The Complaint brought forth claims for violations of the Securities Exchange Act of 1934 against China-Biotics, Inc (“China-Biotics” or the “Company”), and certain of its senior executives. The Complaint alleged that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired China-Biotics securities during the Class Period.
China-Biotics, together with its subsidiaries, engages in the research, development, production, marketing, and distribution of probiotics products, which are basically food supplements in the form of an acidophilus pill that are marketed as improving intestinal microbial balance. In the Company’s publicly disseminated documents during the Class Period, including in Secondary Offering Documents, China-Biotics represented to investors that it had a robust and growing network of retail outlets in China that would purportedly include up to 300 retail centers by 2011. Moreover, in these same filings and public statements, the Company announced impressive financial results.
Specifically, the Complaint alleged Defendants: (i) fabricated the size and scale of China-Biotics operations; ii) exaggerated financial results in order to give the appearance of a growing and stable enterprise, thus attracting more interest in the Secondary Public Offering; (iii) bolstered financial figures through embellished lease expenses, cash amounts, and tax information that did not match with information reported to Chinese authorities. As a result of Defendants’ alleged fraud, the Company’s stock price plummeted all the way to $12.03 when the truth of Defendants’ scheme was fully revealed, a decline of nearly 40%.
On February 10, 2011, Saxena White P.A. was appointed Co-Lead Counsel. Plaintiffs filed a Second Amended Complaint on January 9, 2012. Defendants filed their Motions to Dismiss on February 27, 2012.
During the pendency of the motions to dismiss, the parties began negotiations towards a possible settlement of the action. As a result of these efforts, the parties agreed to a settlement pursuant to which Defendants agreed to pay $1,400,000 to resolve the claims brought forth in the action, as well any amount remaining on China-Biotics’ Insurance Policy after payment of all defense fees and costs. On May 8, 2015, the Court preliminarily approved the Settlement, and on September 10, 2015, entered final judgment finding the settlement to be fair, adequate and reasonable.