong enough to move forward. The judge decided that while betting against a stock is normally legal, the way Credit Suisse set up the whole deal looked like a deliberate scheme to destroy the stock's value. Credit Suisse told everyone the deal was for safe 'hedging,' but the evidence suggests they secretly designed it to allow for destructive, predatory betting. The judge believed Credit Suisse had a powerful motive: to make its very rich and important hedge fund clients happy. Therefore, the case against the bank for market manipulation can continue. However, the judge did throw out the part of the lawsuit about misleading statements in the company's official public filings, because the bank didn't have the final say over what those documents said.

Yes, it looks like the Credit Suisse Defendants cheated with ECD's stock and lied about important stuff. They set things up to help hedge funds make big bets against ECD, and didn't tell the truth about what they were doing. Evidence shows Credit Suisse probably knew what the hedge funds were planning and that it would hurt ECD's stock price. Credit Suisse had reasons to help the hedge funds, like making more money and looking good to them. After the stock offerings, things happened just like Credit Suisse probably planned - tons of short selling tanked ECD's stock price until the company went bankrupt. The people suing lost money because of Credit Suisse's cheating and lying.

Furthermore, in Sharette, this Court found Masri consistent with ATSI to the extent Masri found "open-market transactions that are not, in and of themselves, manipulative or illegal, may constitute manipulative activity within the meaning of Section 10 (b) when coupled with manipulative intent."

—noting that the defendants' motion "argues exclusively that [the][p] laintiffs have not [sufficiently] alleged... claims for market manipulation and misrepresentation in violation of Section 10 (b) and Rule 10b-5—citing to case law applicable only to those sections—and with no separate discussion of [the elements] under Section 9," and therefore construing the motion

Additionally, in a filing with the Securities and Exchange Commission, which the Trust provided to the Court at oral argument and of which the Court can take judicial notice,

—finding that a complaint had sufficiently alleged motive where the alleged fraud allowed the defendants to "improve their ability to access a specific and extremely profitable market, potentially worth billions of dollars

Given that "it is assumed that all commercial businesses seek to make money, claims that amount to `no more than allegations of a general business motive to make a profit,'... cannot support an inference of scienter. "

Pleading loss causation with particularity is not required as "a short and plain statement that provides the defendant with notice of the loss and its causal connection to the alleged misconduct is [] sufficient to assert loss causation."

Given the nature of a manipulation claim, plaintiffs are less likely to have access to certain facts necessary to plausibly state a claim, leading some courts to relax pleadings standards.

Yet, as the Second Circuit has observed, "purchasing a floorless convertible security is not, by itself or when coupled with short selling, inherently manipulative," insofar as "[s] uch securities provide distressed companies with access to much needed capital."

Of the remaining three funds, two (BIGD and FINQ) ceased trading in July 2017 and the third (IMED) ceased trading in September 2017.

—holding that "high-volume short selling," when "willfully combined...[with] a coordinated scheme engineered by the...[d] efendants to use short selling to manipulate the price of [a] stock," stated a claim for market manipulation

Yes, for the most part. The plaintiffs' complaint sufficiently alleges the elements of securities fraud to survive a motion to dismiss, except for claims based on statements made in the offering Prospectuses. While high-volume short selling is not manipulative by itself, it can become an actionable manipulative act when, as alleged here, it is willfully combined with 'something more'—a deceptive scheme designed with manipulative intent. The complaint plausibly alleges Credit Suisse orchestrated a scheme by structuring the offerings with perverse incentives that encouraged predatory short selling, not legitimate hedging, thereby creating a false impression of ECD stock's value. The court found a strong inference of scienter based on both Credit Suisse's motive to attract lucrative hedge fund clients and strong circumstantial evidence, including the offering's structure and pre-offering solicitations. Finally, loss causation was adequately pleaded by linking the materialization of the concealed risk—the predatory short selling—to the subsequent collapse in stock price and plaintiffs' economic harm. However, under the Supreme Court's Janus standard, Credit Suisse cannot be held liable as the 'maker' of statements in ECD's Prospectuses because the complaint fails to allege with particularity that Credit Suisse had ultimate authority over those statements.

Yes, the Credit Suisse Defendants engaged in market manipulation and made misleading statements or omissions in violation of Section 10(b) and Rule 10b-5. The defendants structured the offerings to allow hedge funds to make massive negative bets against ECD stock without the risks normally associated with short sales, and they made misrepresentations to investors about the purpose and nature of the stock offerings. The Credit Suisse Defendants had the motive and opportunity to commit fraud, and there is strong circumstantial evidence of conscious misbehavior or recklessness. The defendants solicited interest from hedge funds and knew in advance how the funds planned to exploit the offerings to short sell ECD stock. The structure of the offerings created perverse incentives for investors to drive down the price of ECD stock. After the offerings, short sales of ECD stock rose dramatically while the stock price plummeted, leading to ECD's bankruptcy. This was the predictable and intended result of the Credit Suisse Defendants' manipulative scheme. The court also noted that pleading loss causation with particularity is not required, and a short and plain statement providing notice of the loss and its causal connection to the alleged misconduct is sufficient. Plaintiffs have adequately alleged that the Credit Suisse Defendants' fraud caused their economic loss when the price of ECD stock dropped.

Sharette v. Credit Suisse International

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