This class action concerns allegations that the public filings of Sino-Forest Corporation (“Sino-Forest”) contained false and/or misleading statements about its business and affairs. It is alleged that Sino-Forest falsely maintained that its financial statements complied with Canadian generally accepted accounting principles (GAAP) and it materially overstated the size and value of its forestry assets, including its holdings in China’s Yunnan province, and its revenue from the sale of those assets. The plaintiffs claim $6.5 billion on behalf of class members.
On June 2, 2011, Muddy Waters Research released a report alleging fraud and that Sino-Forest “massively exaggerates its assets”. Muddy Waters Research claimed to have “smoking gun evidence” of an example of Sino-Forest overstating forestry assets.
On August 26, 2011, the Ontario Securities Commission issued a temporary cease trade order against Sino-Forest, which prohibits all trading in the securities of Sino-Forest in Ontario. The order was initially effective for 15 days, but it has been extended and is currently effective to April 16, 2012.
On November 10, 2011, the Globe and Mail reported that the RCMP had launched a criminal investigation into whether executives of Sino-Forest defrauded Canadian investors.
On March 30, 2012, Sino-Forest Corporation sought and was granted protection from its creditors pursuant to the federal Companies’ Creditors Arrangement Act (CCAA). This is insolvency legislation and the initial order provides for a stay of legal proceedings against the company.
Sino-Forest’s shares were delisted from the TSX on May 9, 2012.
The proposed class of persons in this class action generally includes persons, including non-Canadians, who acquired Sino-Forest securities in Canada between March 19, 2007 and June 2, 2011 and Canadian residents who acquires Sino-Forest securities during that same time period. This includes persons who acquired Sino-Forest notes in these circumstances.
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Koskie Minsky LLP and Siskinds LLP represent the plaintiffs in this action.