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In Acticon AG v. China North East Petroleum Holdings Limited (“China North”), 2015 BL 278511 (2d Cir. 2015), Acticon AG appealed the district court’s grant of the China North, Wang Hong Jun, Ju Guizhi, Robert C. Bruce, and other defendants’ collectively (“Defendants) motion to dismiss in a securities fraud case. Upon appeal, the Second Circuit vacated the Southern District of New York’s decision in part, affirmed in part, reversed in part, and remanded the case for further proceedings.
According to the allegations, China North is an oil exploration company operating in the United States and incorporated in Nevada. Acticon filed a civil complaint in the South District of New York against China North, Wang, Ju, and other defendants. It alleged violations of the Securities Exchange Act of 1934 (“Act”), and in particular brought claims under Section 10(b) of the Act and SEC Rule 10b-5 alleging fraud involving scienter. Furthermore, Acticon alleged violations of Section 20(a) of the Act and sought controlling person liability against Wang and Ju.
To raise a strong inference of scienter under Section 10(b) through motive and opportunity, a plaintiff must allege the defendant or its officers benefited from the fraud in a concrete and personal way. When the defendant is a corporate entity, the facts presented must create a strong inference that someone whose intent could be imputed to the corporation, acted with scienter.
The original article can be found at www.theracetothebottom.org