In the firm's latest defense victory on behalf of a U.S.-listed China-based company facing unsubstantiated fraud allegations from short seller attacks, Loeb & Loeb LLP successfully obtained a dismissal of a federal class action complaint against Sino Clean Energy, Inc., a Chinese producer and distributor of coal water slurry fuel. On January 30, 2011, the U.S. District Court for the Central District of California dismissed the action filed on behalf of the class of Sino Clean Energy shareholders, which alleged that the company misrepresented revenues and operations in filings with the Securities and Exchange Commission (SEC), with the intent to mislead U.S. investors.
The class action complaint against Sino Clean Energy was based on information contained in reports published by two short sellers claiming to have discovered "evidence" that "proved" that Sino Clean's SEC filings were false. The "evidence" consisted primarily of multiple level hearsay from an anonymous source, an alleged video surveillance conducted by someone other than the short seller, and alleged discrepancies between the company's SEC filings and filings by one of its subsidiaries with Chinese authorities.
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