A class action complaint was filed against 360 Digitech, Inc. and their senior executives by shareholders in the Southern District of New York on Tuesday for allegedly collecting personal information illegally and withholding this information from investors. These actions led to a sharp drop in their stock value after Chinese regulators began a formal investigation.
360 Digitech operates a digital consumer finance platform under the 360 Jietiao brand in China, the complaint explained. The platform provides online consumer finance products to the borrowers funded by institutional funding partners, as well as “incremental credit assessment, collection, and other services, as well as guarantee for defaulted loans.”
The complaint alleged that the defendants “made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and compliance policies.” 360 Digitech supposedly did not mention that they “had been collecting personal information in violation of relevant [Chinese] laws,” and were exposed to an “increased risk of regulatory scrutiny and/or enforcement action.”
One week ago, 360 IOU, the company’s “core product,” was removed from major app stores. This was due to Chinese regulators investigating their “customer data protection policies,” and 360 IOU was one of the thirteen platforms under scrutiny. This caused 360 Digitech’s stock price to fall by 21.48% on that same day. The plaintiffs claim that by withholding this information from the public, the defendants’ actions “were committed willfully or with reckless disregard for the truth.”
The plaintiffs are suing for two violations of Section 10(b) of the Exchange Act, directed at all the defendants and the individual defendants, for “engag[ing] in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon [the plaintiffs].”