Emma Gilmore, Jeremy Lieberman and Murielle Steven Walsh
At first glance, Amazon, SPACs, Jeffrey Epstein and crypto currency might not seem to have a lot in common. But they find themselves united in the crosshairs of Pomerantz, a heavyweight plaintiffs’ firm in the practice of investor-side financial services litigation. Founded in 1936, Pomerantz has long been a pioneer in the representation of defrauded investors, playing a vital role in a wide range of cutting-edge cases and shoring up investor protections with precedent-setting decisions.
The work continues: The partners at Pomerantz have secured a run of wins in the past year that are in step with the biggest trends in the space. From the tide going out on SPAC mergers to misstatements surrounding executive misconduct, the firm continues to make new law and secure recoveries for investors in the most pressing areas. “We’re a growing practice,” says Jennifer Pafiti, partner and Head of Client Services who co-manages the firm’s newest office in London, with Dr. Daniel Summerfield, while maintaining a practice in the U.S. “We’re always ready to expand to meet the needs of our clients.”
Lifting the SPAC Shell on Biotech Company Ginkgo
The Pomerantz litigation team, led by associate Brian P. O’Connell, recently survived a motion to dismiss in a case for investors against Ginkgo Bioworks, a synthetic biology company that merged with a SPAC. The case alleges that Ginkgo made false and misleading statements about its revenue, customers and value before the merger. The court denied most of Ginkgo’s motion to dismiss the case, finding that there was enough evidence of falsity and scienter.
Ginkgo’s stock dropped 12 percent after activist investors Scorpion Capital and Citron Research released two short seller reports. The reports said that the company’s self-positioning as a leader in biotechnology engineering was misrepresentative, and accused it of falsifying a strong customer base. A suit was filed, and Pomerantz was appointed lead counsel on behalf of the class of defrauded investors.
Ginkgo attempted to dismiss the case, but the court largely accepted Pomerantz’s arguments that the company knowingly misled investors. The court noted that many of Ginkgo’s so-called customers “operated out of Ginkgo’s headquarters,” and “many listed Ginkgo’s phone number as their own.” Following the court’s ruling, Pomerantz re-filed an amended complaint to address the limited portion of the complaint that the court had dismissed.
The case is part of a larger trend in the boom-and-bust history of SPACs, which became highly popular for providing a quicker and less scrutinized path to market than traditional IPOs. Now, that lack of regulatory scrutiny is coming home to roost, as investors seek recovery for the deceptions – and related investors losses – that are coming to light.
The Ginkgo case also speaks to an evolving area of the law concerning short seller reports, which the 9th Circuit does not always consider a corrective disclosure. Here, Scorpion Capital’s report involved extensive research and interviews, and the court agreed with Pomerantz’s contention that it “provided new information that was not previously reflected in the stock price.” The case is now proceeding to discovery in the Northern District of California.
Class Action to Proceed Against Wynn Resorts Leadership
Pomerantz, led by partner Murielle Steven Walsh, recently secured class certification in a long-running, hard-fought case on behalf of Wynn Resorts shareholders surrounding alleged sexual misconduct by former CEO Steve Wynn at the company. Investors are arguing that their shares lost value after the alleged misconduct came to light in a 2018 Wall Street Journal story, and that Wynn and other executives and directors need to be held accountable for their lack of disciplinary action and misrepresentations to shareholders.
The court rejected the defendants’ arguments that their alleged misstatements had no front-end price impact on their stock, since the price didn’t increase after the statements. The court adopted Pomerantz’s argument that front-end price impact is irrelevant in a price maintenance case such as this.
The case is part of a larger trend in the boom-and-bust history of SPACs, which became popular for providing less scrutinized path to market than traditional IPOs. Now, that lack of regulatory scrutiny is coming home to roost.
The court also refused to narrow the class period or dismiss any of the lead plaintiffs. Pomerantz’s class certification win means that the case is now able to proceed in merits discovery.
In addition to addressing the specifics of price impact, the case is relevant on a societal scale in a post-#MeToo world. It’s a high-profile example of investors demanding accountability and action for the cover-up of alleged sexual misconduct at a company.
Recovery for Deutsche Bank Investors Following a Lack of Internal Controls
The social themes of the Wynn Resorts case echo another recent win for the attorneys at Pomerantz: a $26.3M settlement by Deutsche Bank to recoup losses by investors over allegedly false and misleading statements surrounding the bank’s anti-money laundering practices, which allowed the likes of Jeffrey Epstein to slip through the cracks. Remarkably, the settlement represents about 50 percent of class-wide damages, an exceptionally high figure in securities litigation.
Attorneys at Pomerantz, led by partner Emma Gilmore, brought a case against Deutsche Bank following media coverage of the bank’s relationship with Epstein, a critical report on its anti-money laundering practices by the Federal Reserve and a $150M fine from a state regulator. The stock dropped off significantly in reaction, with the bank losing millions of dollars in market capitalization.
The bank attempted to reassure investors, saying it had robust “know your customer” procedures, implemented at the start of the client relationship and regularly reviewed. In fact, Pomerantz’s complaint asserted, the bank regularly exempted high-net-worth individuals from any real scrutiny. Deutsche Bank’s U.S. reputational risk committee agreed to keep Epstein as a client even after learning that 40 underage girls had come forward with testimony that he had sexually assaulted them.
In addition to continuing their client relationship with Epstein, a convicted sex trafficker and pedophile, the bank was doing business with Russian oligarchs, terrorists and other criminals.
In a statement following the settlement, Gilmore said this recovery “should be a wake-up call for all corporations who choose to conduct business with unsavory characters. As a woman prosecuting the case against Deutsche Bank, this victory is all the more rewarding.”
Targeting Big Tech and Crypto
On the heels of these major wins, the attorneys at Pomerantz are setting their sights on the alleged misuse of data by major technology companies, and major frauds and misstatements in the crypto space.
The firm, led by Managing Partner Jeremy Lieberman and Emma Gilmore, is lead counsel in a closely watched case against Amazon related to their use of seller data. The suit alleges that Amazon would analyze data from merchants, then use that information to create their own products. The SEC is also investigating.
In another high-profile Big Tech case, the firm is bringing a suit against Twitter over the allegations that Elon Musk made, saying that a large percentage of the site’s users were actually bots, or fake accounts. The allegations were backed up by a whistleblower. “The case is an interesting one,” says Lieberman, “because Twitter needs to respond to the claims, but the owner is the one who made the allegations.”
In the crypto sphere, the firm has a case in New York state court against Tyler and Cameron Winklevoss over alleged false and misleading statements concerning Gemini, the beleaguered cryptocurrency exchange. Gemini froze accounts last year, preventing customers from withdrawing around $900M in crypto, prompting a lawsuit from the SEC. “It’s a very large fraud and a very big mess,” says Lieberman, who is leading the firm’s case. The firm is also involved in litigation against FTX and Samuel Bankman-Fried, with similar allegations of misrepresentations and fraud.
From false statements about executive wrongdoing and corporate controls, to market manipulation by players in Big Tech and crypto, Pomerantz is fighting for investors and rooting out fraud wherever it’s found.