In an Opinion and Order dated August 14, 2020, United States District Court Judge Katherine Polk Failla denied the defendants’ motion to dismiss a securities fraud action prosecuted by Wolf Popper LLP on behalf of preferred stockholders of AmTrust Financial Services, Inc., a large insurance company.
The complaint filed by Wolf Popper described how AmTrust and three of its directors falsely assured the investing public that, unlike AmTrust’s common shares, which would be purchased and delisted as part of a merger in which these three directors would be taking the company private, AmTrust preferred stock would continue to be listed on the New York Stock Exchange.
In rejecting the defendants’ arguments, Judge Failla concluded that “[t]he fact of the matter is that, prior to the Merger, Defendants repeatedly assured investors that the preferred stock would remain listed, and then, less than two months after the transaction closed, decided to delist the preferred stock.” The Court found that the “professed reasons for delisting the stock…were known to the Individual Defendants before the Merger,” a fact “only strengthen[ing] Plaintiff’s argument this was a classic bait and switch.”
The case is Martinek v. AmTrust Financial Services, Inc., Case Number 19-cv-8030-KPF, in the U.S. District Court for the Southern District of New York.