Court Grants Match Group’s Motion to Dismiss Securities Suit Over Fraudulent User Counts

On Friday, Judge Karen Gren Scholer of the Northern District of Texas issued a memorandum opinion and order granting Match Group’s motion to dismiss the putative class action securities suit against it. The judge found that the plaintiffs failed to plausibly allege a material misrepresentation or a strong inference of scienter and dismissed their main violation and subsequent violations.

The order noted that the putative stockholder securities class action complaint claimed that Match Group violated Sections 10(b) and 20(a) of the Securities Exchange Act. The defendants include Match Group Inc., which operates dating and matchmaking websites like and Tinder, its CEO Amanda Ginsberg, and CFO Gary Swidler.

The court stated that most of Match’s revenue comes from members who subscribe to premium or paid membership and explained that Match uses typical reporting metrics and “tracks its performance by evaluating the conversion rate from unpaid to paid memberships.” The plaintiffs alleged that “Match’s revenue growth during the Relevant Time Period was driven, at least in part, by widespread fraudulent accounts consisting of scammers and ‘bots.’ … Such fraud was ‘widespread knowledge’ at Match.” The plaintiffs claimed that Match’s “review measures were inadequate.” 

The order noted that according to a confidential witness “approximately 20% of Tinder’s accounts were bots and/or fraudulent, and that Tinder did not adjust its membership numbers in financial reports to account for these fraudulent accounts,” some of which reportedly have premium accounts. The plaintiffs averred that the defendants “failed to take necessary actions to address the problem, preferring instead to focus on the revenue-producing metrics.” Consequently, the plaintiffs asserted that the defendants deceived shareholders by sharing financial performance and forecasts that “did not adjust out the fraudulent accounts.” 

As a result, the plaintiffs averred that the defendants defrauded investors and made material misstatements or omissions about Match’s membership, financial information, certifications, and a Federal Trade Commission investigation.  

In reviewing the motion to dismiss, the court disagreed with the plaintiffs allegations regarding Match’s misstatements, finding that they were not false or misleading. The court explained that the plaintiffs, for example, “do not allege facts supporting that any of Match’s alleged statements regarding its finances were untrue.” 

Addressing the alleged fraud, the court concluded that without specified allegations differentiating between paying and non-paying users, “it is unclear what, if any, material effect disclosure of the omitted facts … would have on a reasonable investor reviewing Match’s financial performance and Match’s commentary regarding the same.” The court noted that the plaintiffs failed to identify any misstatements in Match’s Form 10-Qs or Form 10-Ks. 

Relating to Match’s internal controls, the court found that plaintiffs pleaded insufficiently because they did not adequately allege the individual defendants’ knowledge of its insufficient reviews. Lastly, looking at the FTC’s investigation and lawsuit, the court noted that generally a company’s opinion is not a material misstatement, as is the case here. 

Addressing allegations of scienter, the court found that the plaintiffs failed to sufficiently allege particularized facts showing a strong inference of intent to deceive or severe recklessness. The filing said the plaintiffs’ allegations did not “create a strong inference that Ginsberg’s and Swidler’s failure to disclose facts regularly and openly was intentionally deceiving or otherwise severely reckless.” The court also pointed to the plaintiffs’ failure to differentiate between fraudulent paying and non-paying users, and said there is no strong inference that the defendants intended to mislead investors. 

When granting the dismissal, the court gave the plaintiffs leave to amend their complaint by April 23.

Match and the individual defendants are represented by Norton Rose Fulbright US LLP. The plaintiffs and putative class are represented by Pomerantz LLP, Glancy Prongay & Murray LLP, and Kendall Law Group PLLC.