With the recent, groundbreaking $300 million recovery in the Renren Derivative Litigation and multiple fraud actions pending against other Chinese-owned companies, our senior founding partner @William T. Reid, IV sat down with The National Law Journal to discuss the remarkable risks to shareholders.
In “Plaintiffs Firms Face ‘Catch Me If You Can’ Scenario with Chinese Firms Listed in the US,” he outlined the types of frauds occurring and the daunting legal obstacles which needed to be overcome by his team in litigation against Renren, Inc., the one-time “Facebook of China.” Taking advantage of a loophole as a foreign private issuer of stocks through American Depository Receipts, Renren insiders “simply took the company private for less than what it’s worth.” Minority shareholders “lost the opportunity to sell their shares for what they were truly worth. Instead, insiders took that value for themselves…. There are many cases, in which the majority shareholders simply [do this] …It’s like highway robbery; it’s not even justifiable,” Reid said.
Reid has reached out to lawmakers on Capitol Hill, including Republican Senator Marco Rubio, to close loopholes that exempt foreign issuers from providing full transparency during the valuation process: “Bottom line is, if you are a foreign issuer, you are exempt under §17CFR from sections of the U.S. securities law, including 14(a) meaning—you can lie to the U.S. markets free of liability under our securities laws.”
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