Defendant is a steel processing company based in China and incorporated in British Virgin Islands. Plaintiffs purchased defendant's securities, and now claim that the defendant committed securities fraud. Specifically, plaintiffs claim that the defendant failed to disclose that it grossly overpaid for certain land use rights and that it paid $234 million to purchase an antique porcelain collection.
The court dismissed without prejudice, finding that the plaintiffs did not meet the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure and Private Securities Litigation Reform Act (PSLRA). The court found that the plaintiffs did not allege the facts that connects to material misstatement or omission, made with scienter.
This is a fairly standard securities fraud case, with standard result--in most cases, the complaint is dismissed because the U.S. law has set up a fairly high bar for securities fraud allegation in the form of Rule 9(b) and PSLRA. But the fact pattern here is certainly not standard. The defendant is a BVI corporation doing business in China. (Good luck getting your U.S. judgment enforced!) One of the alleged frauds is not some run-of-the-mill accounting tweaks, but acquisition of ancient porcelain collection for more than $200 million.
This, to me, seems to be an instance that shows U.S. securities regulation, which relies heavily on disclosure and private enforcement, is not sufficient to cover extraterritorial actors whose actual behaviors are difficult to ascertain.