CALI Class Action Report
Levi & Korsinsky, LLP
June 14, 2018
On June 5, 2018, investors sued China Auto Logistics, Inc. (“China Auto” or the “Company”) in United States District Court, District of New Jersey. Plaintiffs in the federal securities class action allege that they acquired China Auto securities at artificially inflated prices between March 28, 2017 and April 13, 2018 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. Here’s what you need to know about the China Auto class action lawsuit (CALI class action lawsuit)
Summary of the Allegations
China Auto (NASAQ: CALI) “sells and trades in imported automobiles “ in the People’s Republic of China.
The Company claims it owns four different websites catering to people interested in buying domestic and imported vehicles. Specifically, the Company says it offers “growing range of auto-related services, from inventory financing for auto dealers to web-based advertising.”
The Company also claims that it has experienced significant growth since its inception and is now “China’s largest wholesaler of imported luxury vehicles with a network of 3000 dealers nationwide.”
Summary of Facts
China Auto and two of its senior officers and directors now stand accused of deceiving investors by lying and withholding critical information about the Company’s business practices during the Class Period.
Specifically, they are accused of omitting truthful information about the Company’s ability to maintain adequate certain internal controls from SEC filings and related material from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused China Auto securities to trade at artificially inflated prices during the time in question.
The truth began to surface on April 2, 2018. Before the market opened that day, the Company reported that it would be unable to meet the SEC’s deadline for filing its Form 10-K for the period that ended December 31, 2017. Specifically, the Company said that it needed more time to “identify certain related party transactions,” and that it “identified a material weakness in internal controls and procedures over identifying and reporting certain relationships and related transactions.”
Then, on April 20, 2018, the Company filed a form with the SEC in which it announced that its Audit Committee felt it necessary to “initiate an investigation into related party transactions from a Company shareholder.”
Finally, after the market closed three days later, the Company filed another form with the SEC in which it advised that its stock was at risk of being delisted from the NASDAQ as a result of China Auto’s “failure to timely file a Form 10-K for the period ended December 31, 2017.” The Company also said that the Audit Committee’s investigation prevented it from meeting the deadline for filing the Form 10-K.
A closer look…
As alleged in the June 5, complaint, the Company made several false and/or misleading statements on a form filed with the SEC on March 28, 2017.
For example, the Company “identified a material weakness in its internal controls over financial reporting relating to a ‘lack of sufficient accounting personnel with an appropriate understanding of US GAAP and SEC reporting requirements.’”
The Company also provided detailed information about “related party balances and transactions,” including certain loans, and the payments of “certain accrued expenses” by a “former shareholder” on the form in question.
Finally, the form also included “signed certifications” by the Individual Defendants regarding “the accuracy of financial reporting, the disclosure of any material changes to the Company’s internal control over financial reporting and the disclosure of all fraud.”
Impact of the Alleged Fraud on China Auto’s Stock Price and Market Capitalization
|Closing stock price prior to disclosures:
|Closing stock price the trading day after disclosures:
|One day stock price decrease (percentage) as a result of disclosures:
The following chart illustrates the stock price during the class period:
Actions You May Take
If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.
NOTE: The deadline to file for lead plaintiff in this class action is August 8, 2018. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.
In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in China Auto common stock using court approved loss calculation methods.
Recently Filed Cases
Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action. Please contact us if you would like an LK report for any of these cases:
|This information is provided for general information purposes only, and should not be construed as legal advice, nor does it establish an attorney-client relationship with Levi & Korsinsky LLP. Any and all information herein is simply an opinion based on publicly available information and should not necessarily be construed as fact. For more information, please visit our website at www.zlk.com.
Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse. With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.
Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients. Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.
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