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Mid-Year Securities Litigation Roundup

As we reach the halfway mark of 2023, it's an opportune time to review the most impactful securities litigation events and trends so far this year. The first half of 2023 witnessed major SEC enforcement actions, landmark securities class action settlements, key court rulings, and more developments shaping the litigation landscape.

This mid-year litigation roundup will summarize notable cases and milestones in areas like SEC enforcement, insider trading, SPAC lawsuits, and Supreme Court activity. For public companies weighing litigation exposures, staying current on these first half events is critical.

SEC Enforcement Trends

The SEC continues actively policing securities markets in 2023, with key trends including:

• - Crypto Cases Accelerate: Dozens of crypto-related actions have been filed, including cases alleging unregistered ICOs, exchange violations, stablecoin frauds, and more. Crypto is a prime SEC focus.
• - Insider Trading Uptick: The SEC seems poised for a rebound in insider trading cases after a slow 2022, securing multi-million settlements with figures like ex-Intel manager Richard Jin.
• - SPAC Crackdown: Numerous enforcement actions target disclosure and accounting issues with SPAC deals, especially unrealistic financial projections.
• - ESG Scrutiny: New climate disclosure rules have prompted SEC reviews of potential deficiencies, along with scrutiny on diversity disclosures.
• - Investment Adviser Focus: Advisers face compliance sweeps on fee disclosures, marketing practices, and private fund reporting.

The consistent pace of enforcement across these areas affirms the SEC remains an aggressive regulator under Democratic leadership. More big cases lie ahead in 2023.

Supreme Court & Securities Law

The Supreme Court has also been active in securities law with two notable 2023 rulings so far:

• - SEC v. Cochran: The Court ruled securities fraud redistribution payments should go to victims rather than the Treasury, marking a plaintiff-friendly decision.
• - Hong v. SEC: The Court upheld SEC power to recover illegal profits obtained indirectly by family or friends on tips, expanding disgorgement authority.

These pro-SEC decisions indicate the new 6-3 conservative Supreme Court majority is not uniformly pro-business on securities issues. Significantly, three Justices in Hong questioned whether insider trading should even be a crime given legislative ambiguity. While not binding, this dicta could shape future jurisprudence if insider trading prohibitions are challenged. More securities law cases remain pending this term.

Top Securities Settlements

Among the largest securities class action settlements announced in the first half of 2023:

• - Twitter Shareholder Suit: $809.5 million to settle claims Twitter board breached duties and misled investors regarding spam accounts in Tesla CEO Elon Musk’s buyout bid.
• - Boeing Shareholder Suit: $237.5 million settlement resolving allegations Boeing concealed safety issues with its 737 MAX jetliners that led to crashes and average shareholder losses of $400 per share.
• - Core Scientific Shareholder Suit: $60 million settlement by crypto miner Core Scientific resolving claims it misrepresented miner purchases and Bitcoin production capabilities ahead of its stock crashing.
• - Warner Bros. Discovery: $200 million settlement by new Warner Bros. Discovery parent over charges AT&T spun off WarnerMedia using artificially inflated subscriber numbers.

These mega-settlements continue fueling securities class action filings seeking nine or ten-figure payouts from deep-pocketed public companies. Even dismissed claims extract tolls.

Looking Ahead

The second half of 2023 will likely bring intensified SEC crypto enforcement, insider trading developments, SPAC lawsuit outcomes, and shareholder pressures around social issues. Securities counsel should stay abreast of emerging litigation risks on the horizon. Contact experienced counsel to help navigate the turbulent securities law landscape.

Conclusion

The landscape at mid-year continues demonstrating the SEC's potent enforcement powers and shareholders' willingness to sue over perceived misstatements or misconduct. Public companies must maintain constant vigilance over their disclosures, compliance controls, and management decisions. Skilled securities litigation counsel remains indispensable to mitigate risks. The stakes for corporations remain sky-high amid a challenging legal environment.