b'CASES GOODWINLiberty Health Sciences, Inc.: Lin v. Liberty22nd Century Group, Inc.: Bull v. 22nd Century Health Sciences Inc., et al., Case No. 1:19-cv- Group, Inc., et al., Case No. 1:19-cv-00409-NGG-00161-MKV-SLC (S.D.N.Y., Jan. 7, 2019) ST (E.D.N.Y., Jan. 21, 2019)Liberty Health Sciences, Inc. (Liberty) is a Canadian- 22nd Century Group, Inc. (22nd Century) is a company based cannabis company specializing in the productionfocused on the development of cannabis products that of cannabis. It serves as the United States operationalcontain little or no THC, in addition to the development entity for Aphria, which is one of the largest cannabisof modified risk nicotine products. In 2016 and 2017, companies in the world. several articles were published boasting 22nd Centurys In January 2018, Liberty announced that it wouldrole as a major player in the cannabis industry. These acquire all of the issued and outstanding sharesarticles, which typically coincided with the companys of 242 Cannabis Canada Ltd. At the time of thepress releases, were allegedly attributed to authors with announcement, the wholly-owned subsidiary of 242fake pseudonyms and did not properly disclose that they Cannabis Canada Ltd., 242 Cannabis, LLC, agreedmay have been paid promotions. Over a period of ten to purchase a 387-acre parcel in Gainesville, Floridamonths, positive articles about the company continued that was allegedly owned by companies affiliated withto be publicly published causing the stock price to Andrew DeFrancesco, a stakeholder in Liberty, andtriple to $3.41 per share. In October 2017, defendants other Aphria insiders. After the Hindenburg Researchissued over 20 million new shares at $2.66 per share, and Quintessential Capital Management report onwhich raised $50 million for the company. Beginning in Aphria was published on December 3, 2018 scrutinizingFebruary 2018, several online articles were published Aphrias related party transactions, Libertys stockwith the goal of exposing what was described as a price dropped nearly 34% to $0.70. A second reportscheme to inflate 22nd Centurys stock price. The was published the next day alleging the existencearticles alleged that 22nd Century engaged a network of improper insider deals that were occurring withinof writers who used pseudonyms and were paid to Liberty including, but not limited to, a previouslypromote the companys products in development. undisclosed round of financing for Libertys stock thatShortly after these purported expos articles were was not made publicly available to investors. published, the companys stock price fell by 1.6%. The company issued responses to the articles defending In January 2019, investors brought a putative classits products and denying that they paid for stock action against Liberty and its executives allegingpromotions. However, following the resignation of the violations of Sections 10(b) and 20(a) of the Exchangecompanys CEO amid pressure and rumors surrounding Act and Rule 10b-5 for allegedly false and materiallythe alleged stock inflation scheme, the stock price misleading omissions made in connection with thefurther declined 26.9% to $1.36 per share.companys investments and transactions that wereInvestors filed a putative class action against the beneficial to Aphria and Liberty executives. Specifically,company and its CEO and CFO alleging violations of the amended complaint alleged that Liberty failed toSections 10(b) and 20(a) of the Exchange Act and Rule disclose material details regarding the nature of its10b-5 in connection with allegedly false and materially transactions and acquisitions. For example, plaintiffsmisleading statements related to the companys alleged that Liberty did not disclose that it bought theattempt to raise capital through the use of paid stock property in Florida for many millions more than it waspromotions. Specifically, plaintiffs alleged that the worth.companys rise in stock price was entirely attributable to Lead plaintiff and lead counsel were appointed by thethe paid promotions, which caused their stock price to court on September 16, 2019. Plaintiffs filed a secondsignificantly increase during a time when the company amended complaint on January 21, 2020, and the casedid not develop any new products and faced scrutiny is ongoing. from the FDA in its pursuits to have new products approved. Ultimately, the paid promotions were part of a larger scheme to artificially inflate the companys stock price in order to raise significant capital. Defendants moved to dismiss the complaint in its entirety. 10'