b'did, they did not adequately allege a primary violation.Investors filed a putative class action against the company On October 14, 2020, Defendants filed a motion forand its CEO and CFO alleging violations of Sections reconsideration and are awaiting the courts decision. 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. Plaintiffs alleged that defendants made false and materially misleading statements related 22nd Century Group, Inc.:to the companys attempt to raise capital through the Bull v. 22nd Century Group, Inc., etuse of paid stock promotions. Specifically, plaintiffs al., Case No. 1:19-cv-00409-NGGSTalleged that the companys rise in stock price was entirely attributable to the paid promotions, which caused their (E.D.N.Y. Jan. 21, 2019) stock price to significantly increase during a time when the company did not develop any new products and faced 22nd Century Group, Inc. (22nd Century) is ascrutiny from the FDA in its pursuits to have new products company focused on the development of cannabisapproved. Plaintiffs alleged the paid promotions were products that contain little or no THC, in addition topart of a larger scheme to artificially inflate the companys the development of modified risk nicotine products.stock price in order to raise significant capital. Defendants In 2016 and 2017, several articles were publishedmoved to dismiss the complaint in its entirety.boasting 22nd Centurys role as a major player in the cannabis industry. These articles, which typicallyIn September 2019, the case was transferred to the coincided with the companys press releases,U.S. District Court for the Western District of New were allegedly attributed to authors with fakeYork (1:19-cv-01285) after the parties stipulated to the pseudonyms and did not properly disclose that theytransfer due to defendants residence. Plaintiffs filed an may have been paid promotions. Over a period ofamended complaint in November 2019. The amended ten months, positive articles about the companycomplaint included claims from a confidential witness continued to be published causing the stock price toto support allegations that the company failed to triple to $3.41 per share. In October 2017, defendantsdisclose a 2016 SEC investigation related to material issued over 20 million new shares at $2.66 per share,weaknesses in the companys accounting practices. which raised $50 million for the company.On May 1, 2020, defendants filed a motion to dismiss the amended complaint in its entirety. The court heard Beginning in February 2018, several online articlesoral argument on the motion on July 31, 2020.were published with the goal of exposing what was described as a scheme to inflate 22nd CenturysThe court dismissed the amended complaint with stock price. The articles alleged that 22nd Centuryprejudice. In a brief summary order, the court rejected engaged a network of writers who used pseudonymsplaintiffs claims that defendants had a duty to disclose and were paid to promote the companys products inpayment for the promotional articles or a 2016 development. Shortly after these purported exposSEC investigation into material weaknesses in the articles were published, the companys stock price fellcompanys accounting. The court noted, however, that by 1.6%. The company issued responses to the articlesdefendants did ultimately disclose and remediate the defending its products and denying that they paid forissues that were the subject of the SECs investigation. stock promotions. However, following the resignationThe court explained that plaintiffs market manipulation of the companys CEO amid pressure and rumorsclaim also failed because their theories of liability surrounding the alleged stock inflation scheme, thedid not allege a manipulation act or market activity. stock price further declined 26.9% to $1.36 per share. On February 12, 2021, plaintiffs filed a notice of appeal to the Second Circuit and the case is ongoing.9'