August 29, 2024 Class Action Against Equity Crowdfunder Over Misleading Emails Moves Forward
Plaintiffs duped into buying stock in a failing startup can continue their lawsuit against an equity crowdfunding company that pursued potential investors with a torrent of emails, a New York judge has ruled.
Manhattan Supreme Court Justice Andrew Borrok on Thursday denied a defense motion to dismiss the case.
Borrok, of the who sits in Manhattan’s Commercial Division, ruled that he found defense claims —including that the emails were inactionable puffery—unavailing.
Lead plaintiff Joseph Mueller sued crowdfunding company Seed Invest Technology and others in July 2023, alleging he was misled by promotional materials distributed about NowRx into buying Series C stock.
Seed Invest sent a “barrage of some 48 hard sell email solicitations” during a nine-month period, Borrok notes, in which it urged potential investors to “act now” because shares were “flying off the shelf.”
In actuality, per court papers, NowRx was failing to secure financing. The company announced in November 2022 that it was winding down—and selling all its assets for $1.
Defendants, represented by a team from Mintz & Gold, argued that the disclaimer language at the bottom of the messages rendered them nonsolicitations.
“They do not,” Borrok wrote. “The clear and unambiguous language and purpose of the Solicitation Emails urging purchase coupled with a hyperlink to a page where NowRx could be purchased […] sounds the death knell for this argument.”
Borrok also rejected arguments that the emails were inactionable puffery.
Plaintiffs are represented by Lee Squitieri of Squitieri & Fearon and Fletcher Moore of Moore Law. They declined to comment.
Counsel for defendants did not immediately return messages.
Read the ruling: