An investor alleged before a Central District of California judge that restaurant supplier HF Foods made statements in Securities and Exchange Commission (SEC) filings and press releases that misrepresented the company’s operations and compliance.
“The individual defendants personally made and/or caused the company to make to the investing public a series of materially false and misleading statements about HF Foods’ business, operations, and compliance,” plaintiff Jesus Mendoza claimed in the document.
Mendoza, a shareholder of HF Foods stock represented by Rosen Law Firm, filed the complaint against HF Foods and its shareholders: Zhou Min Ni, Xiao Mou Zhang, Caixuan Xu, Jian Ming Ni, Zhehui Ni, Hong Wang, Chan Sin Wong, and Ren Hua Zheng. HF foods is a large foodservice distributor to Asian restaurants in 21 different states. HF Foods acquired Atlantic Acquisition Corp. in March 2018 and B&R Global Holdings Inc. in November 2019.
A report published on March 23 disclosed “alarming similarities” between the HF Foods merger and two Atlantic mergers that were unsuccessful as well as undisclosed links between B&R Global and HF Foods suggesting an undisclosed related party transaction. The report raised other concerns with HF Foods’ use of shareholder cash, issues with its auditor, and foul play allegations with free-floating shares. The report caused the company’s stock price to drop by over 20 percent.
“While the company’s SEC filings purported to accurately disclose, among other things, all related party transactions, the company was actually engaging in numerous undisclosed related party activity, in addition to dubious disclosed activities, that enabled insiders to unjustly enrich themselves to the detriment of the company and its shareholders,” the complaint alleged.
Mendoza claimed the shareholders violated SEC rules and breached their fiduciary duties. He filed claims of unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets. He asks for damages to be awarded to HF foods and that the defendants reform their corporate governance.