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Document No. 65 Proposed Judgment was reviewed and approved as to form. 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(sac)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/213525952/","id":213525952,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/219497148/","id":219497148,"tags":[],"absolute_url":"/docket/16738894/67/greco-v-qudian-inc/","date_created":"2022-12-07T07:06:59.232442-08:00","date_modified":"2023-05-30T08:47:59.641574-07:00","sha1":"055c9fa5a8bb05557d9ee28f7d72279d11d8636d","page_count":1,"file_size":118422,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.67.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.67.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 67 Filed 12/07/22 Page 1 of 1\n\n\n\n\nUNITED STATES DISTRICT COURT\nSOUTHERN DISTRICT OF NEW YORK\n------------------------------------------------------------X\nSTEPHEN BELLINGHAM, Individually\nand On Behalf of All Others Similarly\nSituated,\n\n Plaintiff,\n -against- 20 CIVIL 577 (GHW)\n\n JUDGMENT\nQUDIAN INC., MIN LUO, and CARL\nYEUNG,\n\n Defendants.\n-----------------------------------------------------------X\n\n It is hereby ORDERED, ADJUDGED AND DECREED: That for the reasons\n\nstated in the Court's Memo Endorsed Order dated December 5, 2022, application is granted.\n\nJudgment is entered for Defendants; accordingly, the case is closed.\n\nDated: New York, New York\n\n December 7, 2022\n\n\n RUBY J. KRAJICK\n\n _________________________\n Clerk of Court\n\n BY:\n _________________________\n Deputy Clerk\n\f","ocr_status":2,"date_upload":"2022-12-08T00:19:55.475439-08:00","document_number":"67","attachment_number":null,"pacer_doc_id":"127032456869","is_available":true,"is_free_on_pacer":true,"is_sealed":null,"document_type":1,"description":"Judgment - Clerk","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/484718419/","id":484718419,"tags":[],"absolute_url":"/docket/16738894/67/1/greco-v-qudian-inc/","date_created":"2026-07-01T06:51:05.248342-07:00","date_modified":"2026-07-02T03:16:16.983172-07:00","sha1":"fbcc98bd6954f08b325fbaa4884f08ec92390089","page_count":10,"file_size":499750,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.67.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.67.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 1 of 10\n\n United States District Court\n Southern District of New York\n\n\n\nRuby J. Krajick\nClerk of Court\n\nDear Litigant:\n\nEnclosed is a copy of the judgment entered in your case. If you disagree with a judgment or\nfinal order of the district court, you may appeal to the United States Court of Appeals for\nthe Second Circuit. To start this process, file a \u201cNotice of Appeal\u201d with this Court\u2019s Pro Se\nIntake Unit.\n\nYou must file your notice of appeal in this Court within 30 days after the judgment or order\nthat you wish to appeal is entered on the Court\u2019s docket, or, if the United States or its officer\nor agency is a party, within 60 days after entry of the judgment or order. If you are unable\nto file your notice of appeal within the required time, you may make a motion for extension\nof time, but you must do so within 60 days from the date of entry of the judgment, or\nwithin 90 days if the United States or its officer or agency is a party, and you must show\nexcusable neglect or good cause for your inability to file the notice of appeal by the\ndeadline.\n\nPlease note that the notice of appeal is a one-page document containing your name, a\ndescription of the final order or judgment (or part thereof) being appealed, and the name of\nthe court to which the appeal is taken (the Second Circuit) \u2013 it does not include your reasons\nor grounds for the appeal. Once your appeal is processed by the district court, your notice\nof appeal will be sent to the Court of Appeals and a Court of Appeals docket number will\nbe assigned to your case. At that point, all further questions regarding your appeal must be\ndirected to that court.\n\nThe filing fee for a notice of appeal is $505 payable in cash, by bank check, certified check,\nor money order, to \u201cClerk of Court, S.D.N.Y.\u201d No personal checks are accepted. If you are\nunable to pay the $505 filing fee, complete the \u201cMotion to Proceed in Forma Pauperis on\nAppeal\u201d form and submit it with your notice of appeal to the Pro Se Intake Unit. If the\ndistrict court denies your motion to proceed in forma pauperis on appeal, or has certified\nunder 28 U.S.C. ' 1915(a)(3) that an appeal would not be taken in good faith, you may file a\nmotion in the Court of Appeals for leave to appeal in forma pauperis, but you must do so\nwithin 30 days after service of the district court order that stated that you could not proceed\nin forma pauperis on appeal.\n\nFor additional issues regarding the time for filing a notice of appeal, see Federal Rule of\nAppellate Procedure 4(a). There are many other steps to beginning and proceeding with\nyour appeal, but they are governed by the rules of the Second Circuit Court of Appeals and\nthe Federal Rules of Appellate Procedure. For more information, visit the Second Circuit\nCourt of Appeals website at http://www.ca2.uscourts.gov/.\n\n THE DANIEL PATRICK MOYNIHAN THE CHARLES L. BRIEANT, JR.\n UNITED STATES COURTHOUSE UNITED STATES COURTHOUSE\n 500 PEARL STREET 300 QUARROPAS STREET\n NEW YORK, NY 10007-1312 WHITE PLAINS, NY 10601-4150\nRev. 5/23/14\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 2 of 10\n\n\n\n\n U NITED S TATES D ISTRICT C OURT\n S OUTHERN D ISTRICT OF N EW Y ORK\n\n\n\n(List the full name(s) of the plaintiff(s)/petitioner(s).) _____CV________ ( )( )\n -against-\n NOTICE OF APPEAL\n\n\n\n\n(List the full name(s) of the defendant(s)/respondent(s).)\n\n\n\nNotice is hereby given that the following parties:\n\n\n(list the names of all parties who are filing an appeal)\n\n\nin the above-named case appeal to the United States Court of Appeals for the Second Circuit\n\nfrom the \uf0a8 judgment \uf0a8 order entered on:\n (date that judgment or order was entered on docket)\nthat:\n\n\n\n(If the appeal is from an order, provide a brief description above of the decision in the order.)\n\n\n\n *\n Dated Signature\n\n\n\n Name (Last, First, MI)\n\n\n\n Address City State Zip Code\n\n\n\n Telephone Number E-mail Address (if available)\n\n\n\n\n*\n Each party filing the appeal must date and sign the Notice of Appeal and provide his or her mailing address and telephone\nnumber, EXCEPT that a signer of a pro se notice of appeal may sign for his or her spouse and minor children if they are parties\nto the case. Fed. R. App. P. 3(c)(2). Attach additional sheets of paper as necessary.\nRev. 12/23/13\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 3 of 10\n\n\n\n U NITED S TATES D ISTRICT C OURT\n S OUTHERN D ISTRICT OF N EW Y ORK\n\n\n\n _____CV________ ( )( )\n(List the full name(s) of the plaintiff(s)/petitioner(s).)\n\n -against- MOTION FOR EXTENSION\n OF TIME TO FILE NOTICE\n OF APPEAL\n\n\n(List the full name(s) of the defendant(s)/respondent(s).)\n\n\n\n\nI move under Rule 4(a)(5) of the Federal Rules of Appellate Procedure for an extension of time\n\nto file a notice of appeal in this action. I would like to appeal the judgment\n\nentered in this action on but did not file a notice of appeal within the required\n date\ntime period because:\n\n\n\n\n(Explain here the excusable neglect or good cause that led to your failure to file a timely notice of appeal.)\n\n\n\n\nDated: Signature\n\n\n\nName (Last, First, MI)\n\n\n\nAddress City State Zip Code\n\n\n\nTelephone Number E-mail Address (if available)\n\n\n\n\nRev. 3/27/15\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 4 of 10\n\n\n\n\n U NITED S TATES D ISTRICT C OURT\n S OUTHERN D ISTRICT OF N EW Y ORK\n\n\n\n _____CV_________ ( )( )\n(List the full name(s) of the plaintiff(s)/petitioner(s).)\n\n -against- MOTION FOR LEAVE TO\n PROCEED IN FORMA\n PAUPERIS ON APPEAL\n\n\n(List the full name(s) of the defendant(s)/respondent(s).)\n\n\n\nI move under Federal Rule of Appellate Procedure 24(a)(1) for leave to proceed in forma\n\npauperis on appeal. This motion is supported by the attached affidavit.\n\n\n\n\nDated Signature\n\n\n\nName (Last, First, MI)\n\n\n\nAddress City State Zip Code\n\n\n\nTelephone Number E-mail Address (if available)\n\n\n\n\nRev. 12/23/13\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 5 of 10\n\n\n\n Application to Appeal In Forma Pauperis\n\n\n\n______________________v. ______________________ Appeal No. __________________\n\n District Court or Agency No. _________________\n\n\nAffidavit in Support of Motion Instructions\n\nI swear or affirm under penalty of perjury that, Complete all questions in this application and then\nbecause of my poverty, I cannot prepay the docket sign it. Do not leave any blanks: if the answer to a\nfees of my appeal or post a bond for them. I believe question is \"0,\" \"none,\" or \"not applicable (N/A),\"\nI am entitled to redress. I swear or affirm under write that response. If you need more space to answer\npenalty of perjury under United States laws that my a question or to explain your answer, attach a separate\nanswers on this form are true and correct. (28 sheet of paper identified with your name, your case's\nU.S.C. \u00a7 1746; 18 U.S.C. \u00a7 1621.) docket number, and the question number.\n\n\n Signed: _____________________________ Date: _____________________________\n\n\nMy issues on appeal are: (required):\n\n\n\n\n1. For both you and your spouse estimate the average amount of money received from each\n of the following sources during the past 12 months. Adjust any amount that was received\n weekly, biweekly, quarterly, semiannually, or annually to show the monthly rate. Use\n gross amounts, that is, amounts before any deductions for taxes or otherwise.\n\n Income source Average monthly Amount expected next\n amount during the past month\n 12 months\n You Spouse You Spouse\n Employment $ $ $ $\n Self-employment $ $ $ $\n Income from real property (such as $ $ $ $\n rental income)\n\n\n -1-\n12/01/2013 SCC\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 6 of 10\n\n\n\n Interest and dividends $ $ $ $\n Gifts $ $ $ $\n Alimony $ $ $ $\n Child support $ $ $ $\n Retirement (such as social security, $ $ $ $\n pensions, annuities, insurance)\n Disability (such as social security, $ $ $ $\n insurance payments)\n Unemployment payments $ $ $ $\n Public-assistance (such as welfare) $ $ $ $\n Other (specify): $ $ $ $\n\n\n Total monthly income: $0 $0 $0 $0\n\n\n\n2. List your employment history for the past two years, most recent employer first. (Gross\n monthly pay is before taxes or other deductions.)\n\n Employer Address Dates of Gross\n employment monthly pay\n $\n $\n $\n\n3. List your spouse's employment history for the past two years, most recent employer first.\n (Gross monthly pay is before taxes or other deductions.)\n\n Employer Address Dates of Gross\n employment monthly pay\n $\n $\n $\n\n\n\n -2-\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 7 of 10\n\n\n\n\n4. How much cash do you and your spouse have? $________\n\n Below, state any money you or your spouse have in bank accounts or in any other\n financial institution.\n\n Financial Institution Type of Account Amount you have Amount your\n spouse has\n $ $\n $ $\n $ $\n\nIf you are a prisoner seeking to appeal a judgment in a civil action or proceeding, you must\nattach a statement certified by the appropriate institutional officer showing all receipts,\nexpenditures, and balances during the last six months in your institutional accounts. If you\nhave multiple accounts, perhaps because you have been in multiple institutions, attach one\ncertified statement of each account.\n\n\n5. List the assets, and their values, which you own or your spouse owns. Do not list clothing\n and ordinary household furnishings.\n\n Home Other real estate Motor vehicle #1\n (Value) $ (Value) $ (Value) $\n Make and year:\n Model:\n Registration #:\n\n\n Motor vehicle #2 Other assets Other assets\n (Value) $ (Value) $ (Value) $\n Make and year:\n Model:\n Registration #:\n\n\n\n\n -3-\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 8 of 10\n\n\n\n\n6. State every person, business, or organization owing you or your spouse money, and the\n amount owed.\n\n Person owing you or your spouse Amount owed to you Amount owed to your\n money spouse\n $ $\n $ $\n $ $\n $ $\n\n\n7. State the persons who rely on you or your spouse for support.\n\n Name [or, if a minor (i.e., underage), initials only] Relationship Age\n\n\n\n\n8. Estimate the average monthly expenses of you and your family. Show separately the\n amounts paid by your spouse. Adjust any payments that are made weekly, biweekly,\n quarterly, semiannually, or annually to show the monthly rate.\n\n You Your Spouse\n Rent or home-mortgage payment (including lot rented for $ $\n mobile home)\n Are real estate taxes included? [ ] Yes [ ] No\n Is property insurance included? [ ] Yes [ ] No\n Utilities (electricity, heating fuel, water, sewer, and telephone) $ $\n Home maintenance (repairs and upkeep) $ $\n Food $ $\n Clothing $ $\n Laundry and dry-cleaning $ $\n Medical and dental expenses $ $\n\n\n -4-\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 9 of 10\n\n\n\n Transportation (not including motor vehicle payments) $ $\n Recreation, entertainment, newspapers, magazines, etc. $ $\n Insurance (not deducted from wages or included in mortgage payments)\n Homeowner's or renter's: $ $\n Life: $ $\n Health: $ $\n Motor vehicle: $ $\n Other: $ $\n Taxes (not deducted from wages or included in mortgage $ $\n payments) (specify):\n Installment payments\n Motor Vehicle: $ $\n Credit card (name): $ $\n Department store (name): $ $\n Other: $ $\n Alimony, maintenance, and support paid to others $ $\n Regular expenses for operation of business, profession, or $ $\n farm (attach detailed statement)\n Other (specify): $ $\n Total monthly expenses: $0 $0\n\n\n9. Do you expect any major changes to your monthly income or expenses or in your assets\n or liabilities during the next 12 months?\n\n [ ] Yes [ ] No If yes, describe on an attached sheet.\n\n\n10. Have you spent \u2014 or will you be spending \u2014any money for expenses or attorney fees in\n connection with this lawsuit? [ ] Yes [ ] No\n\n If yes, how much? $ ____________\n\n\n\n\n -5-\n\f Case 1:20-cv-00577-GHW Document 67-1 Filed 12/07/22 Page 10 of 10\n\n\n\n11. Provide any other information that will help explain why you cannot pay the docket fees\n for your appeal.\n\n\n\n\n12. Identify the city and state of your legal residence.\n\n City __________________________ State ______________\n\n Your daytime phone number: ___________________\n\n Your age: ________ Your years of schooling: ________\n\n Last four digits of your social-security number: _______\n\n\n\n\n Print Save Reset Form\n\n\n\n\n -6-\n\f","ocr_status":2,"date_upload":"2026-07-01T06:51:35.112855-07:00","document_number":"67","attachment_number":1,"pacer_doc_id":"127032456870","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Right to Appeal","acms_document_guid":""}],"date_created":"2022-12-07T07:06:59.227402-08:00","date_modified":"2023-05-30T08:47:59.575788-07:00","date_filed":"2022-12-07","time_filed":null,"entry_number":67,"recap_sequence_number":"2022-12-07.001","pacer_sequence_number":243,"description":"CLERK'S JUDGMENT re: 66 Memo Endorsement in favor of Qudian Inc., Carl Yeung, Min Luo against Galessi Holding Corp., Stephen Bellingham. It is hereby ORDERED, ADJUDGED AND DECREED: That for the reasons stated in the Court's Memo Endorsed Order dated December 5, 2022, application is granted. Judgment is entered for Defendants; accordingly, the case is closed. (Signed by Clerk of Court Ruby Krajick on 12/7/2022) (Attachments: # 1 Right to Appeal) (km) (Entered: 12/07/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/213434950/","id":213434950,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/219404658/","id":219404658,"tags":[],"absolute_url":"","date_created":"2022-12-06T09:06:39.760389-08:00","date_modified":"2022-12-06T09:06:39.762808-08:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Notice to Court Regarding Proposed Order","acms_document_guid":""}],"date_created":"2022-12-06T09:06:39.756488-08:00","date_modified":"2022-12-06T09:06:39.756498-08:00","date_filed":"2022-12-06","time_filed":null,"entry_number":null,"recap_sequence_number":"2022-12-06T16:04:57+00:00.001","pacer_sequence_number":null,"description":"","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/213434756/","id":213434756,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/219404464/","id":219404464,"tags":[],"absolute_url":"/docket/16738894/66/greco-v-qudian-inc/","date_created":"2022-12-06T09:06:30.922069-08:00","date_modified":"2025-12-25T11:34:47.365337-08:00","sha1":"230060695c30cc76ea902d63935b48dac883ba11","page_count":1,"file_size":221815,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.66.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.66.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 66 USDC\n Page 1 SDNY\n Filed 12/05/22\n of 1\n DOCUMENT\n Simpson Thacher & Bartlett LLP ELECTRONICALLY FILED\n 2475 HA NOVER STREET\n DOC #:\n P A L O A L T O , C A 9 4 3 04\n DATE FILED: 12/5/2022\n\n T E L E P H O N E : + 1- 6 50 - 25 1- 500 0 MEMORANDUM ENDORSED\n F A C S I M I L E : + 1- 6 50- 25 1- 500 2\n\n\n Dir ect Di al Num ber E- ma il A ddr es s\n (650) 25 1-5 153 s bl ak e @s t bl aw. com\n\n\n\n\n BY ECF December 5, 2022\n\n Hon. Gregory H. Woods\n United States District Court for the Southern District of New York\n Daniel Patrick Moynihan U.S. Courthouse\n 500 Pearl St.\n New York, NY 10017-1312\n\n Re: Greco, et al., v. Qudian Inc., et al., Case No. 1:20-cv-00577-GHW\n\n Dear Judge Woods:\n\n Pursuant to the Court\u2019s Individual Rules of Practice in Civil Cases, I write on behalf of\n Defendants Qudian Inc. (\u201cQudian\u201d), Min Luo, and Carl Yeung (collectively, \u201cDefendants\u201d) to request\n the entry of final judgment in favor of Defendants. Lead Plaintiffs Juan Pablo di Benedetto, Galessi\n Holding Corp, and Pablo Greco (collectively, \u201cLead Plaintiffs\u201d) do not oppose this request.\n\n By way of background, on January 22, 2020, Plaintiff Stephen Bellingham filed a Class Action\n Complaint asserting federal securities claims under Sections 10(b) and 20(a) of the Securities\n Exchange Act of 1934, and SEC Rule 10b-5, on behalf of a putative class. Pursuant to a Stipulation\n and Order dated April 7, 2020, the Court appointed Lead Plaintiffs (Dkt. No. 34). Lead Plaintiffs filed\n an Amended Complaint on June 12, 2020 (Dkt. No. 44), and Defendants filed a motion to dismiss the\n Amended Complaint on September 4, 2020 (Dkt. No. 54).\n\n On September 13, 2022, the Court granted Defendants\u2019 motion to dismiss, with leave to file a\n second amended complaint within 30 days, i.e., by October 13, 2022 (Dkt. No. 61), which the Court\n subsequently extended to November 14, 2022 (Dkt. No. 63). Lead Plaintiffs have elected not to file a\n second amended complaint. Defendants therefore respectfully request that, subject to the Court\u2019s\n approval, final judgment be entered in favor of Defendants on all claims in the Amended Complaint in\n the form submitted herewith.\n\n Respectfully submitted,\n\n\n /s/ Stephen P. Blake\n cc: All counsel of record, via ECF Stephen P. Blake\nApplication granted. By separate order, and for the reasons stated in this letter, the Court will enter final judgment in this case.\nThe Clerk of Court is directed to enter judgment for Defendants, to terminate all pending motions and to close this case.\nSO ORDERED.\n _____________________________________\nDated:December 5, 2022 GREGORY H. WOODS\nNew York, New York United States District Judge\n NEW YORK BEIJING HONG KONG HOUSTON LONDON LOS ANGELES S\u00c3O PAULO SEOUL TOKYO WASHINGTON, D.C.\n\f","ocr_status":2,"date_upload":"2025-12-24T16:16:24.837759-08:00","document_number":"66","attachment_number":null,"pacer_doc_id":"127032450799","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Memo Endorsement","acms_document_guid":""}],"date_created":"2022-12-06T09:06:30.916005-08:00","date_modified":"2023-05-30T08:47:59.483892-07:00","date_filed":"2022-12-05","time_filed":null,"entry_number":66,"recap_sequence_number":"2022-12-05.003","pacer_sequence_number":240,"description":"MEMO ENDORSEMENT on re: 64 Letter filed by Qudian Inc., Carl Yeung, Min Luo. ENDORSEMENT: Application granted. By separate order, and for the reasons stated in this letter, the Court will enter final judgment in this case. The Clerk of Court is directed to enter judgment for Defendants, to terminate all pending motions and to close this case. (Signed by Judge Gregory H. Woods on 12/5/2022) (rro) Transmission to Orders and Judgments Clerk for processing. (Entered: 12/06/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/213371643/","id":213371643,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/219339954/","id":219339954,"tags":[],"absolute_url":"/docket/16738894/64/greco-v-qudian-inc/","date_created":"2022-12-05T15:06:18.792541-08:00","date_modified":"2023-05-30T08:47:59.438536-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"64","attachment_number":null,"pacer_doc_id":"127032446415","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Letter","acms_document_guid":""}],"date_created":"2022-12-05T15:06:18.788483-08:00","date_modified":"2023-05-30T08:47:59.373762-07:00","date_filed":"2022-12-05","time_filed":null,"entry_number":64,"recap_sequence_number":"2022-12-05.001","pacer_sequence_number":233,"description":"LETTER addressed to Judge Gregory H. Woods from Stephen P. Blake dated December 5, 2022 re: entry of final judgment. Document filed by Min Luo, Qudian Inc., Carl Yeung..(Blake, Stephen) (Entered: 12/05/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/213371598/","id":213371598,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/219339909/","id":219339909,"tags":[],"absolute_url":"/docket/16738894/65/greco-v-qudian-inc/","date_created":"2022-12-05T15:06:16.906077-08:00","date_modified":"2025-12-25T14:42:18.209598-08:00","sha1":"955f1d82dd5a8efb76c70e218b401d6b6a57d8d8","page_count":1,"file_size":16195,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.65.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.65.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 65 Filed 12/05/22 Page 1 of 1\n\n\n\n\n UNITED STATES DISTRICT COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n\n STEPHEN BELLINGHAM, Individually Case No.: 1:20-cv-00577-GHW\n and On Behalf of All Others Similarly\n Situated, [PROPOSED] FINAL JUDGMENT\n Plaintiff,\n\n v.\n\n QUDIAN INC., MIN LUO, and CARL\n YEUNG,\n\n Defendants.\n\n\n\n [Proposed] Final Judgment\n\n IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that final judgment is entered\n\nin favor of Defendants on all claims in the Amended Complaint, and the above-entitled action is\n\nhereby dismissed in its entirety with prejudice. Each party shall bear its own fees and costs\n\nincurred in connection with the above-entitled action.\n\n\n\nDated: ____________________ ____________________________________\n The Honorable Gregory H. Woods\n United States District Judge\n\n\n\n\n -1-\n\f","ocr_status":2,"date_upload":"2025-12-24T17:19:18.341758-08:00","document_number":"65","attachment_number":null,"pacer_doc_id":"127032446582","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Proposed Judgment","acms_document_guid":""}],"date_created":"2022-12-05T15:06:16.901478-08:00","date_modified":"2023-05-30T08:47:59.455059-07:00","date_filed":"2022-12-05","time_filed":null,"entry_number":65,"recap_sequence_number":"2022-12-05.002","pacer_sequence_number":235,"description":"PROPOSED JUDGMENT. Document filed by Min Luo, Qudian Inc., Carl Yeung..(Blake, Stephen) Proposed Judgment to be reviewed by Clerk's Office staff. (Entered: 12/05/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/208705967/","id":208705967,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/214601231/","id":214601231,"tags":[],"absolute_url":"/docket/16738894/63/greco-v-qudian-inc/","date_created":"2022-10-11T08:06:13.126877-07:00","date_modified":"2026-07-02T03:03:19.857616-07:00","sha1":"c63f0cafde0efe1325203b3157516ffe0d1172ab","page_count":3,"file_size":195828,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.63.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.63.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 63 Filed 10/09/22 USDC\n Page SDNY\n 1 of 3\n DOCUMENT\n ELECTRONICALLY FILED\n DOC #:\n DATE FILED: 10/9/2022\n\n MEMORANDUM ENDORSED\n UNITED STATES DISTRICT COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n\n STEPHEN BELLINGHAM, Individually Case No.: 1:20-cv-00577-GHW\n and On Behalf of All Others Similarly\n Situated, STIPULATION AND [PROPOSED]\n SCHEDULING ORDER\n Plaintiff,\n\n v.\n\n QUDIAN INC., MIN LUO, and CARL\n YEUNG,\n\n Defendants.\n\n\n\n WHEREAS, on January 22, 2020, Plaintiff Stephen Bellingham (\u201cPlaintiff\u201d) filed a Class\n\n Action Complaint asserting federal securities claims under Sections 10(b) and 20(a) of the\n\n Securities Exchange Act of 1934 (the \u201cExchange Act\u201d), and SEC Rule 10b-5, on behalf of a\n\n putative class;\n\n WHEREAS, pursuant to a Stipulation and Order dated April 7, 2020, the Court appointed\n\n Juan Pablo di Benedetto and Galessi Holding Corp (collectively, \u201cdi Benedetto\u201d) and Pablo\n\n Greco as Co-Lead Plaintiffs, and approved of Lead Plaintiffs\u2019 selection of Pomerantz LLP and\n\n Kahn Swick & Foti, LLC as Co-Lead Counsel (Dkt. No. 34);\n\n WHEREAS, Lead Plaintiffs filed an Amended Complaint on June 12, 2020 (Dkt. No.\n\n44);\n\n WHEREAS, Defendants filed a motion to dismiss the Amended Complaint on September\n\n4, 2020 (Dkt. No. 54);\n\n\n\n\n{00520111;2 }\n\f Case 1:20-cv-00577-GHW Document 63 Filed 10/09/22 Page 2 of 3\n\n\n\n WHEREAS, on September 13, 2022, the Court granted Defendants\u2019 motion to dismiss,\n\nwith leave to file a second amended complaint within 30 days, i.e., by October 13, 2022 (Dkt. No.\n\n61);\n\n WHEREAS, the parties have conferred and, for the convenience of the parties and the\n\nCourt, hereby enter into the following stipulation regarding the schedule for the filing of an\n\nsecond amended complaint and the defendants\u2019 response thereto;\n\n NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED among the\n\nundersigned parties, subject to the Court\u2019s approval, as follows:\n\n 1. Lead Plaintiffs shall file a Second Amended Complaint no later than November\n\n14, 2022;\n\n 2. Defendants shall file their pre-motion conference request related to its anticipated\n\nmotion to dismiss (\u201cDefendants\u2019 Pre-Motion Letter\u201d), pursuant to Rule 2C of the Court\u2019s\n\nIndividual Rules of Practice in Civil Cases, no later than December 12, 2022;\n\n 3. Lead Plaintiffs shall file their response to Defendants\u2019 Pre-Motion Letter no later\n\nthan December 19, 2022;\n\n 4. Defendants shall move to dismiss the Amended Complaint no later than January\n\n20, 2023 or 14 days after the Court\u2019s ruling on Defendant\u2019s Pre-Motion Letter, whichever is\n\nlater;\n\n 5. Lead Plaintiffs shall file any opposition to such motion no later than 42 days after\n\nDefendants files its motion to dismiss;\n\n 6. Defendants shall file their reply to any such opposition no later than 28 days after\n\nLead Plaintiffs\u2019 opposition to their motion to dismiss; and\n\n 7. This stipulation is without prejudice to any of the parties\u2019 rights or defenses in this\n\naction.\n\n\n\n{00520111;2 }\n\f Case 1:20-cv-00577-GHW Document 63 Filed 10/09/22 Page 3 of 3\n\n\n Dated: October 7, 2022 Respectfully submitted,\n\n SIMPSON THACHER & POMERANTZ LLP\n BARTLETT LLP\n\n /s/ Stephen P. Blake ________________________ /s/ Michael Grunfeld\n Stephen P. Blake Jeremy A. Lieberman\n 2475 Hanover Street Michael Grunfeld\n Palo Alto, California 94304 600 Third Avenue, 20th Floor\n Telephone: (650) 251-5000 New York, New York 10016\n Facsimile: (650) 251-5002 Telephone: (212) 661-1100\n Email: sblake@stblaw.com Facsimile: (212) 661-8665\n Email: jalieberman@pomlaw.com\n Counsel for Defendants Qudian Inc., Email: mgrunfeld@pomlaw.com\n Min Luo, and Carl Yeung\n\n KAHN SWICK & FOTI, LLC\n\n /s/Kim E. Miller\n Kim E. Miller\n J. Ryan Lopatka\n 250 Park Avenue, Suite 2040\n New York, NY 10177\n Telephone: (212) 696-3730\n Facsimile: (504) 455-1498\n Email: kim.miller@ksfcounsel.com\n Email: j.lopatka@ksfcounsel.com\n\n Co-Lead Counsel for Co-Lead Plaintiff Juan\n Pablo di Benedetto, Galessi Holding Corp\n and Pablo Greco\nApplication granted in part. Lead Plaintiffs are granted leave to file their Second Amended Complaint no later than November 14,\n2022. Defendants may file their pre-motion conference request related to their anticipated motion to dismiss (\u201cDefendants\u2019 Pre-\nMotion Letter\u201d) no later than December 12, 2022. In accordance with the Court\u2019s Individual Rule 2(C)(i), Plaintiffs must submit any\nletter in response to Defendants\u2019 letter within five days of the filing of Defendants\u2019 letter. Upon receipt of the parties\u2019 letter(s), the\nCourt will determine whether to grant or deny the request to file the motion, or whether to schedule a pre-motion conference on the\nmatter. At that time, the Court will set deadlines, as necessary, for any briefing schedule concerning Defendants\u2019 anticipated motion.\nThis application does not comply with the Court's Rule 1(F), which requires the filing of a letter together with any requested order\nor application. The parties are again directed to review and comply with the Court's Individual Rules.\n SO ORDERED\n _____________________________________\n Dated: October 9, 2022 GREGORY H. WOODS\n United States District Judge\n\n\n\n\n {00520111;2 }\n\f","ocr_status":2,"date_upload":"2026-07-01T06:51:27.121570-07:00","document_number":"63","attachment_number":null,"pacer_doc_id":"127032100772","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"~Util - Set Deadlines AND Memo Endorsement","acms_document_guid":""}],"date_created":"2022-10-11T08:06:13.122073-07:00","date_modified":"2023-05-30T08:47:59.344187-07:00","date_filed":"2022-10-09","time_filed":null,"entry_number":63,"recap_sequence_number":"2022-10-09.001","pacer_sequence_number":229,"description":"MEMO ENDORSEMENT on re: 62 Proposed Stipulation and Scheduling Order filed by Juan Pablo Di Benedetto, Galessi Holding Corp., Pablo Greco. ENDORSEMENT: Application granted in part. Lead Plaintiffs are granted leave to file their Second Amended Complaint no later than November 14, 2022. Defendants may file their pre-motion conference request related to their anticipated motion to dismiss (\"Defendants' Pre- Motion Letter\") no later than December 12, 2022. In accordance with the Court's Individual Rule 2(C)(i), Plaintiffs must submit any letter in response to Defendants' letter within five days of the filing of Defendants' letter. Upon receipt of the parties' letter(s), the Court will determine whether to grant or deny the request to file the motion, or whether to schedule a pre-motion conference on the matter. At that time, the Court will set deadlines, as necessary, for any briefing schedule concerning Defendants' anticipated motion. This application does not comply with the Court's Rule 1(F), which requires the filing of a letter together with any requested order or application. The parties are again directed to review and comply with the Court's Individual Rules. ( Amended Pleadings due by 11/14/2022.) (Signed by Judge Gregory H. Woods on 10/9/2022) (tro) (Entered: 10/11/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/208541701/","id":208541701,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/214433634/","id":214433634,"tags":[],"absolute_url":"/docket/16738894/62/greco-v-qudian-inc/","date_created":"2022-10-07T12:06:55.864769-07:00","date_modified":"2023-05-30T08:47:59.277379-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"62","attachment_number":null,"pacer_doc_id":"127032092876","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Proposed Stipulation and Order","acms_document_guid":""}],"date_created":"2022-10-07T12:06:55.860150-07:00","date_modified":"2023-05-30T08:47:59.264699-07:00","date_filed":"2022-10-07","time_filed":null,"entry_number":62,"recap_sequence_number":"2022-10-07.001","pacer_sequence_number":227,"description":"PROPOSED STIPULATION AND ORDER. Document filed by Juan Pablo Di Benedetto, Galessi Holding Corp., Pablo Greco..(Grunfeld, Michael) (Entered: 10/07/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/206181344/","id":206181344,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/212032960/","id":212032960,"tags":[],"absolute_url":"/docket/16738894/61/greco-v-qudian-inc/","date_created":"2022-09-13T08:10:16.616557-07:00","date_modified":"2023-05-30T08:47:59.241795-07:00","sha1":"99da48cf02e610a3477f255274b2e5fa83ee7285","page_count":52,"file_size":429708,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.61.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.61.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 1 of 52\n USDC SDNY\n DOCUMENT\n ELECTRONICALLY FILED\nUNITED STATES DISTRICT COURT\n DOC #: ________________\nSOUTHERN DISTRICT OF NEW YORK\n DATE FILED: 9/13/2022\n------------------------------------------------------------------X\nPABLO GRECO, GALESSI HOLDING CORP., :\nand JUAN PABLO DI BENEDETTO, individually :\nand on behalf of all others similarly situated, :\n : 1:20-cv-577-GHW\n Lead Plaintiffs,:\n : MEMORANDUM OPINION\n -against- : AND ORDER\n :\nQUDIAN INC., MIN LUO, and CARL YEUNG, :\n :\n Defendants. :\n------------------------------------------------------------------X\n\n\nGREGORY H. WOODS, United States District Judge:\n Defendant Qudian, Inc. is a leading provider of micro-loans to consumers in China. In June\n\n2019, Qudian raised its guidance for its total non-GAAP net income for the year from 3.5 billion\n\nrenminbi to 4.5 billion renminbi. Qudian attributed the increase to its strong early results and\n\nconfidence in its ability to grow through the second half of the year. Not long after Qudian raised\n\nits guidance, the company\u2019s performance plummeted. By the time the smoke settled, Qudian missed\n\nnot only its increased guidance, but its initial guidance as well\u2014Qudian\u2019s non-GAAP net income for\n\n2019 was 3.4 billion renminbi.\n\n The lead plaintiffs in this action, Juan Pablo di Benedetto, Galessi Holding Corp., and Pablo\n\nGreco (together, \u201cLead Plaintiffs\u201d), brought this securities class action on behalf of themselves and\n\nother similarly situated investors who purchased or otherwise acquired Qudian securities between\n\nDecember 13, 2018 and January 15, 2020 (the \u201cClass Period\u201d). Lead Plaintiffs allege that\n\nDefendants made a number of false and misleading statements and omissions, including by\n\nmisrepresenting that Qudian\u2019s business was compliant with China\u2019s regulations, and by\n\nmisrepresenting that Qudian was experiencing significant growth while remaining conservative in its\n\nlending practices. Lead Plaintiffs allege that Defendants violated Section 10(b) of the Securities\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 2 of 52\n\n\n\nExchange Act of 1934 and Rule 10b-5, and that Min Luo and Carl Yeung violated Section 20(a) of\n\nthe Exchange Act.\n\n For the reasons that follow, Lead Plaintiffs have not plausibly alleged that Defendants made\n\nmaterially false or misleading statements with a wrongful state of mind. Therefore, Defendants\u2019\n\nmotion to dismiss the amended complaint is GRANTED.\n\nI. BACKGROUND\n\n A. Facts 1\n\n 1. Qudian\n\n Qudian was founded in 2014 and is \u201ca leading provider of online small consumer credit\n\nproducts in China.\u201d Am. Compl., Dkt. No. 44, \u00b6\u00b6 24, 28. Almost all of Qudian\u2019s transactions are\n\nconducted through mobile phones\u2014potential borrowers apply for small amounts of credit on their\n\nphones and receive approval within seconds. Id. \u00b6 28. Qudian\u2019s average loan size is less than $300\n\nand has a duration of less than a year. Id. Qudian states that it \u201ctarget[s] the large and growing\n\nnumber of creditworthy borrowers in China who we believe are of emerging prime credit quality but\n\nhave limited credit history and access to traditional consumer credit from banks or other lenders.\u201d\n\nId. \u00b6 33. Over 80% of Qudian\u2019s active borrowers are between 18 and 35 years old. Id. Qudian was\n\na private company until October 18, 2017, when the company went public with an initial public\n\noffering that listed Qudian\u2019s American Depositary Shares (\u201cADS\u201d) on the New York Stock\n\nExchange. Id. \u00b6 29. Luo is the founder of Qudian and serves as the CEO and chairman of Qudian\u2019s\n\nboard of directors. Id. \u00b6 24. Yeung was Qudian\u2019s CFO. Id. \u00b6 25.\n\n\n\n\n1 Unless otherwise noted, the facts are drawn from the amended complaint, Dkt. No. 44, and are accepted as true for the\npurposes of this motion to dismiss. See, e.g., Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). But \u201c[t]he\ntenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.\u201d\nAshcroft v. Iqbal, 556 U.S. 662, 678 (2009).\n\n 2\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 3 of 52\n\n\n\n 2. Core Loan Book\n\n Lead Plaintiffs refer to Qudian\u2019s consumer lending business as its \u201ccore loan book.\u201d\n\nQudian\u2019s core loan book consists of \u201con-balance sheet\u201d and \u201coff-balance sheet\u201d transactions. Id.\n\n\u00b6 58. On-balance sheet transactions are loans funded either directly by Qudian or by Qudian\u2019s\n\ninstitutional funding partners. Id. Off-balance sheet transactions are loans that Qudian facilitates\n\nbetween borrowers and third parties. Id. \u00b6 59. Under this service, Qudian refers qualified credit\n\napplications to banks along with Qudian\u2019s assessment of the potential borrower\u2019s credit profile and\n\nsuggested credit limits. Id. The banks then independently review the credit application and approve\n\nor deny the loan. Id. If the loan is approved, the banks directly fund the loan to the borrower. Id.\n\nQudian receives a facilitation fee for each loan and guarantees the full loan amount in the event of a\n\ndefault. Id. In 2018, Qudian\u2019s core loan book funded approximately $8.4 billion worth of loans. Id.\n\n\u00b6 58. 64% of the transactions were on-balance sheet and the remainder were off-balance sheet. Id.\n\n 3. Regulatory Issues with the Core Loan Book\n\n China imposes strict regulations on the online consumer lending industry. Id. \u00b6 61. On\n\nDecember 1, 2017, China\u2019s Office of the Leading Group for Specific Rectification against Online\n\nFinance Risks and the Office of the Leading Group for Specific Rectification against P2P Online\n\nLending Risks jointly issued the Circular on Regulating and Rectifying Cash Loan Business, which is\n\nknown as Circular 141. Id. In its 2018 Annual Report, Qudian explained that Circular 141\n\n\u201cprovides restrictions on banks\u2019 collaboration with third parties in cash loan business,\u201d including\n\nthat \u201c[a] bank may not outsource its core business functions, such as credit assessment and risk\n\nmanagement, to third parties\u201d and that \u201c[a] bank participating in loan facilitation transactions may\n\nnot accept credit enhancement services from a third party which has not obtained any license or\n\napproval to provide guarantees, including credit enhancement service in the form of a commitment\n\nto assume default risks.\u201d Id. \u00b6 62.\n\n\n\n 3\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 4 of 52\n\n\n\n Lead Plaintiffs allege that Qudian\u2019s off-balance sheet transactions, as well as on-balance\n\nsheet loans that were funded by other financial institutions, violate Chinese regulations, including\n\nCircular 141. Id. \u00b6 66. Lead Plaintiffs allege that \u201cit was common for Qudian to violate Circular\n\n141\u2019s prohibition on having financial institutions outsource their credit assessments to Qudian,\u201d\n\nbecause \u201cmany of the banks that Qudian did business with were actually outsourcing the credit\n\nassessment function to Qudian\u201d rather than conducting their own independent credit assessments.\n\nId. \u00b6 69. Despite allegedly violating Circular 141, Qudian \u201crepeatedly assured investors . . . that\n\nQudian was compliant with online lending regulations.\u201d Id. \u00b6 78.\n\n In addition to Circular 141, Qudian was subject to strict licensing regulations. At the end of\n\n2018, Qudian had two online microlending licenses. Id. \u00b6 72. The licenses were associated with two\n\nof Qudian\u2019s subsidiaries: Fuzhou Gaoxin District Qufenqi Microlending Co. Ltd. and Ganzhou\n\nHappy Life Online Microlending Co. Ltd. Id. Lead Plaintiffs allege that, in May 2019, China\u2019s\n\ngovernment \u201cdowngraded the scope of business that Qufenqi Microlending could engage in so that\n\nits lending license was narrowed from not having any geographic restriction to being just a regional\n\nmicrolending license. This severely restricted Qudian to making microloans within the limits of\n\nGanzhou district and surrounding counties.\u201d Id. Consequently, Lead Plaintiffs allege, the number\n\nof loans that Qudian was able to fund with its own capital was narrowed. Id. \u00b6 73. Lead Plaintiffs\n\nallege that the restriction impacted Qudian\u2019s core loan book\u2014both the number of on-balance sheet\n\ntransactions and Qudian\u2019s financing income from those transactions declined in 2019. Id. \u00b6 74.\n\n Lead Plaintiffs contend that, as a result of these regulatory issues, Qudian\u2019s financial partners\n\nbecame reluctant to provide Qudian funding and some partners ended their partnership completely.\n\nId. \u00b6 76\u201377. Qudian became concerned about the viability of the core loan book. Id. \u00b6 75. These\n\nconcerns, among other reasons, pushed Qudian to try to generate income through other methods.\n\nId. \u00b6 75\u201377. However, Qudian failed numerous times to grow its business outside of its core loan\n\nbook, including through a relationship with Ant Financial, an auto-financing business, and several e-\n\n 4\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 5 of 52\n\n\n\ncommerce projects, among others. See id. \u00b6 36\u201352. By November 2018, Qudian\u2019s share price had\n\nfallen by 82% from its IPO as a result of these failed projects. Id. \u00b6 52.\n\n 4. Open Platform\n\n In the third quarter of 2018, Qudian developed a new loan-referral business called Open\n\nPlatform. Id. \u00b6\u00b6 2, 82. Through Open Platform, Qudian refers borrowers to other financial\n\ninstitutions which then make loans directly to the borrowers. Id. \u00b6 2. The primary difference\n\nbetween Open Platform and the off-balance sheet loans that Qudian facilitated through its core loan\n\nbook is that Qudian does not guarantee the loans made through Open Platform. Id. \u00b6 103. In its\n\n2018 Annual Report, Qudian explained that Open Platform:\n\n [O]ffers our large user base with more choices to satisfy their financial needs, while\n incurring no material cost of operations and no credit risk for us. For users that do\n not meet our credit requirements, we provide recommendations of financial products\n that are offered by financial service providers that participate on our platform. The\n relevant financial service providers perform independent credit assessment of users\n and make the ultimate credit decisions. We typically charge such financial service\n providers for lead generation on a cost-per-click basis. On the other hand, for users\n with better credit profiles that are applying for large loan amounts that exceed the limit\n permitted under our policy, we refer their applications to our institutional funding\n partners. We do not bear credit risk and receive commissions from our institutional\n funding partners for such referrals.\n\nId. \u00b6 82. Qudian portrayed Open Platform as the next source of growth for Qudian after its other\n\nfailed attempts to expand beyond the core loan book. Id. \u00b6 84. Qudian told investors that Open\n\nPlatform would allow Qudian to profit off its tens of millions of registered users that were not\n\ntaking out loans. Id.\n\n The reality, Lead Plaintiffs allege, was vastly different. Although Defendants stated that\n\nOpen Platform was created as a new business opportunity, Lead Plaintiffs assert that Qudian\n\n\u201cdeveloped Open Platform to address its serious regulatory concerns with its core loan business.\u201d\n\nId. \u00b6 85. \u201cQudian\u2019s reason for shifting to Open Platform was actually that it was more compliant\n\nwith China\u2019s strict online lending regulations, not that it presented a promising new avenue of\n\ngrowth separate from the core loan book. But rather than explaining the Company\u2019s true reason for\n\n 5\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 6 of 52\n\n\n\nits shift to Open Platform, Defendants described Open Platform as a great new business\n\nopportunity that would provide Qudian with its long-sought-after next leg of rapid growth alongside\n\ncontinued growth in its core loan book.\u201d Id. \u00b6 92. Lead Plaintiffs allege that Qudian\u2019s ultimate goal\n\nwas to \u201cshift their entire business to Open Platform.\u201d Id. \u00b6 192.\n\n Further, Lead Plaintiffs allege that Defendants misrepresented how Open Platform\n\ncompared to the core loan book. Rather than being a new product, Lead Plaintiffs assert that Open\n\nPlatform \u201cwas very similar to Qudian\u2019s pre-existing off-balance sheet loan facilitation business,\n\nwhich also facilitated loans directly between Qudian\u2019s users and third-party\u201d and that therefore\n\nOpen Platform did not provide an avenue for growth separate from the core loan book. Id. \u00b6 92.\n\nMoreover, Lead Plaintiffs assert that Open Platform was in direct competition with the core loan\n\nbook. Id. \u00b6 85. Because Qudian did not guarantee the risk of default in Open Platform, Qudian\u2019s\n\npartners demanded that Qudian refer only its highest-quality and most-credit-worthy borrowers. Id.\n\n\u00b6 104. \u201cRather than accessing Qudian\u2019s tens of millions of inactive users, Open Platform was\n\nactually limited to the much smaller set of the highest-quality borrowers from Qudian\u2019s core loan\n\nbook.\u201d Id. \u00b6 85. Consequently, Lead Plaintiffs maintain that Qudian\u2019s best borrowers shifted from\n\nthe core loan book to Open Platform. Id. \u00b6 104.\n\n 5. Credit Trial Program\n\n In the third quarter of 2018, Qudian began lowering its credit standards in the core loan\n\nbook through its Credit Trial Program. Id. \u00b6\u00b6 108\u201310. The Credit Trial Program \u201centailed Qudian\n\nmaking loans in its core business to riskier borrowers that were not approved under Qudian\u2019s\n\ntraditional risk assessment.\u201d Id. \u00b6 108. Lead Plaintiffs allege that the Credit Trial Program was\n\ncreated to compensate for the fact that Qudian had diverted its highest-quality borrowers from the\n\ncore loan book to Open Platform. Id. \u00b6 4. The Credit Trial Program allowed \u201cQudian to portray its\n\ncore loan book as continuing to grow alongside Open Platform,\u201d when in reality, \u201cQudian was\n\npopulating its legacy business with much riskier loans that would have a much higher rate of\n\n 6\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 7 of 52\n\n\n\ndefault.\u201d Id. \u00b6 108. Qudian did not disclose the Credit Trial Program until August 16, 2019. Id.\n\n\u00b6 110. After the third quarter of 2019, Qudian revealed that it had stopped the Credit Trial\n\nProgram, but that twenty percent of the loans in the core loan book were part of the Credit Trial\n\nProgram. Id. \u00b6 116.\n\n 6. Qudian\u2019s 2019 Financial Guidance\n\n On December 13, 2018, Qudian issued a press release announcing its financial guidance for\n\n2019. Id. \u00b6 198. In the press release, Qudian announced that it expected that its non-GAAP net\n\nincome in 2019 would exceed 3.5 billion renminbi. Id. \u00b6 54. Qudian\u2019s stock price rose twenty\n\npercent by the close of trading on December 13, 2018. Id.\n\n Qudian subsequently updated its 2019 Financial Guidance multiple times throughout the\n\nClass Period. On June 21, 2019, Qudian issued a press release announcing that it was raising its\n\nincome guidance for 2019 from 3.5 billion renminbi to greater than 4.5 billion renminbi. Id. \u00b6\u00b6 260\u2013\n\n61. Shortly after releasing its updated guidance, Qudian began to suffer poor performance. On\n\nNovember 18, 2019, Qudian issued a press release announcing its financial results for the third\n\nquarter of 2019. Id. \u00b6 299. In the press release, Qudian reduced its financial guidance for 2019 from\n\n4.5 billion renminbi to 4.0 billion renminbi. Id. \u00b6 144. Compared to the previous quarter, revenue in\n\nthe core loan book dropped from 1.6 billion renminbi to 1.4 billion renminbi, and new active\n\nborrowers decreased from 1.1 million to less than 700,000. Id. \u00b6\u00b6 145, 147. In addition, Qudian\n\nrecorded over 1 billion renminbi in expenses related to credit costs in the quarter and the\n\ndelinquency rate of loans in the core loan book rose by more than four percent. Id. \u00b6\u00b6 148\u201350.\n\n As a result of Qudian\u2019s poor results and updated guidance, Qudian\u2019s share price began to fall\n\nrapidly. Id. \u00b6\u00b6 329, 334. By November 21, 2019, Qudian\u2019s share price had fallen over 45% below\n\nthe price on November 15, 2019. Id. \u00b6 335. In an attempt to assuage investor concerns, Qudian\n\nheld an emergency \u201cBusiness Update Call\u201d on November 25, 2019. Id. \u00b6 157. On the call, Yeung\n\nstated, \u201c[w]e are perplexed, first of all, on how the market reacted. We think it\u2019s unreasonable . . . .\u201d\n\n 7\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 8 of 52\n\n\n\nId. Yeung also reinforced Qudian\u2019s new financial guidance for 2019, which he described as\n\n\u201cconservative.\u201d Id. \u00b6 309\u201310.\n\n Less than two months later, on January 16, 2020, Qudian abandoned its 2019 financial\n\nguidance. Id. \u00b6 17. In a press release, Qudian explained \u201cthat the Company withdraws its fiscal 2019\n\nguidance and will not issue guidance in the near term due to uncertainty related to the recent\n\nregulatory and operating environment.\u201d Id. \u00b6 159. The market reacted strongly\u2014Qudian\u2019s stock\n\nprice fell 24.8% by the close of trading on January 21, 2020. Id. \u00b6 351.\n\n Qudian announced its results for 2019 on March 18, 2020. Id. \u00b6 160. Qudian had fallen\n\nshort of its guidance\u2014its non-GAAP net income for 2019 was 3.4 billion renminbi. Id. \u00b6 161.\n\nQudian\u2019s fourth quarter results were particularly bad. The company earned only approximately 157\n\nmillion renminbi in the quarter, down from 1.1 billion in the third quarter. Id. \u00b6 160. Qudian\n\nacknowledged that \u201c[i]f you look at our fourth quarter number, if we single out the open platform\n\nbusiness, we are actually experiencing a loss for our loan book business.\u201d Id. \u00b6 162. On the same\n\nday, the company announced that Yeung was resigning from his position as CFO effective\n\nimmediately. Id. \u00b6 164.\n\n B. Procedural History\n\n Stephen Bellingham, an investor who purchased Qudian\u2019s ADS during the Class Period,\n\ninitiated this action on January 22, 2020 against Qudian, Luo, and Yeung. Dkt. No. 1. On April 7,\n\n2020, the parties stipulated to appoint Juan Pablo di Benedetto, Galessi Holding Corp., and Pablo\n\nGreco as lead plaintiffs in this action. Dkt. No. 34. Lead Plaintiffs filed an amended complaint on\n\nJune 17, 2020. Dkt. No. 44.\n\n The amended complaint asserts two claims for relief. First, the amended complaint alleges\n\nviolations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. \u00a7 78j(b), (\u201cSection\n\n10(b)\u201d) and rule 10b-5 promulgated thereunder, 17 C.F.R. \u00a7 240.10b-5 (\u201cRule 10b-5\u201d). Am. Compl.\n\n\u00b6\u00b6 382\u201392. Second, the amended complaint alleges control person liability against Luo and Yeung\n\n 8\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 9 of 52\n\n\n\nunder section 20(a) of the Exchange Act, 15 U.S.C. \u00a7 78t, (\u201cSection 20(a)\u201d) for the same violations\n\nalleged in the first cause of action. Am. Compl. \u00b6\u00b6 393\u2013400.\n\n On September 4, 2020, Defendants moved to dismiss the amended complaint, on the basis\n\nthat Lead Plaintiffs had failed to state a claim. Mot. to Dismiss Pls.\u2019 Am. Compl., Dkt. No. 54; see\n\nalso Defs.\u2019 Mem. of Law in Support of Their Mot. to Dismiss the Am. Compl. (\u201cMem.\u201d), Dkt. No.\n\n55; Kreissman Decl., Dkt. No. 56. Lead Plaintiffs opposed Defendants\u2019 motion on October 2,\n\n2020. Pls.\u2019 Mem. in Opp\u2019n to Defs\u2019 Mot. to Dismiss (\u201cOpp\u2019n\u201d), Dkt. No. 57. Defendants replied\n\non October 16, 2020. Defs.\u2019 Reply Mem. of Law in Supp. of Their Mot. to Dismiss (\u201cReply\u201d), Dkt.\n\nNo. 58. On March 10, 2022, Lead Plaintiffs submitted a notice of supplemental authority, notifying\n\nthe Court of the February 16, 2022 opinion in the case France v. Jiayin Grp. Inc., 161 N.Y.S. 3d 755\n\n(N.Y. Sup. Ct. 2022). Dkt. No. 59. Defendants responded on March 17, 2022. Dkt. No. 60.\n\nII. LEGAL STANDARD\n\n A complaint must contain \u201ca short and plain statement of the claim showing that the pleader\n\nis entitled to relief.\u201d Fed. R. Civ. P. 8(a)(2). If a complaint fails to meet this pleading standard, a\n\ndefendant may move to dismiss it for \u201cfailure to state a claim upon which relief can be granted.\u201d\n\nFed. R. Civ. P. 12(b)(6). \u201cTo survive a motion to dismiss, a complaint must contain sufficient\n\nfactual matter, accepted as true, to \u2018state a claim to relief that is plausible on its face.\u2019\u201d Ashcroft v.\n\nIqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). \u201cA\n\nclaim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the\n\nreasonable inference that the defendant is liable for the misconduct alleged.\u201d Id. (citing Twombly, 550\n\nU.S. at 556). It is not enough for a plaintiff to allege facts consistent with liability; the complaint\n\nmust \u201cnudge[]\u201d claims \u201cacross the line from conceivable to plausible.\u201d Twombly, 550 U.S. at 570.\n\n\u201cTo survive dismissal, the plaintiff must provide the grounds upon which his claim rests through\n\nfactual allegations sufficient \u2018to raise a right to relief above the speculative level.\u2019\u201d ATSI Commc\u2019ns,\n\nInc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at 555).\n\n 9\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 10 of 52\n\n\n\n Determining whether a complaint states a plausible claim is a \u201ccontext-specific task that\n\nrequires the reviewing court to draw on its judicial experience and common sense.\u201d Iqbal, 556 U.S.\n\nat 679. The court must accept all facts alleged in the complaint as true and draw all reasonable\n\ninferences in the plaintiff\u2019s favor. Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 124 (2d Cir. 2008)\n\n(per curiam). However,\n\n \u201c[t]hreadbare recitals of the elements of a cause of action, supported by mere\n conclusory statements, do not suffice.\u201d A complaint must therefore contain more\n than \u201cnaked assertion[s] devoid of further factual enhancement.\u201d Pleadings that\n contain \u201cno more than conclusions . . . are not entitled to the assumption of truth\u201d\n otherwise applicable to complaints in the context of motions to dismiss.\n\nDeJesus v. HF Mgmt. Servs., LLC, 726 F.3d 85, 87\u201388 (2d Cir. 2013) (second alteration in original)\n\n(internal quotation marks and citations omitted) (quoting Iqbal, 556 U.S. at 678\u201379). Thus, a\n\ncomplaint that offers \u201clabels and conclusions\u201d or \u201cnaked assertion[s]\u201d without \u201cfurther factual\n\nenhancement\u201d will not survive a motion to dismiss. Iqbal, 556 U.S. at 678 (alteration in original)\n\n(citing Twombly, 550 U.S. at 555, 557).\n\n Securities fraud claims are also subject to the heightened pleading requirements of Federal\n\nRule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act (the \u201cPSLRA\u201d). Rule\n\n9(b) requires that \u201cin alleging fraud or mistake, a party must state with particularity the\n\ncircumstances constituting fraud or mistake.\u201d Fed. R. Civ. P. 9(b). To satisfy this requirement, the\n\ncomplaint must \u201c(1) specify the statements that the plaintiff contends were fraudulent, (2) identify\n\nthe speaker, (3) state where and when the statements were made, and (4) explain why the statements\n\nwere fraudulent.\u201d ATSI, 493 F.3d at 99. \u201cAllegations that are conclusory or unsupported by factual\n\nassertions are insufficient.\u201d Id. Under the PSLRA, plaintiffs must also specify \u201ceach statement\n\nalleged to have been misleading, the reason or reasons why the statement is misleading, and, if an\n\nallegation regarding the statement or omission is made on information and belief, the complaint\n\nshall state with particularity all facts on which that belief is formed.\u201d 15 U.S.C. \u00a7 78u-4(b)(1).\n\nPlaintiffs must therefore \u201cdo more than say that the statements . . . were false and misleading; they\n\n 10\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 11 of 52\n\n\n\nmust demonstrate with specificity why and how that is so.\u201d Rombach v. Chang, 355 F.3d 164, 174 (2d\n\nCir. 2004).\n\n On a motion to dismiss, a court must generally \u201climit itself to the facts stated in the\n\ncomplaint.\u201d Field Day, LLC v. Cnty. of Suffolk, 463 F.3d 167, 192 (2d Cir. 2006) (quoting Hayden v.\n\nCnty. of Nassau, 180 F.3d 42, 54 (2d Cir. 1999)). In that context, \u201c[a] court\u2019s task is to assess the legal\n\nfeasibility of the complaint; it is not to assess the weight of the evidence that might be offered on\n\neither side.\u201d Lynch v. City of New York, 952 F.3d 67, 75 (2d Cir. 2020). \u201cThe purpose of Rule\n\n12(b)(6) is to test, in a streamlined fashion, the formal sufficiency of the plaintiff\u2019s statement of a\n\nclaim for relief without resolving a contest regarding its substantive merits. The Rule thus assesses\n\nthe legal feasibility of the complaint, but does not weigh the evidence that might be offered to\n\nsupport it.\u201d Glob. Network Commc\u2019ns, Inc. v. City of New York, 458 F.3d 150, 155 (2d Cir. 2006)\n\n(emphasis in original).\n\n In ruling on a motion to dismiss, a court \u201cmay consider any written instrument attached to\n\nthe complaint, statements or documents incorporated into the complaint by reference, legally\n\nrequired public disclosure documents filed with the SEC, and documents possessed by or known to\n\nthe plaintiff and upon which it relied in bringing the suit.\u201d ATSI, 493 F.3d at 98 (citing Rothman v.\n\nGregor, 220 F.3d 81, 88 (2d Cir. 2000)). As the Second Circuit recently reaffirmed in Lynch, \u201c[i]t is\n\nwell established that a pleading is deemed to include any \u2018written instrument\u2019 that is attached to it as\n\n\u2018an exhibit,\u2019 or is incorporated in it by reference.\u201d Lynch, 952 F.3d at 79 (citations omitted). Courts\n\nmay also consider \u201cmatters of which judicial notice may be taken.\u201d Goel v. Bunge, Ltd., 820 F.3d 554,\n\n559 (2d Cir. 2016) (quoting Concord Assocs., L.P. v. Entm\u2019t Props. Tr., 817 F.3d 46, 51 n.2 (2d Cir.\n\n2016)).\n\n A court can also consider documents that are \u201cintegral to\u201d the complaint. Lynch, 952 F.3d at\n\n79. In order for a document to meet this exception to the general principle that a court may not\n\nconsider documents outside of the pleadings without converting the motion to one for summary\n\n 11\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 12 of 52\n\n\n\njudgment, the complaint must rely heavily upon its terms and effects. See DiFolco v. MSNBC Cable\n\nLLC, 622 F.3d 104, 111 (2d Cir. 2010) (\u201cWhere a document is not incorporated by reference, the\n\ncourt may nevertheless consider it where the complaint relies heavily upon its terms and effect,\n\nthereby rendering the document integral to the complaint.\u201d) (internal quotation marks omitted)).\n\n\u201cHowever, even if a document is integral to the complaint, it must be clear on the record that no\n\ndispute exists regarding the authenticity or accuracy of the document.\u201d Id. (internal quotation\n\nmarks omitted) (quoting Faulkner v. Beer, 463 F.3d 130, 134 (2d Cir. 2006)). \u201cIt must also be clear\n\nthat there exist no material disputed issues of fact regarding the relevance of the document.\u201d Id.\n\n(quoting Faulkner, 463 F.3d at 134). \u201cIn most instances where this exception is recognized, the\n\nincorporated material is a contract or other legal document containing obligations upon which the\n\nplaintiff\u2019s complaint stands or falls, but which for some reason\u2014usually because the document, read\n\nin its entirety, would undermine the legitimacy of the plaintiff\u2019s claim\u2014was not attached to the\n\ncomplaint.\u201d Glob. Network Commc\u2019ns, Inc., 458 F.3d at 157. The Second Circuit has \u201crecognized the\n\napplicability of this exception where the documents consisted of emails that were part of a\n\nnegotiation exchange that the plaintiff identified as the basis for its good faith and fair dealing claim,\n\nor consisted of contracts referenced in the complaint which were essential to the claims.\u201d United\n\nStates ex rel. Foreman v. AECOM, 19 F.4th 85, 108\u201309 (2d Cir. 2021) (citations omitted) (first citing L-\n\n7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir. 2011); and then citing Chambers v. Time\n\nWarner, Inc., 282 F.3d 147, 153 n.4 (2d Cir. 2002)).\n\n \u201cWhere a district court considers material outside of the pleadings that is not attached to the\n\ncomplaint, incorporated by reference, or integral to the complaint, the district court, to decide the\n\nissue on the merits, must convert the motion into one for summary judgment.\u201d Id. at 106. \u201cThis\n\nrequirement \u2018deters trial courts from engaging in factfinding when ruling on a motion to dismiss and\n\nensures that when a trial judge considers evidence [outside] the complaint, a plaintiff will have an\n\nopportunity to contest defendant\u2019s relied-upon evidence by submitting material that controverts it.\u2019\u201d\n\n 12\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 13 of 52\n\n\n\nId. at 107\u201308 (alteration in original) (quoting Glob. Network Commc\u2019ns, Inc., 458 F.3d at 155). \u201cA\n\ndistrict court therefore \u2018errs when it consider[s] affidavits and exhibits submitted by defendants, or\n\nrelies on factual allegations contained in legal briefs or memoranda in ruling on a 12(b)(6) motion to\n\ndismiss.\u2019\u201d Id. at 108 (alteration in original) (quoting Friedl v. City of New York, 210 F.3d 79, 83\u201384 (2d\n\nCir. 2000)).\n\n Here, Defendants attached 28 articles regarding regulatory developments in China to their\n\nmotion to dismiss. See Mem. at 6 n.3, Kreissman Decl., Ex. G. None of the articles were attached\n\nto the complaint, incorporated by reference in the complaint, or integral to the complaint.\n\nDefendants also attached five SEC filings from two of Qudian\u2019s competitors to their motion to\n\ndismiss. See Mem. at 34 n.22; Kreissman Decl., Ex. Q. Although the Court can consider legally\n\nrequired public disclosure documents filed with the SEC, the Court can consider them \u201c\u2018only to\n\ndetermine what the documents stated,\u2019 and \u2018not to prove the truth of their contents.\u2019\u201d Roth v. Jennings, 489\n\nF.3d 499, 509 (2d Cir. 2007) (quoting Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991)).\n\nDefendants solely rely on the SEC filings for the truth of their contents. See Mem. at 34\u201335 (relying\n\non the documents to show that two of Qudian\u2019s competitors \u201cexperienced downturns in their loan\n\nbook volume that paralleled Qudian\u2019s\u201d). Accordingly, the Court has not considered these materials\n\nin deciding this motion.\n\nIII. DISCUSSION\n\n A. Section 10(b) and Rule 10b-5 Liability\n\n Lead Plaintiffs have not plausibly alleged that Defendants\u2019 statements violated federal\n\nsecurities laws. Under Section 10(b) and Rule 10b-5, it is unlawful to \u201cmake any untrue statement of\n\na material fact or to omit to state a material fact necessary in order to make the statements made, in\n\nthe light of the circumstances under which they were made, not misleading[.]\u201d 17 C.F.R. \u00a7 240.10b-\n\n5(b); see also 15 U.S.C. \u00a7 78j(b). To survive a defendant\u2019s motion to dismiss a Section 10(b) claim, a\n\nplaintiff must plausibly plead \u201c(1) a material misrepresentation (or omission); (2) scienter, i.e., a\n\n 13\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 14 of 52\n\n\n\nwrongful state of mind; (3) a connection with the purchase or sale of a security; (4) reliance;\n\n(5) economic loss; and (6) loss causation.\u201d Kleinman v. Elan Corp., plc, 706 F.3d 145, 152 (2d Cir.\n\n2013) (alterations omitted) (quoting Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341\u201342 (2005)).\n\nDefendants challenge the first and second elements.\n\n 1. False or Misleading Statements or Omissions\n\n a. Legal Standard\n\n \u201cA statement is misleading if a reasonable investor would have received a false impression\n\nfrom the statement.\u201d Freudenberg v. E*Trade Fin. Corp., 712 F. Supp. 2d 171, 180 (S.D.N.Y. 2010).\n\nWhen a company does not have an obligation to speak but does so anyway, it assumes \u201ca duty to be\n\nboth accurate and complete.\u201d Caiola v. Citibank, N.A., 295 F.3d 312, 331 (2d Cir. 2002); see also In re\n\nMorgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 366 (2d Cir. 2010) (explaining that once a\n\ncorporation makes \u201ca disclosure about a particular topic, whether voluntary or required, the\n\nrepresentation must be complete and accurate\u201d (internal quotation marks omitted)). And \u201cliterally\n\ntrue statements\u201d are actionable if they \u201ccreate a materially misleading impression.\u201d SEC v. Gabelli,\n\n653 F.3d 49, 57 (2d Cir. 2011), rev\u2019d and remanded on other grounds, 568 U.S. 442 (2013). \u201cThe literal\n\ntruth of an isolated statement is insufficient; the proper inquiry requires an examination of\n\ndefendants\u2019 representations, taken together and in context.\u201d Morgan Stanley Info. Fund, 592 F.3d at\n\n366 (internal quotation marks omitted). Accordingly, plaintiffs \u201cmay not cherry pick certain public\n\nstatements for [their] complaint and divorce them from the universe of disclosed information to\n\nplausibly allege fraud.\u201d In re Synchrony Fin. Sec. Litig., 988 F.3d 157, 171 (2d Cir. 2021).\n\n \u201cSilence, absent a duty to disclose, is not misleading under Rule 10b-5[,]\u201d Basic Inc. v.\n\nLevinson, 485 U.S. 224, 239 n.17 (1988), but omissions can also be actionable under section 10(b).\n\nAn omission is actionable if the omitted information was subject to \u201can affirmative legal disclosure\n\nobligation\u201d or the omitted information is \u201cnecessary to prevent existing disclosures from being\n\nmisleading.\u201d Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 715\u201316 (2d Cir. 2011). The key is the\n\n 14\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 15 of 52\n\n\n\n\u201cpresence of a prior statement that otherwise is or will become materially misleading\u201d as a result of\n\nthe omission; without such a statement, \u201ca corporation need not affirmatively disclose\u201d negative\n\nfacts to the market. DoubleLine Capital LP v. Construtora Norberto Odebrecht, S.A., 413 F. Supp. 3d 187,\n\n206 (S.D.N.Y. 2019) (citing City of Pontiac Policemen\u2019s & Firemen\u2019s Ret. Sys. v. UBS AG, 752 F.3d 173,\n\n184 (2d Cir. 2014)).\n\n To incur liability, misrepresentations or omissions must be material. An omission is material\n\nif there is \u201ca substantial likelihood that the disclosure of the omitted fact would have been viewed by\n\nthe reasonable investor as having significantly altered the \u2018total mix\u2019 of information made available.\u201d\n\nLevinson, 485 U.S. at 231\u201332 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). \u201cAt\n\nthe pleading stage, a plaintiff satisfies the materiality requirement of Rule 10b-5 by alleging a\n\nstatement or omission that a reasonable investor would have considered significant in making\n\ninvestment decisions.\u201d Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000).\n\n i. Statements of Opinion\n\n As a general principle, \u201c[t]o be actionable, a misrepresentation must be one of existing fact,\n\nand not merely an expression of opinion, expectation, or declaration of intention.\u201d In re Moody\u2019s\n\nCorp. Sec. Litig., 599 F. Supp. 2d 493, 507 (S.D.N.Y. 2009) (quotation omitted). Statements of\n\nopinion must be examined in the context in which they arise. \u201c[T]he investor takes into account the\n\ncustoms and practices of the relevant industry.\u201d Omnicare, Inc. v. Laborers Dist. Council Const. Indus.\n\nPension Fund, 575 U.S. 175, 190 (2015). \u201c[A]n omission that renders misleading a statement of\n\nopinion when viewed in a vacuum may not do so once that statement is considered, as is\n\nappropriate, in a broader frame.\u201d Id. Statements of opinion can give rise to liability in two distinct\n\nways, even if they are sincerely believed: if they contain false embedded statements of fact or if they\n\n\u201comit[ ] material facts about the [speaker\u2019s] inquiry into or knowledge concerning a statement of\n\nopinion.\u201d Id. at 189; see Tongue v. Sanofi, 816 F.3d 199, 210 (2d Cir. 2016) (applying Omnicare beyond\n\nSection 11 claims to claims arising under Section 10(b) and Rule 10b-5).\n\n 15\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 16 of 52\n\n\n\n First, \u201cliability for making a false statement of opinion may lie if either \u2018the speaker did not\n\nhold the belief she professed\u2019 or \u2018the supporting fact she supplied were untrue.\u2019\u201d Tongue, 816 F.3d at\n\n210 (quoting Omnicare, 575 U.S. at 185\u201386). \u201cIt is not sufficient for these purposes to allege that an\n\nopinion was unreasonable, irrational, excessively optimistic, [or] not borne out by subsequent\n\nevents.\u201d Lopez v. Ctpartners Exec. Search Inc., 173 F. Supp. 3d 12, 24 (S.D.N.Y. 2016) (quoting In re\n\nSalomon Analyst Level 3 Litig., 350 F. Supp. 2d 477, 489 (S.D.N.Y.2004)). The Second Circuit has\n\nfirmly rejected the \u201cfraud by hindsight\u201d approach. See Stevelman v. Alias Rsch., Inc., 174 F.3d 79, 85\n\n(2d Cir. 1999).\n\n Second, \u201copinions, though sincerely held and otherwise true as a matter of fact, may\n\nnonetheless be actionable if the speaker omits information whose omission makes the statement\n\nmisleading to a reasonable investor.\u201d Tongue, 816 F.3d at 210 (citing Omnicare, 575 U.S. at 188\u201389).\n\nA reasonable investor \u201cexpects not just that the [speaker] believes the opinion (however irrationally),\n\nbut that it fairly aligns with the information in the issuer\u2019s possession at the time.\u201d Omnicare, 575\n\nU.S. at 188\u201389. However, \u201c[r]easonable investors understand that opinions sometimes rest on a\n\nweighing of competing facts,\u201d and \u201cdo[ ] not expect that every fact known to [a speaker] supports its\n\nopinion statement.\u201d Tongue, 816 F.3d at 210 (quoting Omnicare, 575 U.S. at 194). Therefore, a\n\nstatement of opinion \u201cis not necessarily misleading when an issuer knows, but fails to disclose, some\n\nfact cutting the other way.\u201d Id. (quoting Omnicare, 575 U.S. at 194).\n\n At the pleading stage, a plaintiff \u201cmust identify particular (and material) facts going to the\n\nbasis for the issuer\u2019s opinion\u2014facts about the inquiry the issuer did or did not conduct or the\n\nknowledge it did or did not have\u2014whose omission makes the opinion statement at issue misleading\n\nto a reasonable person reading the statement fairly and in context.\u201d Id. at 209 (quoting Omnicare, 575\n\nU.S. at 194). The \u201ccore inquiry is whether the omitted facts would \u2018conflict with what a reasonable\n\ninvestor would take from the statement itself.\u2019\u201d Id. at 210 (quoting Omnicare, 575 U.S. at 194). The\n\nSupreme Court emphasized that this \u201cis no small task for an investor.\u201d Omnicare, 575 U.S. at 194.\n\n 16\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 17 of 52\n\n\n\n ii. Corporate Optimism and Puffery\n\n General statements of optimism and puffery are non-actionable under federal securities laws\n\nbecause they are not \u201csufficiently specific that a reasonable investor could rely on [them] as a\n\n\u2018guarantee of some concrete fact or outcome.\u2019\u201d Lopez, 173 F. Supp. 3d at 29 (quoting City of Pontiac,\n\n752 F.3d at 185); see also In re Vale S.A. Sec. Litig., No. 1:15-cv-9539, 2017 WL 1102666, at *22\n\n(S.D.N.Y. Mar. 23, 2017) (statements regarding \u201cwhat Vale is \u2018seeking\u2019 to do, what it is \u2018committed\u2019\n\nto doing, what it is \u2018focused on,\u2019 what it is \u2018aiming\u2019 to do, and what its \u2018priorities\u2019 are\u201d were non-\n\nactionable). Even \u201cmisguided optimism is not a cause of action, and does not support an inference\n\nof fraud\u201d because, as stated above, the Second Circuit has \u201crejected the legitimacy of \u2018alleging fraud\n\nby hindsight.\u2019\u201d Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1129 (2d Cir. 1994) (citing Denny v.\n\nBarber, 576 F.2d 465, 470 (2d Cir. 1978)). Allegations that a defendant should have been \u201cmore alert\n\nand more skeptical\u201d are insufficient; speakers are \u201cnot required to take a gloomy, fearful or defeatist\n\nview of the future.\u201d Id.\n\n However, like opinion statements, statements of optimism and puffery can be actionable\n\nwhere they \u201ccontradict facts that are known to a defendant,\u201d In re Virtus Inv. Partners, Inc. Sec. Litig.,\n\n195 F. Supp. 3d 528, 537 (S.D.N.Y. 2016), or where they amount to \u201c\u2018misrepresentations of existing\n\nfacts\u2019 that were made even though the speaker \u2018knew that the contrary was true,\u2019\u201d Galestan v.\n\nOneMain Holdings, Inc., 348 F. Supp. 3d 282, 298 (quoting Novak v. Kasaks, 216 F.3d 300, 315 (2d Cir.\n\n2000)).\n\n iii. Forward-Looking Statements\n\n A statement is not actionable if it falls under the PSLRA\u2019s safe-harbor provision for\n\n\u201cforward-looking statements.\u201d See 15 U.S.C. \u00a7 78u\u20135(c). The PSLRA includes several definitions of\n\nforward-looking statements. See 15 U.S.C. \u00a7 78u\u20135(i)(1)(A)\u2013(C)). Under the safe-harbor provision,\n\n\u201ca defendant is not liable if (1) \u2018the forward-looking statement is identified and accompanied by\n\nmeaningful cautionary language,\u2019 (2) the forward-looking statement \u2018is immaterial,\u2019 or (3) \u2018the\n\n 17\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 18 of 52\n\n\n\nplaintiff fails to prove that [the forward-looking statement] was made with actual knowledge that it\n\nwas false or misleading.\u2019\u201d In re Vivendi, S.A. Sec. Litig., 838 F.3d 223, 245 (2d Cir. 2016) (quoting\n\nSlayton v. Am. Express Co., 604 F.3d 758, 766 (2d Cir. 2010)). \u201cBecause \u2018[t]he safe harbor is written in\n\nthe disjunctive,\u2019 a forward-looking statement is protected under the safe harbor if any of the three\n\nprongs applies.\u2019\u201d Id. at 245\u201346 (quoting Slayton, 604 F.3d at 766). However, the Second Circuit has\n\nheld that \u201c\u2018[a] statement may contain some elements that look forward and others that do not,\u2019 and\n\n\u2018forward-looking elements\u2019 may be \u2018severable\u2019 from \u2018non-forward-looking\u2019 elements. Id. (quoting\n\nIowa Pub. Emps.\u2019 Ret. Sys. v. MF Glob., Ltd., 620 F.3d 137, 144 (2d Cir. 2010); see also Makor Issues &\n\nRts, Ltd. v. Tellabs Inc., 513 F.3d 702, 705 (7th Cir. 2008) (\u201c[A] mixed present/future statement is not\n\nentitled to the safe harbor with respect to the part of the statement that refers to the present.\u201d).\n\n However, there are limits to the safe harbor\u2019s reach. \u201cTo avail themselves of safe harbor\n\nprotection under the meaningful cautionary language prong, defendants must demonstrate that their\n\ncautionary language was not boilerplate and conveyed substantive information.\u201d Slayton, 604 F.3d at\n\n772; see also City of Austin Police Ret. Sys. v. Kinross Gold Corp., 957 F. Supp. 2d 277, 301 (S.D.N.Y.\n\n2013) (\u201c[G]eneric and mere boilerplate words of caution\u2014for example, a statement at the beginning\n\nof a conference call that states merely that \u2018forward-looking statements are subject to certain risks\n\nand uncertainties\u2019\u2014are insufficient to put investors on notice of the risks at hand and therefore to\n\ninoculate these statements.\u201d (quoting Ill. State Bd. of Inv. v. Authentidate Holding Corp., 369 F. App\u2019x\n\n260, 265 n.3 (2d Cir. 2010) (summary order)). Because \u201c[c]autionary language in securities offerings\n\nis just about universal[,]\u201d \u201cthe key question a district court must decide when determining whether\n\nto grant a motion to dismiss a securities fraud complaint is whether plaintiffs have overcome the\n\nexistence of such language. Plaintiffs may do this by showing, for example, that the cautionary\n\nlanguage did not expressly warn of or did not directly relate to the risk that brought about plaintiffs\u2019\n\nloss.\u201d Halperin v. eBanker USA.com, 295 F.3d 352, 359 (2d Cir. 2002). The Court must evaluate the\n\nlanguage \u201con a case-by-case basis. In all cases, however, the court must keep in mind that a\n\n 18\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 19 of 52\n\n\n\ncomplaint fails to state a claim of securities fraud if no reasonable investor could have been misled about\n\nthe nature of the risk when he invested.\u201d Id.\n\n b. Application\n\n Lead Plaintiffs allege that Defendants made a myriad of statements during the Class Period\n\nthat were false and misleading because Defendants misrepresented and failed to disclose the\n\nfollowing information: (1) that the core loan book violated Circular 141; (2) that the Chinese\n\ngovernment narrowed the geographic scope of Qudian\u2019s lending license in May 2019; (3) that\n\nQudian lowered its lending standards in the core loan book to such a degree that at least 20% of the\n\nloans in its core loan book were made to borrowers that did not meet Qudian\u2019s lending standards;\n\n(4) that Open Platform took the best, highest-quality borrowers from Qudian\u2019s user base; and\n\n(5) that Open Platform was developed to address regulatory problems in the core loan book. The\n\namended complaint frames the allegations around these five buckets. For each individual statement,\n\nthe amended complaint alleges that the statement was false or misleading \u201cfor the reasons set forth\u201d\n\nwith respect to the bucket. Similarly, rather than focusing on whether any specific statement was\n\nfalse or misleading, the parties\u2019 briefing focuses on whether the information in each bucket was\n\nproperly disclosed or whether the information was material.\n\n For purposes of this opinion, the Court will follow the structure of the complaint and\n\naddress the parties\u2019 arguments regarding each of the five buckets in turn. However, the Court\n\ncannot resolve Defendants\u2019 motion solely by analyzing the buckets; instead, analysis of each of the\n\nspecific, stand-alone statements is required. For many of the challenged statements, Lead Plaintiffs\n\nhave relied on selective quotations. Portions of statements not included in the amended complaint,\n\nbut incorporated into it by reference, are discussed below for context.\n\n i. Bucket One: Circular 141\n\n First, Lead Plaintiffs allege that Defendants misrepresented or failed to disclose that \u201cthe\n\ncore loan book violated Circular 141\u2019s prohibition on Qudian conducting credit assessments on\n\n 19\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 20 of 52\n\n\n\nbehalf of other financial institutions.\u201d Am. Compl. \u00b6 197. Lead Plaintiffs claim that Defendants\u2019\n\nomission rendered numerous of Defendants\u2019 statements false or misleading.\n\n Lead Plaintiffs\u2019 allegations must be contextualized in light of Defendants\u2019 disclosures.\n\nQudian\u2019s 2018 Annual Report contained the following disclosure regarding Circular 141:\n\n Among other things, Circular 141 provides restrictions on banks\u2019 collaboration with\n third parties in cash loan business. Pursuant to Circular 141, a bank may not outsource\n its core business functions, such as credit assessment and risk management, to third\n parties. Circular 141 also prohibits a bank participating in loan facilitation transactions\n from accepting credit enhancement services from a third party which has not obtained\n any license or approval to provide guarantees, including credit enhancement service in\n the form of a commitment to assume default risks. As Circular 141 is relatively new,\n it remains uncertain how the regulatory authorities will interpret and enforce the\n requirements. We have entered into arrangements with several banks which directly\n fund credit drawdowns to borrowers. We refer to such banks qualified credit\n applications from borrowers, including our assessment of their credit profiles and our\n suggested credit limits. They will then review the credit applications and approve\n credit for drawdown.\n\nKreissman Decl., Ex. K at 12\u201313; see also Am. Compl. \u00b6\u00b6 66\u201367. Qudian also disclosed:\n\n We have entered into cooperative agreements with banks in China and started to fund\n credit drawdowns to borrowers under such arrangements in April 2017. The banks\n are able to utilize our data-driven credit assessment model to screen potential\n borrowers who are traditionally underserved by banks due to the lack of credit data.\n Under such agreements, we refer to such banks qualified credit applications from\n borrowers, including our assessment of their credit profiles and our suggested credit\n limits. They will then review the credit applications independently in accordance with\n their credit assessment standards and approve credit for drawdown.\n\nKreissman Decl., Ex. K at 63; see also Am. Compl. \u00b6\u00b6 66\u201367.\n\n Lead Plaintiffs admit that \u201cDefendants disclosed: (i) the existence of Circular 141, (ii) that\n\nunder Circular 141, \u2018[a] bank may not outsource its core business functions, such as credit\n\nassessment and risk management, to third parties,\u2019 and (iii) that Qudian referred and transferred\n\nqualified credit applications and assessments to banks that supposedly conducted independent\n\nassessments of those files.\u201d Opp\u2019n at 13. Notably, Lead Plaintiffs do not allege that Qudian\n\nviolated Circular 141 by providing credit assessments to banks. Nor do Lead Plaintiffs allege that\n\nQudian has been investigated or found liable for violating Circular 141. Further, Lead Plaintiffs\n\n\n 20\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 21 of 52\n\n\n\nconcede that Qudian was not \u201cobligated to disclose legal conclusions or legal interpretations\u201d\n\nregarding Circular 141. Id.\n\n Given this context, Lead Plaintiffs\u2019 allegations are considerably narrower than they are\n\nframed in the amended complaint. There is no dispute that Defendants disclosed that Circular 141\n\nprevented banks from outsourcing credit assessments to third parties, disclosed that Qudian\n\nprovided credit assessments to banks, and disclosed the uncertainty regarding how regulatory\n\nauthorities would interpret and enforce Circular 141. Rather than alleging that Qudian\u2019s conduct\n\nviolated Circular 141, Lead Plaintiffs allege that Qudian\u2019s funding partners violated Circular 141 by\n\nrelying on Qudian\u2019s credit assessments instead of conducting their own credit assessments. What\n\nDefendants failed to disclose, Lead Plaintiffs allege, is \u201cthat banks were outsourcing credit\n\nassessments to [Qudian] and not conducting their own, independent evaluations of credit files.\u201d\n\nOpp\u2019n at 13.\n\n Lead Plaintiffs support this allegation with statements from a single confidential witness,\n\nCW 4. Courts in the Second Circuit allow \u201cplaintiffs to rely on unnamed sources so long as \u2018[the\n\nunnamed sources] are described in the complaint with sufficient particularity to support the\n\nprobability that a person in the position occupied by the source would possess the information\n\nalleged.\u2019\u201d N.J. Carpenters Health Fund v. Royal Bank of Scotland Grp., 709 F.3d 109, 123\u201324 (2d Cir.\n\n2013) (quoting Novak, 216 F.3d at 314). Here, Lead Plaintiffs allege:\n\n CW 4\u2014a former employee who directly assisted Defendant Luo, communicated with\n him on a daily basis, and worked with Qudian\u2019s funding partners from early 2018 until\n the summer of 2018\u2014explained that many of the banks that Qudian did business with\n were actually outsourcing the credit assessment function to Qudian. This witness\n explained that already in 2018, Qudian and the financial institutions that provided it\n with funding were aware of the prohibition on Qudian conducting credit assessments\n for these funding partners. The witness also described how certain financial\n institutions that \u201chad a good relationship with the local regulator\u201d would rely on\n Qudian\u2019s risk assessment rather than conducting their own independent risk\n assessment after receiving Qudian\u2019s initial review. In other words, CW 4 confirmed\n that it was common for Qudian to violate Circular 141\u2019s prohibition on having\n financial institutions outsource their credit assessments to Qudian.\n\n\n 21\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 22 of 52\n\n\n\nAm. Compl. \u00b6 69.\n\n Although a close call, the amended complaint describes CW 4 with sufficient particularity to\n\nsupport that a person in the position would know that certain banks were relying solely on Qudian\u2019s\n\nrisk assessments rather than conducting their own independent assessments. Defendants contend\n\nthat the amended complaint \u201coffer[s] no facts suggesting how CW4 supposedly knew what the\n\ninstitutions were doing.\u201d Reply at 8. To the contrary, the amended complaint alleges that CW 4\n\nworked directly with the funding partners and that CW 4 worked closely with Luo, the founder and\n\nCEO of Qudian. At this stage, the Court is required to draw all reasonable inferences in Lead\n\nPlaintiffs\u2019 favor. Burch, 551 F.3d at 124. It is plausible that a person who worked closely with\n\nQudian\u2019s CEO as well as Qudian\u2019s funding partners would know that some of the funding partners\n\nwere not conducting independent risk assessments. 2\n\n Next, Defendants argue that \u201cCW4\u2019s allegations are insufficient because he or she left\n\nQudian months before the class period, and thus cannot speak to what Qudian or its banking partners\n\nwere doing during the class period.\u201d Reply at 8 (internal citation omitted). Yet, \u201callegations\n\nconcerning activity in one period can support an inference of similar circumstances in a subsequent\n\nperiod.\u201d Emps\u2019 Ret. Sys. of Gov't of the Virgin Islands v. Blanford, 794 F.3d 297, 307 (2d Cir. 2015).\n\nAlthough CW 4 left Qudian at least a few months prior to the Class Period, the fact that banks were\n\nnot conducting independent credit assessments in the summer of 2018 supports the inference that\n\nthe banks continued that practice into the Class Period. See Iowa Pub. Emps., 620 F.3d at 143 n.13\n\n\n\n2 The cases Defendants cite in opposition are distinguishable. In Glaser v. The9, Ltd., 772 F. Supp. 2d 573 (S.D.N.Y.\n2011), the court held that three confidential witnesses\u2019 allegations regarding the defendant company were insufficient\nwhere the confidential witnesses did not work for the defendant company and \u201cplaintiffs make no allegation that those\nsources ever had any contact with anyone at [the defendant company], much less with the Individual Defendants.\u201d Id. at\n594. Similarly, in Frankfurt-Tr. Inv. Luxemburg AG v. United Techs. Corp., 336 F. Supp. 3d 196 (S.D.N.Y. 2018), the court\ndid not accept allegations from confidential witnesses because the employees worked mainly within a single corporate\nunit and did not have insight into corporate units or divisions. Id. at 223. Here, by contrast, the amended complaint\nalleges that CW 4 worked at the highest level of Qudian\u2019s corporate structure and that CW4 worked with Qudian\u2019s\nfunding partners. These allegations are sufficient to support that CW 4 could plausibly have knowledge that Qudian\u2019s\nfunding partners were relying solely on Qudian\u2019s credit assessments rather than conducting their own.\n\n 22\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 23 of 52\n\n\n\n(\u201cDepending on the problem, its existence in February 2008 may support an inference that it was\n\npresent six months earlier.\u201d).\n\n In sum, CW 4\u2019s statements support that Qudian\u2019s funding partners were violating Circular\n\n141 by relying on Qudian\u2019s risk assessments rather than conducting their own independent\n\nassessments. Accordingly, the Court must analyze each of the challenged statements to determine\n\nwhether Qudian\u2019s omission renders the statements misleading.\n\n Most of the challenged statements are not actionable. First, Lead Plaintiffs challenge various\n\nstatements consisting of Defendants\u2019 opinions regarding Qudian\u2019s financial outlook for 2019. See\n\nAm. Compl. \u00b6\u00b6 199\u2013201, 204 (statements announcing Qudian\u2019s guidance, justifying the guidance,\n\nexpressing confidence in Qudian\u2019s growth prospect, and expressing confidence in the guidance); id.\n\n\u00b6 237 (reaffirming Qudian\u2019s guidance); id. \u00b6 261 (raising Qudian\u2019s guidance); id. \u00b6 262 (expressing\n\nconfidence in Qudian\u2019s raised guidance); id. \u00b6 265 (reaffirming Qudian\u2019s raised guidance); id. \u00b6 282\n\n(stating that Qudian raised its guidance based on \u201csolid second quarter results driven by strong\n\nmomentum in our open platform initiative and better-than-expected loan book growth\u201d); id. \u00b6 297\n\n(reaffirming Qudian\u2019s updated 2019 financial guidance); id. \u00b6 301 (lowering Qudian\u2019s 2019 financial\n\nguidance); id. \u00b6 306 (Yeung\u2019s statement that \u201cI think we are going to start to see some pretty\n\ninteresting good trends into Q1. Q4 will still be like a tail end of what\u2019s happening in 2019, but Q1,\n\nwe should expect to see some fantastic results from doing all of this.\u201d); id. \u00b6\u00b6 309\u201311 (justifying\n\nQudian\u2019s lowered guidance). Lead Plaintiffs have not adequately alleged that Qudian\u2019s omission\n\nrenders these statements misleading. None of these statements contain representations about the\n\nregulatory compliance of the core loan book. Instead, Lead Plaintiffs\u2019 theory is that Defendants\n\nlacked a basis to make these statements given that Qudian\u2019s funding partners were violating Circular\n\n141 by relying solely on Qudian\u2019s credit assessments.\n\n This is a clear attempt to plead fraud by hindsight. \u201cIt is not sufficient . . . to allege that an\n\nopinion was unreasonable, irrational, excessively optimistic, [or] not borne out by subsequent\n\n 23\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 24 of 52\n\n\n\nevents.\u201d Lopez, 173 F. Supp. 3d at 24. The Second Circuit has firmly rejected the \u201cfraud by\n\nhindsight\u201d approach. See Stevelman, 174 F.3d at 85. Here, Lead Plaintiffs \u201chave failed to sufficiently\n\nallege facts that show that Defendants did not believe these opinions and expectations at the time\n\nthey made the statements.\u201d In re Adient plc Sec. Litig., No. 18-cv-9116, 2020 WL 1644018, at *17\n\n(S.D.N.Y. Apr. 2, 2020). The fact that some of Qudian\u2019s funding partners were not conducting\n\nindependent credit assessments and therefore may have been violating Circular 141, standing alone,\n\ndoes not establish that Defendants lacked a basis to believe in their guidance statements. Therefore,\n\nLead Plaintiffs fail to adequately allege that Defendants\u2019 statements regarding Qudian\u2019s financial\n\nguidance for 2019 were false or misleading. 3\n\n Another set of challenged statements are non-actionable puffery. Lead Plaintiffs challenge\n\nseveral statements regarding Defendants\u2019 regulatory compliance. See Am. Compl. \u00b6 230 (statement\n\nthat \u201c[w]e will continue to make efforts to ensure that we are compliant with the existing laws,\n\nregulations and governmental policies relating to our industry and to comply with new laws and\n\nregulations or changes under existing laws and regulations that may arise in the future\u201d); id. \u00b6 273\n\n(management presentation stating that \u201cRegulatory Compliant is Embedded in Our DNA\u201d and\n\n\n\n3 Defendants also argue that many of these statements are protected under the PSLRA\u2019s safe-harbor provision. See\nMem. at 14\u201316. To determine whether the statements are protected under the PSLRA\u2019s safe-harbor provision, the\nCourt must conduct a statement-by-statement analysis. A threshold issue in determining the applicability of the\nPSLRA\u2019s safe harbor is a determination of whether the challenged statements are forward-looking in nature. \u201cAs a\ngeneral rule, statements whose truth cannot be ascertained until some time after they are made are \u2018forward-looking\nstatements.\u2019\u201d In re Bear Stearns Cos., Inc. Sec., Derivative, & ERISA Litig., 763 F. Supp. 2d 423, 493 (S.D.N.Y. 2011)\n(citation omitted). In contrast, \u201cthe safe harbor . . . do[es] not apply to statements of present or historical facts.\u201d In re\nGen. Elec. Co. Sec. Litig., 857 F. Supp. 2d 367, 385 (S.D.N.Y. 2012); see also Sgalambo v. McKenzie, 739 F. Supp. 2d 453, 478\n(S.D.N.Y. 2010) (concluding that PSLRA safe harbor was inapplicable because statements at issue \u201cstate[d] a present or\nhistorical fact alone or incorporate[d] forward-looking aspects into statements of present or historical fact\u201d). Next, the\nCourt would have to determine, for each forward-looking statement, whether the statements are immaterial or whether\nthe statements are identified and accompanied by meaningful cautionary language. Defendants\u2019 briefing on these issues\nis insufficient. Rather that analyze the language of the individual statements, Defendants summarily assert that the\nstatements are forward looking. Similarly, although Defendants argue that each of the statements was accompanied by\nsufficient cautionary language, Defendants only list examples and do not identify the cautionary language that\naccompanied each statement. Plaintiffs also fail to analyze the language of the statements or the accompanying\ncautionary language, and instead summarily argue that the statements were statements of present or historical fact and\nthat the cautionary language was insufficient. Because the Court concludes that Lead Plaintiffs have not sufficiently\nalleged that these statements were materially false or misleading, the Court need not resolve whether these statements are\nalso protected under the PSLRA\u2019s safe-harbor provision.\n\n 24\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 25 of 52\n\n\n\ndescribing Qudian\u2019s key \u201ccompliance undertakings\u201d); id. \u00b6 278 (statement that \u201c[w]e pride ourselves\n\nin having a competitive regulatory compliance fee\u201d); id. \u00b6 282 (statement that \u201c[s]ince 2019, we have\n\nmade effective efforts to address evolving regulation and partnership landscape\u201d). These statements\n\nare too general to cause a reasonable investor to rely upon them. None of the statements assert that\n\nQudian is compliant with all regulations, or that Qudian has never faced regulatory issues. Instead,\n\nthey are general statements regarding Qudian\u2019s attempts to remain compliant with regulations.\n\nAccordingly, these statements are non-actionable puffery. See In re Synchrony, 988 F.3d at 170\n\n(\u201cVague positive statements regarding a corporate entity\u2019s risk management strategy, asset quality,\n\nand business practices are \u2018too general to cause a reasonable investor to rely upon them\u2019 and\n\ntherefore are \u2018precisely the type of puffery that this and other circuits have consistently held to be\n\ninactionable.\u2019\u201d (quoting ECA, Local 134 IBEW Joint Pension Tr. of Chi. v. JP Morgan Chase Co., 553\n\nF.3d 187, 206 (2d Cir. 2009))); City of Pontiac, 752 F.3d at 183 (\u201cIt is well-established that general\n\nstatements about reputation, integrity, and compliance with ethical norms are [non]actionable\n\n\u2018puffery,\u2019 meaning that they are too general to cause a reasonable investor to rely upon them. This is\n\nparticularly true where . . . the statements are explicitly aspirational, with qualifiers such as \u2018aims to,\u2019\n\n\u2018wants to,\u2019 and \u2018should.\u2019\u201d (internal quotation marks and citations omitted)); see also Smallen v. W. Union\n\nCo., No. 17-cv-00474, 2019 WL 1382823, at *15 (D. Colo. Mar. 27, 2019) (holding that the\n\nstatement \u201ccompliance culture is in our DNA\u201d was \u201cnothing more than unverifiable puffery\u201d), aff\u2019d\n\nsub nom. Smallen v. The W. Union Co., 950 F.3d 1297 (10th Cir. 2020).\n\n Similarly, Lead Plaintiffs challenge a statement from Qudian\u2019s November 18, 2019 press\n\nrelease. The press released stated:\n\n In our risk undertaking business, we implemented a conservative strategy of reducing\n credit volumes and paused our credit trial program. Our proactive and prompt\n management of macro driven risk was effective in stabilizing the delinquency rates.\n . . . [W]e expect to continue a conservative approach on our risk-taking book into the\n final quarter of 2019 and thus revise our full year guidance accordingly.\n\n\n\n 25\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 26 of 52\n\n\n\nAm. Compl. \u00b6 303. Lead Plaintiffs assert that this statement was materially false or misleading\n\nbecause \u201cQudian was not taking a \u2018conservative\u2019 approach to risk in its core loan book\u201d and that\n\nDefendants misrepresented the regulatory problems with the core loan book. Id. \u00b6 304. The press\n\nreleases\u2019 generic statements that Qudian\u2019s strategy was \u201cconservative\u201d and that Qudian \u201cexpect[ed]\n\nto continue a conservative approach\u201d are non-actionable puffery. See In re Sec. Cap. Assur. Ltd. Sec.\n\nLitig., 729 F. Supp. 2d 569, 597 (S.D.N.Y. 2010) (\u201cPlaintiffs\u2019 allegations that [Defendant] made\n\nmaterial misrepresentations when it referred to its underwriting approach as \u2018disciplined\u2019 and\n\n\u2018conservative\u2019 and its overcollateralization triggers as \u2018robust\u2019 in the face of deterioration are classic\n\nexamples of puffery.\u201d).\n\n Lead Plaintiffs also challenge a statement from Yeung that \u201c[w]e stay away from anything\n\nthat are susceptible to regulatory change.\u201d Am. Compl. \u00b6 287. Lead Plaintiffs assert that this\n\nstatement was false or misleading because \u201cQudian\u2019s core loan book violated Circular 141\u2019s\n\nprohibition on conducting credit assessments on behalf of other financial institutions.\u201d Id. \u00b6 288.\n\nYeung\u2019s full statement reads:\n\n Insurance. Yes, thank you for observing the recent regulation on CBIRC preventing\n insurance company to participate in so-called cash lending. We did explore that as\n part of a product enhancement in the fourth quarter last year and partially in the first\n quarter 2019. But we had the foresight to not get close to so-called regulatory sort of\n fringes. We stay away from anything that are susceptible to regulatory change. So\n essentially, there are no insurance fees or income in second quarter 2019. We are one\n of the earliest companies in the sector to explore this, and we are the earliest of the\n companies to basically stop that, and way ahead of the potential regulation came\u2014\n when that came in, I think, June. So they are essentially immaterial, nothing in Q2.\n\nKreissman Decl., Ex. L at 9. Yeung\u2019s statement is related to a specific area of regulations. In that\n\ncontext, no reasonable investor would consider Yeung\u2019s vague and general statement that \u201c[w]e stay\n\naway from anything that are susceptible to regulatory change\u201d as a concrete guarantee that none of\n\nQudian\u2019s business was susceptible to regulatory change. See In re New York Cmty. Bancorp, Inc., Sec.\n\nLitig., 448 F. Supp. 2d 466, 480 (E.D.N.Y. 2006) (\u201cGeneralized statements regarding a company\u2019s\n\nfiscal discipline and risk management amount to no more than inactionable puffery.\u201d).\n\n 26\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 27 of 52\n\n\n\n Lead Plaintiffs also fail to adequately allege that two additional statements are materially false\n\nor misleading. First, Lead Plaintiffs challenge a statement made by Yeung during Qudian\u2019s August\n\n16, 2019 earnings call. Yeung stated:\n\n We\u2019ve adopted a purely institutional approach where the funding of these loans are\n made strictly by licensed financial institutions, whom their core business is to\n understand risk. These would be your banks and financial\u2014consumer finance\n companies. So there\u2019s a big difference in the way we get the funding into the hands\n of the borrowers.\n\n And in our case, we have taken this to an even further step by not touching the loan\n in itself. So if you look at the regulation that applies in this transaction structure, we\n are an Internet technology company. We have a proper ITP license to allow us to run\n our apps, run the technology platform, manage that traffic on behalf of the banks.\n\n The banks have a proper lending license, so that the lending relationship happens\n between the borrower and the bank. We don\u2019t touch that money. Just don\u2019t. And\n when that transaction goes through, the bank pays us a service fee. Now that can be\n recorded as financing income. If it\u2019s our capital that is being invested through a bank\n or a loan facilitation income if that capital happens to be bank\u2019s own capital.\n\nAm. Compl. \u00b6 286; Kreissman Decl., Ex. L at 13. Lead Plaintiffs assert that Yeung\u2019s statement\n\n\u201caffirmed that both Qudian\u2019s core loan book and Open Platform were regulatory compliant,\u201d and\n\ntherefore the statement was materially false and misleading because \u201cQudian\u2019s core loan book\n\nviolated Circular 141\u2019s prohibition on conducting credit assessments on behalf of other financial\n\ninstitutions.\u201d Id. \u00b6\u00b6 286, 288. Lead Plaintiffs are mistaken. Yeung\u2019s statement is a description of\n\nOpen Platform; the statement simply does not relate to the core loan book in any manner. Yeung\n\nexplained that Open Platform is a \u201cpurely institutional approach\u201d in which the loans are funded by\n\nbanks and consumer finance companies rather than Qudian. He also explained that \u201cif you look at\n\nthe regulation that applies in this transaction structure, we are an Internet technology company\u201d and\n\nthat \u201c[w]e have a proper ITP license to allow us to run our apps, run the technology platform,\n\nmanage that traffic on behalf of the banks.\u201d In context, the \u201ctransaction structure\u201d Yeung is\n\ndescribing is clearly Open Platform, not the core loan book. Yeung\u2019s statements would be\n\nunderstood as a description of the licensing requirements for Open Platform, not as an assertion\n\n\n 27\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 28 of 52\n\n\n\nthat the core loan book was compliant from a regulatory standpoint. Thus, Yeung\u2019s statement is not\n\nadequately alleged to have been false or misleading to a reasonable investor.\n\n Second, Lead Plaintiffs challenge a statement made by Yeung during Qudian\u2019s earnings call\n\nfor the first quarter of 2019. Yueng stated:\n\n [O]ur loan book grew by 91.2% year-on-year this demonstrated robust user demand\n and ample institutional funding. During this quarter, through successful efforts in\n testing and activating our dormant user base, new active borrowers increased by 16.6%\n from last quarter and contributed 18% of total active borrower. . . . While our loan\n book business continue[s] robust growth, our open platform initiative contributed\n meaningful revenue with little marginal operating costs and zero credit costs.\n\nAm. Compl. \u00b6 256. Qudian\u2019s alleged omission does not render this statement false or misleading.\n\nThis statement merely describes the core loan book\u2019s performance in the first quarter of 2019, which\n\nLead Plaintiffs\u2019 do not challenge. A reasonable investor would not be misled by this statement into\n\nbelieving that the core loan book faced no regulatory uncertainty. Accordingly, this statement is not\n\nactionable.\n\n Lead Plaintiffs have adequately alleged that the remaining statements are materially false or\n\nmisleading. Although generic, several of the statements specifically represent that Qudian is\n\ncompliant with all regulations or that Qudian does not face material regulatory uncertainty. See Am.\n\nCompl. \u00b6 206 (\u201cQudian is a leader and pioneer to operate a purely institutional funding base of\n\nlicensed lenders strictly under regulatory compliant annual interest rate and regulated lending\n\nactivities happen between borrowers and institutions, meaning there are no material regulatory\n\nuncertainties for us.\u201d); id. \u00b6 218 (\u201cOn regulatory risks, there were various new regulations and\n\nguidance issued in 2018 for Internet finance. Yet, we are the first in the industry to shift from being\n\na direct lender to being a pure platform assisting loans between borrowers and licensed institutional\n\nfunding partners with annual interest rate kept under legal cap. Therefore, there are no material\n\nregulatory uncertainties for us.\u201d); id. \u00b6 222 (stating that Qudian\u2019s \u201csolid results\u201d for the fourth\n\nquarter of 2018 were partially attributable to its \u201cregulatory compliant operating structure\u201d); id. \u00b6 224\n\n\n 28\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 29 of 52\n\n\n\n(\u201cGiven our current regulatory compliant and stable operating structure, we look to put more that\n\ncash into our product that design that we work with our funding partners.\u201d). Lead Plaintiffs also\n\nchallenge Qudian\u2019s disclosures regarding Circular 141 in its 2018 Annual Report. 4 See id. \u00b6 234; see\n\nalso Kreissman Decl., Ex. K at 63; Am. Compl. \u00b6\u00b6 66\u201367. The 2018 Annual Report explains that\n\nQudian refers credit applications to banks along with Qudian\u2019s assessments of the potential\n\nborrowers\u2019 credit profile. The Report then asserts that the banks \u201creview the credit applications\n\nindependently in accordance with their credit assessment standards.\u201d Kreissman Decl., Ex. K at 63.\n\nThese statements are adequately alleged to be misleading given the fact that some of Qudian\u2019s\n\nfunding partners were violating Circular 141 by relying solely on Qudian\u2019s credit assessments rather\n\nthan conducting their own independent assessments. Accordingly, these statements are actionable.\n\n ii. Bucket Two: May 2019 License Restriction\n\n Second, Lead Plaintiffs allege that Qudian made a material omission by failing to disclose\n\nthat \u201cin May 2019, the government severely restricted Qudian\u2019s lending license by changing it to a\n\nnarrow local license.\u201d Am. Compl. \u00b6 6. Specifically, Lead Plaintiffs allege that Qudian had two\n\nonline microlending licenses at the beginning of the Class Period, but that in May 2019, the Chinese\n\ngovernment \u201cdowngraded the scope of business that Qufenqi Microlending could engage in so that\n\nits lending license was narrowed from not having any geographic restriction to being just a regional\n\nmicrolending license.\u201d Id. \u00b6 72. Lead Plaintiffs contend that the reduction in scope \u201cseverely\n\nrestricted Qudian to making microloans within the limits of Ganzhou district and surrounding\n\ncounties,\u201d \u201cwhich substantially narrowed the amount of loans that Qudian was able to make itself.\u201d\n\nId. \u00b6\u00b6 72\u201373.\n\n Lead Plaintiffs do not allege that Defendants had an affirmative legal obligation to disclose\n\nthe license restriction. Thus, the alleged omission is actionable only if the omitted information was\n\n\n\n4 The disclosures are quoted in full above.\n\n 29\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 30 of 52\n\n\n\n\u201cnecessary to prevent existing disclosures from being misleading.\u201d Litwin, 634 F.3d at 715\u201316. Lead\n\nPlaintiffs point to numerous statements that they allege are materially false or misleading as a result\n\nof the omitted information. However, in their motion to dismiss, Defendants do not analyze\n\nwhether the alleged omission was necessary to prevent the challenged statements from being\n\nmisleading. Nor do Defendants dispute that they failed to disclose the license restriction.\n\n Instead, Defendants make generalized arguments regarding the alleged omission itself.\n\nDefendants argue that that Lead Plaintiffs\u2019 \u201cclaim fails because Qudian publicly disclosed that it had\n\nabandoned the use of its micro-lending licenses long before May 2019.\u201d Mem. at 17. Defendants\n\nassert that Qudian disclosed that it had temporarily \u201cceased funding credit drawdowns through [its]\n\nonline small credit companies\u201d and disclosed in each subsequent Form 20-F filed with the SEC that\n\nits use of those entities was \u201chistorical.\u201d Id.; Reply at 6. Defendants argue that \u201c[h]aving disclosed\n\nthat it no longer used this entity to make loans, any later restriction of the entity\u2019s lending license\n\nwas clearly immaterial.\u201d Mem. at 18.\n\n The Court cannot determine, as a matter of law, that Defendants\u2019 omission was immaterial\n\nwithout analyzing each challenged statement. Defendants did not disclose the license restriction and\n\nthere is a difference between being able to use a license and choosing not to, and being unable to use\n\nthe license. A reasonable investor could understand the temporal terms like \u201ctemporarily\u201d and\n\n\u201chistorically\u201d to mean that Qudian was not currently using the license, but that Qudian retained the\n\nability to resume use of the license in the future. Depending on the challenged statement, this\n\ndifference could be material. For example, a statement that Qudian retained the ability to use the\n\nlicense in the future would clearly be materially false in light of the omission. Accordingly, the Court\n\ncannot conclude as a matter of law that, regardless of the challenged statement at issue, the omission\n\nwould not have been viewed by a reasonable investor as having significantly altered the total mix of\n\ninformation made available. Therefore, the Court must analyze each of the challenged statements in\n\nturn.\n\n 30\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 31 of 52\n\n\n\n After reviewing the amended complaint and the public filings from which the statements\n\ndescribed in the complaint are found, the Court concludes that none of the challenged statements in\n\nthis bucket are actionable. As in bucket one, Lead Plaintiffs challenge a number of Defendants\u2019\n\nopinions regarding Qudian\u2019s financial outlook for 2019. See Am. Compl. \u00b6 237 (reaffirming\n\nQudian\u2019s guidance); id. \u00b6 261 (raising Qudian\u2019s guidance); id. \u00b6 262 (expressing confidence in\n\nQudian\u2019s raised guidance); id. \u00b6 265 (reaffirming Qudian\u2019s raised guidance); id. \u00b6 297 (reaffirming\n\nQudian\u2019s updated 2019 financial guidance); id. \u00b6 301 (lowering Qudian\u2019s 2019 financial guidance); id.\n\n\u00b6 306 (Yeung\u2019s statement that \u201cI think we are going to start to see some pretty interesting good\n\ntrends into Q1. Q4 will still be like a tail end of what\u2019s happening in 2019, but Q1, we should expect\n\nto see some fantastic results from doing all of this.\u201d); id. \u00b6\u00b6 309\u201311 (justifying Qudian\u2019s lowered\n\nguidance).\n\n These allegations fail for the same reason as in the first bucket: Lead Plaintiffs are\n\nimproperly attempting to plead fraud by hindsight. Lead Plaintiffs have not established that any of\n\nthese statements contain misrepresentations of existing fact regarding Qudian\u2019s lending license. Nor\n\ncould they\u2014none of these statements discuss, either directly or indirectly, Qudian\u2019s lending licenses.\n\nInstead, Lead Plaintiffs argue that, because Qudian had its lending license restricted, Defendants\n\nlacked a basis to provide the guidance statements. Yet, Lead Plaintiffs again \u201cfailed to sufficiently\n\nallege facts that show that Defendants did not believe these opinions and expectations at the time\n\nthey made the statements.\u201d In re Adient, 2020 WL 1644018, at *17 (S.D.N.Y. Apr. 2, 2020).\n\n Finally, the remaining statements, Am. Compl. \u00b6\u00b6 273, 278, 282, 286, 287, 303, are not\n\nactionable for same reasons as reasons described for bucket one.\n\n iii. Bucket Three: Credit Trial Program\n\n Third, Lead Plaintiffs allege that Defendants misrepresented, or failed to disclose, that\n\n\u201cQudian lowered its lending standards in the core loan book under the Credit Trial Program to such\n\na degree that at least 20% of the loans in its core loan book were made to borrowers that did not\n\n 31\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 32 of 52\n\n\n\nmeet Qudian\u2019s lending standards.\u201d Am. Compl. \u00b6 197. None of the challenged statements suggest\n\nthat Qudian would never lower its lending standards. To the contrary, Qudian disclosed that it\n\nperiodically lowers its credit standards, and that lowering its credit standards may result in higher\n\ndelinquency rates. See Mem. at 26. Further, on its November 21, 2018 earnings call, Qudian\n\ndisclosed that its credit standards \u201cwill actually relax a lot more into fourth quarter,\u201d leading to a\n\n\u201chigher number of outstanding borrowers.\u201d Kreissman Decl., Ex. O at 12. Lead Plaintiffs concede\n\nthat Defendants made these disclosures but assert that the disclosures were too generic and did not\n\ndisclose that Qudian was planning to lower its credit standards in the core loan book to such a\n\nsignificant extent. See Opp\u2019n at 19\u201320. The Court cannot conclude as a matter of law that\n\nDefendants\u2019 failure to disclose the size of the Credit Trial Program was immaterial. Accordingly, the\n\nCourt will address each allegedly false or misleading statement in turn below.\n\n The amended complaint lacks sufficient allegations demonstrating the falsity of any\n\nstatements made by Defendants. First, Lead Plaintiffs challenge a number of Defendants\u2019 opinions\n\nand expectations regarding Qudian\u2019s financial outlook and prospect for growth. See Am. Compl.\n\n\u00b6\u00b6 199\u2013201, 204 (statements announcing Qudian\u2019s guidance, justifying the guidance, expressing\n\nconfidence in Qudian\u2019s growth prospect, and expressing confidence in the guidance); id. \u00b6 226\n\n(reaffirming Qudian\u2019s 2019 guidance); \u00b6 237 (reaffirming Qudian\u2019s guidance); id. \u00b6 261 (raising\n\nQudian\u2019s guidance); id. \u00b6 262 (expressing confidence in Qudian\u2019s raised guidance); id. \u00b6 265\n\n(reaffirming Qudian\u2019s raised guidance); id. \u00b6 282 (stating that Qudian raised its guidance based on\n\n\u201csolid second quarter results driven by strong momentum in our open platform initiative and better-\n\nthan-expected loan book growth\u201d); id. \u00b6 284 (Yeung\u2019s statement that \u201cagain on guidance, we remain\n\nfully confident in our growth prospects given sufficient funding, strong user demand and ramp up\n\nof our open platform.\u201d); id. \u00b6 297 (reaffirming Qudian\u2019s updated 2019 financial guidance); id. \u00b6 301\n\n(lowering Qudian\u2019s 2019 financial guidance); id. \u00b6 306 (Yeung\u2019s statement that \u201cI think we are going\n\nto start to see some pretty interesting good trends into Q1. Q4 will still be like a tail end of what\u2019s\n\n 32\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 33 of 52\n\n\n\nhappening in 2019, but Q1, we should expect to see some fantastic results from doing all of this.\u201d);\n\nid. \u00b6\u00b6 309\u201311 (justifying Qudian\u2019s lowered guidance).\n\n Here, again, Lead Plaintiffs\u2019 allegations are an improper attempt to plead fraud by hindsight.\n\nLead Plaintiffs have not sufficiently alleged facts that show that Defendants did not believe their\n\nopinions. \u201cA violation of Section 10(b) and Rule 10b\u20135 premised on misstatements cannot occur\n\nunless an alleged material misstatement was false at the time it was made.\u201d In re Lululemon Sec. Litig.,\n\n14 F. Supp. 3d 553, 571 (S.D.N.Y. 2014), aff\u2019d, 604 F. App\u2019x 62 (2d Cir. 2015); see also San Leandro\n\nEmergency Med. Grp. Profit Sharing Plan v. Philip Morris Cos, Inc., 75 F.3d 801, 813 (2d Cir. 1996)\n\n(\u201c[P]laintiffs have not alleged circumstances to show that the defendants lacked a reasonable basis\n\nfor their optimistic, but qualified, predictions as to the company\u2019s future performance.\u201d). Lead\n\nPlaintiffs\u2019 belief that Qudian\u2019s guidance statements were misguided in light of the size of the Credit\n\nTrial Program is insufficient. See Lopez, 173 F. Supp. 3d at 24 (\u201cIt is not sufficient . . . to allege that\n\nan opinion was unreasonable, irrational, excessively optimistic, [or] not borne out by subsequent\n\nevents.\u201d).\n\n Next Lead Plaintiffs challenge a number of statements on the grounds that Defendants\n\nfailed to disclose that \u201cQudian lowered the credit standards in its core loan book and therefore\n\ncould not profit from both the core loan book and Open Platform in the way that Defendants\n\nrepresented.\u201d See Am. Compl. \u00b6 239 (\u201cWe remained focused on growing our loan book steadily\n\nlooking for exceptional risk-adjusted profits, while investing in our open-platform initiative launched\n\nin the third quarter of 2018 to drive additional profit growth.\u201d); id. \u00b6 241 (\u201cLooking ahead, we will\n\ncontinue to invest in our open platform and expand partnerships in funding and user engagement,\n\nfueling growth above and beyond the capacity of our balance sheet. Given the exciting and visible\n\ngrowth throughout these core business lines, we will stay focused on our technology-based\n\nconsumption credit services.\u201d); id. \u00b6 243 (representing that Open Platform could provide growth\n\nbeyond the core loan book); id. \u00b6 248 (\u201cOur core small more consumption finance business\n\n 33\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 34 of 52\n\n\n\ncontinues to deliver exceptional risk-adjustment profit driven by strong user demand and risk\n\nmanagement capability. First, on the user side. Since our thoughtful and streamlined product and\n\nservice offering, as well as strong brand recognition, our registered users continued to grow to 73.3\n\nmillion with a little additional marketing costs. In particular, our efforts to activate our dormant user\n\nbase have paid off, evidenced by a sequential growth of 16.6% in new active borrowers.\u201d); id. \u00b6 251\n\n(stating that Qudian has \u201chave a lot of hope that [Open Platform] would grow even faster in the\n\nupcoming quarters\u201d and that \u201cthere should be no problem growing\u201d the core loan book); id. \u00b6 256\n\n(\u201cWhile our loan book business continue[s] robust growth, our open platform initiative contributed\n\nmeaningful revenue with little marginal operating costs and zero credit costs.\u201d); id. \u00b6 267\n\n(\u201cStrategically, via our open-platform initiative we are further opening up our dormant registered\n\nuser base beyond our loan book to financial institution partners who wish to grow their own loan\n\nbook.\u201d); id. \u00b6 269 (describing the growth in Qudian\u2019s user base and outstanding borrowers in the\n\nsecond quarter of 2019); id. \u00b6 271 (describing Qudian\u2019s growth and stating that Open Platform\n\n\u201ccontinued to prove its strong potential to become a major growth driver\u201d); id. \u00b6 280 (stating that\n\nQudian\u2019s record non-GAAP net income \u201ccame as a result of continuing to ramp up our risk-free\n\nopen platform initiative and successfully growing our loan balance, while managing risk\n\nappropriately\u201d); id. \u00b6 290 (describing that Qudian\u2019s funding partners \u201cenjoy both\u201d the core loan\n\nbook and Open Platform). Yet, none of these statements represent that the growth in the core loan\n\nbook, or any future growth, would not be driven in part by a lowering of the core loan book\u2019s credit\n\nstandards. Given that Qudian had disclosed that it periodically lowered its lending standards, Lead\n\nPlaintiffs have failed to sufficiently allege that Defendants\u2019 omission of the size of the Credit Trial\n\nProgram was necessary to prevent the challenged statements from being misleading.\n\n Another significant portion of the challenged statements consistent of non-actionable\n\npuffery. See Am. Compl. \u00b6 208 (describing Open Platform as an example of an investment that\n\nQudian undertook \u201cresponsibly with the priority that our core consumption finance operations will\n\n 34\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 35 of 52\n\n\n\nnot be interrupted and targets will be delivered.\u201d); id. \u00b6 210 (touting that Qudian\u2019s growth in\n\noutstanding borrowers \u201cdemonstrate[ed] that an innately affordable and attractive service does not\n\nrequire costly marketing or special channels to successfully grow\u201d); id. \u00b6 220 (stating that Qudian has\n\na \u201ccommitment in . . . [a] conservative risk management approach\u201d and that Qudian \u201cremained\n\nselective in serving new users\u201d); id. \u00b6 222 (stating that Qudian\u2019s \u201csolid results\u201d in 2018 \u201cwere\n\nattributable to our growing user base, low operating costs, regulatory compliant operating structure\n\nand solid asset quality\u201d and that the growth in the core loan book \u201cdemonstrated the strong demand\n\nfrom our users with reliable funding to serve\u201d); id. \u00b6 243 (representing that the core loan book was\n\nexpanding \u201cat [s]table and [h]ealthy [l]everage\u201d); id. \u00b6 249 (stating that Qudian had an \u201cexciting and\n\nreasonable growth outlook throughout our core business line\u201d); id. \u00b6 253 (representing that Qudian\n\n\u201chad been overall quite conservative\u201d in the core loan book); id. \u00b6 254 (explaining that, for Open\n\nPlatform, \u201c[s]ince, we don\u2019t underwrite the risk, we don\u2019t really care . . . where the losses are\u201d); id.\n\n\u00b6 276 (\u201c[B]oth the loan book and open platform approaches are making strong inroads with our\n\nmassive proprietary app-based user base.\u201d); id. \u00b6 278 (stating that \u201c[o]ur scalable and profitable\n\nplatform allows us to consistently catch the new and dormant users using NPL, allowing us to have\n\nan organic based user growth.\u201d); id. \u00b6 282 (representing that Qudian\u2019s second quarter results were\n\n\u201cdriven by strong momentum in our open platform initiative and better-than-expected loan book\n\ngrowth\u201d); id. \u00b6 289 (assuring that Qudian was \u201ccarefully managing\u201d its mix between the core loan\n\nbook and Open Platform \u201cso that we meet our guidance numbers carefully\u201d); id. \u00b6 292 (explaining\n\nthat Qudian has \u201cabout 40 million potential customers, that we\u2019ve just been conservative on\u201d); id.\n\n\u00b6 295 (\u201cWe continue to be conservative on our provisioning and operations.\u201d); id. \u00b6 303 (assertion\n\nthat \u201c[i]n our risk undertaking business, we implemented a conservative strategy of reducing credit\n\nvolumes and paused our credit trial program. Our proactive and prompt management of macro\n\ndriven risk was effective in stabilizing the delinquency rates. . . . . [W]e expect to continue a\n\nconservative approach on our risk-taking book into the final quarter of 2019 and thus revise our full\n\n 35\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 36 of 52\n\n\n\nyear guidance accordingly.\u201d); id. \u00b6 313 (stating that \u201cwe are a dynamic company that knows how to\n\nnavigate the changing landscape.\u201d); id. \u00b6 319 (stating that \u201crisk remains well managed\u201d and \u201cwe\n\nexpect to continue a conservative approach on our risk-taking book into the final quarter of 2019.\u201d).\n\n These statements are not sufficiently specific that a reasonable investor could rely on them\n\nas a guarantee of some concrete fact or outcome. See Lopez, 173 F. Supp. 3d at 29; see also Tobia v.\n\nUnited Grp. of Companies, Inc., No. 15-cv-1208, 2016 WL 5417824, at *10 (N.D.N.Y. Sept. 22, 2016)\n\n(concluding that statements describing an investment fund as a \u201cgood investment\u201d and\n\n\u201cconservative\u201d were \u201ctoo general to be anything more than opinion and puffery.\u201d); Shemian v. Rsch.\n\nIn Motion Ltd., No. 11-cv-4068, 2013 WL 1285779, at *23 (S.D.N.Y. Mar. 29, 2013) (holding that\n\nstatements such as \u201cwe\u2019re laying in the pieces here to sustain really exciting growth\u201d were \u201cnon-\n\nactionable corporate puffery\u201d), aff\u2019d, 570 F. App\u2019x 32 (2d Cir. 2014); In re Sec. Cap. Assur. Ltd. Sec.\n\nLitig., 729 F. Supp. 2d at 597 (\u201cPlaintiffs\u2019 allegations that [Defendant] made material\n\nmisrepresentations when it referred to its underwriting approach as \u2018disciplined\u2019 and \u2018conservative\u2019\n\nand its overcollateralization triggers as \u2018robust\u2019 in the face of deterioration are classic examples of\n\npuffery.\u201d); Woodward v. Raymond James Fin., Inc., 732 F. Supp. 2d 425, 434 (S.D.N.Y. 2010) (holding\n\nthat the statement that \u201c[Defendant\u2019s] leadership believes that the managed growth strategy,\n\ncommitment to risk management and conservative lending practices that helped the firm avert the\n\nsubprime crisis and post solid operating results in 2007 will continue to serve the company well in\n\nthe coming year\u201d was \u201cnothing more than a general platitude that accompanies nearly every press\n\nrelease or public statement issued by a financial institution\u2014it defines the term \u2018puffery\u2019\u201d); In re JP\n\nMorgan Chase Sec. Litig., 363 F.Supp.2d 595, 633 (S.D.N.Y. 2005) (\u201cThe particular misstatements that\n\nplaintiffs allege\u2014generalizations regarding integrity, fiscal discipline and risk management\u2014amount\n\nto no more than puffery.\u201d); Frazier v. VitalWorks, Inc., 341 F. Supp. 2d 142, 153 (D. Conn. 2004)\n\n(\u201cSaying that a product is \u2018significant,\u2019 \u2018attractive\u2019 or \u2018great\u2019 is merely \u2018puffery,\u2019 not actionable\n\nsecurities fraud.\u201d).\n\n 36\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 37 of 52\n\n\n\n None of the remaining challenged statements are actionable. Lead Plaintiffs challenge the\n\nfollowing statements made by Yeung on Qudian\u2019s August 16, 2019 earnings call regarding the Credit\n\nTrial Program:\n\n \u2022 So if we look at the big data, about 76 million registered users and around 30-\n plus million approved users. So we have\u2014actually have a fairly large gap,\n about 40 million potential customers, that we[\u2019ve] just been conservative on.\n\n \u2022 [W]e are proactively doing this so-called NPL marketing method. And if we\n were to take out the NPL for marketing purpose, I think the delinquency rate\n on some of the back calculations we\u2019ve done would have been just around\n 3.7% on M1+ and then just around 2.1% on the M6 charge off. So it\u2019s pretty\n much stable like before. That\u2019s kind of how we think about it. I\u2019m trying very\n hard to see if we can, in the next few quarters, be able to separate that\n delinquency by vintage into what is really the core business and what is really\n for sales and marketing purpose so everybody can have a better comparison in\n terms of how we spend money on acquiring users versus others.\n\n \u2022 [W]e have be[en] continuing the activation of our dormant user base by\n effective credit trial programs. Instead of purchasing high-cost traffic to our\n app, our credit assessment model identifies specific user cohorts to which we\n extend very small credit size for a short duration to quickly gauge their credit\n behavior data and thereby can extrapolate risk profiles for multiple clusters of\n the test user group, gradually adding qualified users to our core user group.\n Through this effort, our new active borrowers increased by 108.2% from the\n last quarter and approximately RMB 500 million was provisioned in the quarter\n to bring on more outstanding borrowers to reach over 6 million on our own\n loan book in the second quarter, growing the outstanding borrower base on\n the loan book by 12% in 1 single quarter. Our M1+ vintage delinquency rates\n would have decreased by 0.5% excluding users in these trial programs.\n\n\nAm. Compl. \u00b6\u00b6 292\u201395; Kreissman Decl., Ex. L at 4, 6, 11. Lead Plaintiffs argue that these\n\nstatements \u201cfalsely minimized the Credit Trial Program as a small program that was the equivalent\n\nof a marketing expense to acquire new borrowers,\u201d and \u201ctried to pass the Credit Trial Program off\n\nas tantamount to a marketing expense.\u201d See Am Compl. \u00b6\u00b6 292\u201393. The Court is not persuaded.\n\nYeung\u2019s statements would be understood to mean that Qudian used the Credit Trial Program to\n\nidentify new qualified users, rather than relying on traditional sales and marketing approaches. No\n\n\n\n\n 37\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 38 of 52\n\n\n\nreasonable investor would be misled by Yeung\u2019s statements into believing the Credit Trial Program\n\nwas small or was equivalent to traditional marketing expenses.\n\n Finally, Lead Plaintiffs challenge a number of statements made by Yeung during Qudian\u2019s\n\nBusiness Update Call on November 25, 2019. See Am. Compl. \u00b6\u00b6 313, 315\u201317. Lead Plaintiffs do\n\nnot challenge the content of the specific statements, but rather assert that the statements were false\n\nor misleading because \u201cDefendants still misrepresented the full extent to which Qudian had lowered\n\ncredit standards in Qudian\u2019s core loan book.\u201d See id. However, Yeung had already revealed the\n\nextent to which Qudian lowered its credit standards in the core loan book prior to the Business\n\nUpdate Call. The amended complaint asserts that Yeung\u2019s revelation took place on November 25,\n\n2019. See id. \u00b6 182. But Lead Plaintiffs have the date wrong\u2014Yeung\u2019s revelation was made on\n\nNovember 18, 2019. Compare id., with Kreissman Decl., Ex. F at 7. Accordingly, Lead Plaintiffs have\n\nnot sufficiently alleged that Yeung\u2019s statements on the Business Update Call were false or misleading\n\nto a reasonable investor.\n\n iv. Bucket Four: Composition of Open Platform\n\n Fourth, Lead Plaintiffs allege that Defendants misrepresented, or failed to disclose, that\n\n\u201cOpen Platform took the best, highest-quality borrowers from Qudian\u2019s user base, which hurt the\n\ncore loan book\u2019s credit quality and its ability to perform alongside Open Platform.\u201d Am. Compl.\n\n\u00b6 197. Lead Plaintiffs maintain that Open Platform cannibalized users from the core loan book.\n\nHowever, this theory rests on an unsupported assumption. Lead Plaintiffs assume that any user\n\nwho borrowed from Open Platform otherwise would have borrowed the core loan book. Yet,\n\nDefendants disclosed that Open Platform would include \u201cusers with better credit profiles that are\n\napplying for large loan amounts that exceed the limit permitted under our policy.\u201d Am. Compl.\n\n\u00b6 232; see also Opp\u2019n at 18. Lead Plaintiffs do not challenge this disclosure. Thus, it is clear that at\n\nleast some of Open Platform\u2019s users sought loans that would not have been approved through the\n\ncore loan book.\n\n 38\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 39 of 52\n\n\n\n More fundamentally, Lead Plaintiffs\u2019 theory is premised on hindsight. Lead Plaintiffs allege\n\nthat, because Open Platform took the \u201cbest\u201d borrowers from the core loan book, it was inevitable\n\nthat Qudian would be unable to grow the core loan book. However, Lead Plaintiffs do not allege\n\nthat any of the challenged statements suggested that the core loan book\u2019s \u201cbest\u201d or \u201chighest-quality\u201d\n\nborrowers would not migrate to Open Platform, or that Open Platform would not target such users.\n\nRather, Lead Plaintiffs rely on an alleged omission\u2014Lead Plaintiffs contend that Defendants \u201cin no\n\nway disclosed to investors that [Open Platform] focused on [the core loan book\u2019s] best borrowers.\u201d\n\nOpp\u2019n at 18. Lead Plaintiffs assert that the omitted information was necessary to prevent various\n\nstatements from being misleading. Specifically, Lead Plaintiffs challenge any statement that\n\nsuggested that Open Platform and the core loan book could grow in tandem, or that expressed a\n\npositive view of Qudian\u2019s growth.\n\n Lead Plaintiffs fail to allege circumstances which support their allegation that Defendants\u2019\n\nstatements were false at the time they were made. Lead Plaintiffs attempt to rely on a confidential\n\nwitness, CW 7, alleging that the witness \u201cstated that while Open Platform \u2018made much profit in the\n\nshort term, in the long term, it was just using up its own customers\u2019\u201d and \u201celaborated that Open\n\nPlatform relied on old customers from Qudian\u2019s core loan book and \u2018[i]t basically reduced the\n\nlifecycle of its customers\u2019 by offering them higher loan balances.\u201d Am. Compl. \u00b6 100. However, the\n\namended complaint\u2019s description of CW 7 as a \u201ca business manager at Qudian from July 2017 to\n\nJune 2019,\u201d is insufficient to support the probability that CW 7 was in a position to possess this\n\ninformation. See N.J. Carpenters Health Fund, 709 F.3d at 123\u201324 (\u201c[W]e have permitted plaintiffs to\n\nrely on unnamed sources so long as \u2018[the unnamed sources] are described in the complaint with\n\nsufficient particularity to support the probability that a person in the position occupied by the source\n\nwould possess the information alleged.\u2019\u201d (quoting Novak, 216 F.3d at 314)); In re Hebron Tech. Co.,\n\nLtd. Sec. Litig., No. 20-cv-4420, 2021 WL 4341500, at *17 (S.D.N.Y. Sept. 22, 2021) (concluding that\n\n\n\n 39\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 40 of 52\n\n\n\nthe complaint\u2019s \u201cthreadbare descriptions of titles and functions do not indicate access to knowledge\n\non the issues . . . to which . . . [the confidential witnesses] have opined\u201d).\n\n Lead Plaintiffs also argue that Defendants\u2019 financial results in the third quarter of 2019\n\n\u201cestablish that even if the number of [Open Platform] borrowers was growing, that came at the\n\nexpense of the quality of borrowers in [the core loan book].\u201d Opp\u2019n at 16\u201317. \u201cPlaintiffs are not\n\npermitted, however, to proceed with allegations of \u2018fraud by hindsight,\u2019 in which statements are\n\nproven false on the basis of subsequent information.\u201d In re Ferroglobe PLC Sec. Litig., No. 1:19-cv-\n\n629, 2020 WL 6585715, at *6 (S.D.N.Y. Nov. 10, 2020); see also San Leandro Emergency Med. Grp. Profit\n\nSharing Plan v. Philip Morris Cos., Inc., 75 F.3d 801, 812 (2d Cir. 1996) (\u201cPlaintiffs allege no\n\ncircumstances to support their allegation that the allegedly false statements, made at least three\n\nweeks before the 8.3 percent figure was announced, were false at the time made.\u201d). The mere fact\n\nthat Qudian\u2019s development of Open Platform may have ultimately hurt the core loan book\u2019s ability\n\nto grow in the third quarter of 2019 is insufficient to establish that Defendants\u2019 statements were\n\nfalse when made.\n\n Consequently, Lead Plaintiffs have failed to sufficiently allege that Defendants\u2019 omission\u2014\n\nnamely, that Open Platform targeted the \u201cbest\u201d and \u201chighest-quality\u201d borrowers from the core loan\n\nbook and not just \u201cusers with better credit profiles\u201d\u2014was necessary to prevent the challenged\n\nstatements from being misleading.\n\n v. Bucket Five: Intent Behind Open Platform\n\n Finally, Lead Plaintiffs allege that Defendants misrepresented, or failed to disclose, that\n\nOpen Platform was \u201cintended to address regulatory problems in the core loan book.\u201d Am. Compl.\n\n\u00b6 197. Lead Plaintiffs allege that \u201cDefendants did not view Open Platform as an additional product\n\nthat generated revenue on top of Qudian\u2019s core loan book, but rather, as a revised business model\n\nthat would allow Qudian to conduct its loan business in a regulatory compliant manner,\u201d and that\n\n\n\n 40\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 41 of 52\n\n\n\n\u201cDefendants actually planned to shift Qudian\u2019s entire loan business to Open Platform.\u201d Am.\n\nCompl. \u00b6 124.\n\n It is important to clarify Lead Plaintiffs\u2019 allegation. For purposes of this bucket, Lead\n\nPlaintiffs are not alleging that Defendants failed to disclose regulatory issues with the core loan\n\nbook. Those allegations are separate and are addressed by the first and second buckets. See supra\n\nSections III(A)(1)(b)(i)\u2013(ii). Nor do Lead Plaintiffs allege that Defendants misrepresented the fact\n\nthat Open Platform was more regulatory compliant that the core loan book. Instead, Lead\n\nPlaintiffs\u2019 allegation is that Defendants misrepresented, or failed to disclose, the intent behind\n\ndeveloping Open Platform.\n\n Lead Plaintiffs do not provide particularized facts in the amended complaint to support their\n\nallegation that Open Platform was developed in order to address regulatory issues in the core loan\n\nbook. Citing four paragraphs of the amended complaint, Lead Plaintiffs argue that the amended\n\ncomplaint \u201cadequately pleads that Defendants did not view [Open Platform] as an additional\n\nproduct that generated revenue on top of [the core loan book], as described to investors, but rather\n\nas a revised business model that would allow Qudian to conduct its business in a regulatory\n\ncompliant manner.\u201d Opp\u2019n at 15. (citing Am. Compl. \u00b6\u00b6 57, 65, 98, 124). Three of the four\n\nparagraphs cited by Lead Plaintiffs do not include any particularized facts and consist solely of Lead\n\nPlaintiffs\u2019 unsupported speculation premised on \u201cinformation and belief.\u201d See Am. Compl. \u00b6 57\n\n(conclusory allegation that \u201cQudian started Open Platform not because it was a promising new\n\nbusiness line, but rather, in order to address the regulatory problems in Qudian\u2019s core lending\n\nbusiness\u201d); id. \u00b6 65 (conclusory allegation that \u201cOpen Platform was started to address the regulatory\n\nproblems with Qudian\u2019s core loan book\u201d); id. \u00b6 124 (conclusory allegation that \u201cQudian\u2019s true\n\nreason for developing Open Platform was that its core lending business ran afoul of China\u2019s strict\n\nonline lending regulations and risked being shut-down,\u201d that \u201cDefendants did not view Open\n\nPlatform as an additional product that generated revenue on top of Qudian\u2019s core loan book, but\n\n 41\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 42 of 52\n\n\n\nrather, as a revised business model that would allow Qudian to conduct its loan business in a\n\nregulatory compliant manner,\u201d and that \u201cDefendants actually planned to shift Qudian\u2019s entire loan\n\nbusiness to Open Platform\u201d). \u201c[I]t is well-settled that bare-bones allegations based upon\n\n\u2018information and belief,\u2019 without more, are insufficient to support a securities fraud claim.\u201d Doscher\n\nv. Sobel & Co., LLC, No. 14-cv-646, 2015 WL 774695, at *5 (S.D.N.Y. Feb. 11, 2015) (citing First\n\nCapital Asset Mgmt. Inc. v. Satinwood, Inc., 385 F.3d 159, 179 (2d Cir. 2004)).\n\n In addition, Lead Plaintiffs attempt to support their allegation with statements from a\n\nconfidential witness, CW 1. See Am. Compl. \u00b6 98. Lead Plaintiffs allege that:\n\n CW 1 worked for Qudian\u2019s loan business until CW 1 left the Company in May 2019.\n CW 1 described Open Platform as substantially the same as Qudian\u2019s prior loan\n business and stated that Qudian described Open Platform as a new line of business\n \u201c[f]or compliance reasons.\u201d CW 1 explained that part of Qudian\u2019s prior loan business\n was \u201crenamed as Open Platform\u201d around the time that CW 1 left the Company in May\n 2019. . . . In addition, CW 1 explained that because of Circular 141, which came out\n in 2017, Qudian could no longer give loans itself the way that it had previously and\n the old loan business therefore \u201ccould no longer be continued.\u201d 5\n\nId. However, the amended complaints\u2019 generic description of CW 1 as \u201ca manager in Qudian\u2019s loan\n\nbusiness,\u201d Am. Compl. \u00b6 118, is insufficient to support the probability that CW 1 was in a position\n\nto know Qudian\u2019s motivation behind developing Open Platform. See New Jersey Carpenters Health\n\nFund, 709 F.3d at 123\u201324 (\u201c[W]e have permitted plaintiffs to rely on unnamed sources so long as\n\n\u2018[the unnamed sources] are described in the complaint with sufficient particularity to support the\n\nprobability that a person in the position occupied by the source would possess the information\n\nalleged.\u2019\u201d (quoting Novak, 216 F.3d at 314)); In re Hebron Tech. Co., Ltd. Sec. Litig., 2021 WL 4341500,\n\nat *17 (concluding that the complaint\u2019s \u201cthreadbare descriptions of titles and functions do not\n\n\n\n\n5Notably, CW 1 does not assert that Qudian developed Open Platform due to concerns over Circular 141. Lead\nPlaintiffs appear to concede that Open Platform could not have been designed to address Circular 141\u2019s ban on credit\nassessments because, as Defendants argue, Qudian continues to perform credit assessments through Open Platform. See\nMem. at 24; Opp\u2019n at 16.\n\n 42\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 43 of 52\n\n\n\nindicate access to knowledge on the issues . . . to which . . . [the confidential witnesses] have\n\nopined\u201d).\n\n Finally, to the extent that Lead Plaintiffs assert that Defendants\u2019 November 2019 statements\n\nregarding Open Platform support their allegation, Lead Plaintiffs are mistaken. None of the\n\nstatements address Defendants\u2019 original motivation for developing Open Platform; instead, the\n\nstatements only describe Defendants\u2019 view of Open Platform at the time the statements were made. 6\n\nAccordingly, because Lead Plaintiffs have not pleaded with particularity facts on which their belief\n\nthat Open Platform was intended to address regulatory problems in the core loan book is based, this\n\nallegation cannot serve as a basis for securities fraud liability.\n\n 2. Scienter\n\n a. Legal Standard\n\n A plaintiff alleging securities fraud must allege \u201cwith particularity facts giving rise to a strong\n\ninference that the defendant acted with the required state of mind.\u201d 15 U.S.C. \u00a7 78u-4(b)(2)(A).\n\nThe Supreme Court has explained that the \u201cPSLRA requires plaintiffs to state with particularity both\n\n\n\n6 See Am. Compl. \u00b6 170 (Luo explaining that Qudian was not \u201ctoo interested in new forms of [lending] licenses\u201d because\n\u201c[w]e found a better way, the way where we do open platform, where we allow licensed lenders, 100% licensed lenders,\nto lend, we don\u2019t touch the loan from a lending perspective, but we just service the loan. It\u2019s probably the better way to\nconduct FinTech. And it just makes us sleep better at night. It should make all of our shareholders sleep better at night\nover time. So that's our direction to be a tech company.\u201d); id. \u00b6 171 (Luo emphasizing that \u201cmost importantly, most,\nmost importantly, for us and all my funding partners, [Open Platform] is the most regulatory compliant structure\nbecause there is no third party involved in guaranteeing risk. Banks are doing exactly what they\u2019re supposed to do, lend\nand put stuff on balance sheet.\u201d); id. \u00b6 174 (Yeung explaining that Qudian was \u201cdiligently interpreting regulatory\ndirections\u201d which caused Qudian to conclude that \u201cthe future of fintech in China is not about risk-taking. The existence\nof fintech is about putting together technology to help license regulated [financial institutions] do what they are\nsupposed to do in the first place, namely, lending month and taking risk on it. We want to be clear we do not take risk\nor provide any implicit guarantees on open platforms.\u201d); id. \u00b6 175 (Yeung explaining that \u201c[s]ince our inception in 2016,\nwe have gone through stages of business and regulatory compliance upgrades from license-based lending to loan\nfacilitation for financial institutions to now becoming a technology-based free driven platform.\u201d); id. \u00b6 176 (Yeung\nexplaining that \u201c[w]e are investing in the better business model and the technologies in a regulatory-compliant way to do\nthings for the long term\u201d); id. \u00b6 193 (Yeung stating that Qudian \u201cstrives to be a technology company rather to be a\nlender. . . . all our focus now is to become a tech company. And I think that\u2019s a better way to go from the overall\nregulatory shifts and changes, our shareholders will be much more protected from any regulatory noise. . . . If the\nopportunity allows, if the opportunity really allows, we wouldn\u2019t have a loan book at all.\u201d); id. \u00b6 194 (stating that Open\nPlatform was \u201cthe final and long-term viable form of fintech in China. . . . Focusing on this is the only path to deliver\nsustainable results and therefore long-term leadership\u201d); id. \u00b6 195 (explaining that by focusing on Open Platform,\nQudian was \u201cinvesting in the better business model and the technologies in a regulatory-compliant way to do things for\nthe long term.\u201d).\n\n 43\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 44 of 52\n\n\n\nthe facts constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant\u2019s\n\nintention to deceive, manipulate, or defraud.\u201d Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308,\n\n313 (2007) (quotation omitted). The question \u201cis whether all of the facts alleged, taken collectively,\n\ngive rise to a strong inference of scienter, not whether any individual allegation, scrutinized in\n\nisolation, meets that standard.\u201d Id. at 322\u201323. To plead scienter for a forward-looking statement, a\n\nplaintiff must allege that the statement was made \u201cwith actual knowledge\u201d of its falsity. 15 U.S.C.\n\n\u00a7 78u-5(c)(1)(B).\n\n For all other statements, \u201crecklessness is a sufficiently culpable mental state for securities\n\nfraud in this circuit.\u201d ECA, 553 F.3d at 198 (citation omitted); see Slayton, 604 F.3d at 773 (\u201c[T]he\n\nscienter requirement for forward-looking statements is stricter than for statements of current fact.\n\nWhereas liability for the latter requires a showing of either knowing falsity or recklessness, liability\n\nfor the former attaches only upon proof of knowing falsity.\u201d). That standard can be satisfied \u201c(a) by\n\nalleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by\n\nalleging facts that constitute strong circumstantial evidence of conscious misbehavior or\n\nrecklessness.\u201d Kalnit v. Eichler, 264 F.3d 131, 138 (2d Cir. 2001) (quotation omitted). A plaintiff\n\nneed not rely exclusively on one of these theories. Indeed, Kalnit held that absent allegations of\n\nmotive, \u201cthe strength of the circumstantial [evidence] must be correspondingly greater.\u201d Id. at 142\n\n(quotation omitted). That accords with the Supreme Court\u2019s admonition to consider \u201cwhether all of\n\nthe facts alleged, taken collectively, give rise to a strong inference of scienter.\u201d Tellabs, 551 U.S. at\n\n323.\n\n Reckless conduct is \u201cconduct which is highly unreasonable and which represents an extreme\n\ndeparture from the standards of ordinary care to the extent that the danger was either known to the\n\ndefendant or so obvious that the defendant must have been aware of it.\u201d In Re Carter-Wallace Sec.\n\nLitig., 220 F.3d 36, 39 (2d Cir. 2000) (quotation omitted). But a plaintiff alleging recklessness must\n\nallege \u201cconscious recklessness\u2014i.e., a state of mind approximating actual intent, and not merely a\n\n 44\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 45 of 52\n\n\n\nheightened form of negligence.\u201d Stratte-McClure v. Morgan Stanley, 776 F.3d 94, 106 (2d Cir. 2015)\n\n(quotation omitted). \u201cSecurities fraud claims typically have sufficed to state a claim based on\n\nrecklessness when they have specifically alleged defendants\u2019 knowledge of facts or access to\n\ninformation contradicting their public statements.\u201d Kalnit, 264 F.3d at 142 (quotation omitted).\n\n\u201cUnder such circumstances, defendants knew or, more importantly, should have known that they\n\nwere misrepresenting material facts related to the corporation.\u201d Id. (quotation omitted).\n\n An \u201cinference of scienter must be more than merely plausible or reasonable\u2014it must be\n\ncogent and at least as compelling as any opposing inference of nonfraudulent intent.\u201d Tellabs, 551\n\nU.S. at 314. If an inference of fraudulent intent is not \u201cat least as compelling\u201d as a contrary\n\ninference, it is inadequate, even in a \u201cclose case.\u201d Slayton, 604 F.3d at 777. An inference of scienter\n\nneed not be \u201cirrefutable, i.e., of the \u2018smoking-gun\u2019 genre, or even the most plausible of competing\n\ninferences.\u201d Tellabs, 551 U.S. at 324 (quotation omitted); see also City of Pontiac, 875 F. Supp. 2d at 372\n\n(\u201c[A]t the motion to dismiss stage, a tie on scienter goes to the plaintiff.\u201d). In sum, \u201c[t]he inquiry on\n\na motion to dismiss is as follows: \u2018When the allegations are accepted as true and taken collectively,\n\nwould a reasonable person deem the inference of scienter at least as strong as any opposing\n\ninference?\u2019\u201d In re Scottish Re Grp. Sec. Litig., 524 F. Supp. 2d 370, 383 (S.D.N.Y. 2007) (quoting\n\nTellabs, 551 U.S. at 326).\n\n Rule 9(b) requires that \u201c[i]n a case involving multiple defendants, plaintiffs must plead\n\ncircumstances providing a factual basis for scienter for each defendant; guilt by association is\n\nimpermissible.\u201d In re DDAVP Direct Purchaser Antitrust Litig., 585 F.3d 677, 695 (2d Cir. 2009); see\n\nalso DeAngelis v. Corzine, 17 F. Supp. 3d 270, 281\u201382 (S.D.N.Y. 2014) (\u201c[Plaintiff] improperly\n\nattempts to group-plead the scienter requirement.\u201d); The Penn. Ave. Funds v. Inyx Inc., No. 08-cv-6857,\n\n2010 WL 743562, at *12 (S.D.N.Y. Mar. 1, 2010) (\u201c\u2018[G]roup pleading\u2019 of scienter . . . runs afoul of\n\nthe PSLRA\u2019s requirement that a plaintiff \u2018state with particularity facts giving rise to a strong\n\ninference that the defendant acted with the required state of mind.\u2019\u201d(citation omitted)).\n\n 45\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 46 of 52\n\n\n\n b. Application\n\n As explained above, the Court has determined that only certain statements made by\n\nDefendants are actionable. Lead Plaintiffs have not adequately alleged that Defendants had the\n\nrequisite scienter when making those statements.\n\n First, Lead Plaintiffs have not adequately pleaded facts showing that Defendants had an\n\nimproper motive to commit fraud. \u201cIn order to raise a strong inference of scienter through \u2018motive\n\nand opportunity\u2019 to defraud,\u201d Lead Plaintiffs must allege that Defendants \u201cbenefitted in some\n\nconcrete and personal way from the purported fraud.\u201d ECA, 553 F.3d at 198 (quoting Novak, 216\n\nF.3d at 307\u201308. \u201cMotives that are common to most corporate officers, such as the desire for the\n\ncorporation to appear profitable and the desire to keep stock prices high to increase officer\n\ncompensation, do not constitute \u2018motive\u2019 for purposes of this inquiry.\u201d Id. \u201cRather, the \u2018motive\u2019\n\nshowing is generally met when corporate insiders allegedly make a misrepresentation in order to sell\n\ntheir own shares at a profit.\u201d Id. As a general matter, \u201c[t]he absence of stock sales by insiders, or\n\nany other evidence of pecuniary gain by company insiders at shareholders\u2019 expense, is inconsistent\n\nwith an intent to defraud shareholders.\u201d In re N. Telecom Ltd. Secs. Litig., 116 F. Supp. 2d 446, 462\n\n(S.D.N.Y. 2000).\n\n Lead Plaintiffs have not alleged that Luo or Yeung sold securities, or otherwise directly\n\nprofited in any way from the alleged misstatements and omissions. Lead Plaintiffs instead allege that\n\nLuo had a motive to commit fraud because Luo decided \u201cto relinquish [his] salary and bonus until\n\n[Qudian\u2019s] market capitalization reaches US$100 billion.\u201d Am. Compl. \u00b6\u00b6 51 n.5, 362. Yet, \u201cthe\n\nexistence, without more, of executive compensation dependent upon stock value does not give rise\n\nto a strong inference of scienter.\u201d Kalnit, 264 F.3d at 141 (quotation omitted).\n\n Lead Plaintiffs also argue that Defendants had motive to commit fraud \u201cbecause of the\n\nfailures of Qudian\u2019s previous business projects.\u201d Opp\u2019n at 33. The alleged motive of making the\n\nQudian appear successful in light of past failures is \u201ctoo generalized to demonstrate [D]efendants\u2019\n\n 46\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 47 of 52\n\n\n\n\u2018concrete and personal benefit\u2019 from the alleged fraud.\u201d Kalnit, 264 F.3d at 140; see also S. Cherry St.,\n\nLLC v. Hennessee Grp. LLC, 573 F.3d 98, 109 (2d Cir. 2009) (\u201c[I]n attempting to show that a\n\ndefendant had fraudulent intent, it is not sufficient to allege goals that are \u2018possessed by virtually all\n\ncorporate insiders,\u2019 such as the desire to . . . sustain the appearance of corporate profitability or the\n\nsuccess of an investment[.]\u201d); City of Austin, 957 F. Supp. 2d at 295 (\u201c[T]he motives of increased\n\ncompensation and to assure that the company completed its announced initiatives are common to\n\ncorporate officers.\u201d). Accordingly, Lead Plaintiffs have not sufficiently alleged motive.\n\n Absent a showing of motive, \u201cthe strength of [Lead Plaintiffs\u2019] circumstantial allegations\n\nmust be correspondingly greater.\u201d ECA, 553 F.3d at 199 (quoting Kalnit, 264 F.3d at 142). Here,\n\nLead Plaintiffs attempt to demonstrate scienter under the \u201cconscious recklessness\u201d approach, which\n\nrequires that Defendants \u201cknew facts or had access to information suggesting that [their] public\n\nstatements were not accurate.\u201d Emps. Ret. Sys. of Gov\u2019t of the Virgin Islands, 794 F.3d at 306.\n\n Lead Plaintiffs have not sufficiently alleged that Luo or Yeung knew or had access to\n\ninformation suggesting that their statements were not accurate. The remaining statements are all\n\npremised on Lead Plaintiffs\u2019 first bucket of alleged omissions\u2014namely, that banks were outsourcing\n\ncredit assessments to Qudian rather than conducting their own independent credit assessments and\n\ntherefore violating Circular 141. However, the amended complaint is devoid of any allegation that\n\nLuo or Yeung knew that banks were not conducting independent credit assessments. Lead\n\nPlaintiffs\u2019 allegations rest solely on the statements of CW 4. Lead Plaintiffs allege that CW 4\n\n\u201cexplained that already in 2018, Qudian and the financial institutions that provided it with funding\n\nwere aware of the prohibition on Qudian conducting credit assessments for these funding partners,\u201d\n\nand that CW 4 \u201calso described how certain financial institutions that \u2018had a good relationship with\n\nthe local regulator\u2019 would rely on Qudian\u2019s risk assessment rather than conducting their own\n\nindependent risk assessment after receiving Qudian\u2019s initial review.\u201d Am. Compl. \u00b6 69. Notably,\n\nalthough CW 4 specifically asserts that Qudian was aware of Circular 141, CW 4 does not assert that\n\n 47\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 48 of 52\n\n\n\nLuo, Yeung, or anyone else at Qudian knew that some of its financial partners relied solely on\n\nQudian\u2019s risk assessments.\n\n Lead Plaintiffs also broadly allege that \u201cLuo and Yeung \u2013 as CEO and CFO \u2013 were directly\n\ninvolved in Qudian\u2019s day-to-day operations and had access to the information that was\n\nmisrepresented or omitted.\u201d Opp\u2019n at 32. \u201cScienter, however, \u2018cannot be inferred solely from the\n\nfact that, due to the defendants\u2019 board membership or executive managerial position, they had\n\naccess to the company\u2019s internal documentation as well as any adverse information.\u2019\u201d In re Sanofi Sec.\n\nLitig., 155 F. Supp. 3d 386, 407 (S.D.N.Y. 2016) (quoting Foley v. Transocean Ltd., 861 F.Supp.2d 197,\n\n212 (S.D.N.Y.2012)). \u201cWhere plaintiffs contend defendants had access to contrary facts, they must\n\nspecifically identify the reports or statements containing this information.\u201d Novak, 216 F.3d at 309.\n\nLead Plaintiffs do not identify any information that was available to Luo and Yeung which suggested\n\nthat banks were not conducting independent credit assessments and instead were relying on\n\nQudian\u2019s credit assessments.\n\n Finally, Lead Plaintiffs argue that the scienter of Luo and Yeung should be imputed to\n\nQudian. \u201cCourts routinely impute to the corporation the intent of officers and directors acting\n\nwithin the scope of their authority.\u201d In re Vale, 2017 WL 1102666, at *34 (quoting Penn. Pub. Sch.\n\nEmps. Ret. Sys. v. Bank of Am. Corp., 874 F. Supp. 2d 341, 363 (S.D.N.Y. 2012)). However, because\n\nLead Plaintiffs have not sufficiently alleged scienter for Luo and Yueng, there is no basis to impute\n\ncorporate scienter to Qudian. Accordingly, Lead Plaintiffs have not adequately alleged scienter.\n\n 3. Item 303\n\n The amended complaint asserts that Defendants violated Item 303 of Regulation S-K, 17\n\nC.F.R. \u00a7 228.303(a)(3)(ii) (\u201cItem 303\u201d). \u201cItem 303 does not apply to foreign corporations\u201d such as\n\nQudian. Willard v. UP Fintech Holding Ltd., 527 F. Supp. 3d 609, 619 n.5 (S.D.N.Y. 2021) (quoting\n\nPanther Partners Inc. v. Jianpu Tech. Inc., No. 18-cv-9848, 2020 WL 5757628, at *7 n.5 (S.D.N.Y. Sept.\n\n27, 2020)). \u201cBecause omissions are not actionable absent a legal duty to disclose, any failure by\n\n 48\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 49 of 52\n\n\n\n[foreign] defendants to comply with SEC Regulation S-K is insufficient to allege securities fraud.\u201d\n\nCity of Sterling Heights Police & Fire Ret. Sys. v. Reckitt Benckiser Grp. PLC, No. 20-cv-10041, 2022 WL\n\n596679, at *23 (S.D.N.Y. Feb. 28, 2022) (internal quotation marks omitted) (alteration in original).\n\n That said, \u201cthe SEC has stated that its interpretations of Item 303 apply to Management\n\nDiscussion & Analysis disclosures drafted pursuant to Item 5 of Form 20-F, which does apply to\n\nforeign corporations.\u201d Willard, 527 F. Supp. 3d at 619 n.5 (alterations omitted) (quoting Panther\n\nPartners, 2020 WL 5757628, at *7 n.5); see also Ontario Teachers\u2019 Pension Plan Bd. v. Teva Pharm. Indus.\n\nLtd., 432 F. Supp. 3d 131, 163 (D. Conn. 2019) (\u201c[T]he SEC and courts have interpreted Item 303\n\nand Item 5 to require the same disclosures.\u201d). Item 303 requires a public company to describe\n\n\u201cknown trends or uncertainties\u201d that the company \u201creasonably expects will have a material favorable\n\nor unfavorable impact on net sales or revenues or income from continuing operations.\u201d 17 C.F.R.\n\n\u00a7 229.303(a)(3)(ii); see also id. (\u201cIf the registrant knows of events that will cause a material change in\n\nthe relationship between costs and revenues (such as known future increases in . . . inventory\n\nadjustments), the change in the relationship shall be disclosed.\u201d). \u201cItem 303 requires the registrant\n\nto disclose only those trends, events, or uncertainties that it actually knows of when it files the\n\nrelevant report with the SEC. It is not enough that it should have known of the existing trend,\n\nevent, or uncertainty.\u201d Indiana Pub. Ret. Sys. v. SAIC, Inc., 818 F.3d 85, 95 (2d Cir. 2016). \u201cItem 303\n\nrequires not only a \u2018discussion\u2019 but also an analysis of known material trends.\u201d Stratte-McClure v.\n\nMorgan Stanley, 776 F.3d 94, 105 (2d Cir. 2015). \u201cA violation of Item 303 can constitute a material\n\nomission under Rule 10b-5, but plaintiffs must also sufficiently plead the other elements of such a\n\nclaim, including scienter.\u201d In re Gen. Elec. Sec. Litig., No. 19-cv-1013, 2020 WL 2306434, at *8\n\n(S.D.N.Y. May 7, 2020) (citing Stratte-McClure, 776 F.3d at 103), aff\u2019d, 844 F. App\u2019x 385 (2d Cir.\n\n2021). Lead Plaintiffs must also allege that the omission in violation of Item 303 was material,\n\nwhich requires \u201cbalancing . . . both the indicated probability that the event will occur and the\n\n\n\n 49\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 50 of 52\n\n\n\nanticipated magnitude of the event in light of the totality of the company activity.\u201d Stratte-McClure,\n\n776 F.3d at 102\u201303 (internal quotation marks omitted).\n\n Although the amended complaint does not identify the particular filing that Lead Plaintiffs\u2019\n\nchallenge, Qudian only filed one Form 20-F with the SEC during the Class Period. See Am. Compl.\n\n\u00b6 228. The Form 20-F was filed on April 15, 2019. Id. Lead Plaintiffs allege that Qudian violated\n\ntwo disclosure obligations. First, Lead Plaintiffs assert that Defendants had a duty \u201cto disclose the\n\nrisk and uncertainty that its fundamental business model in its core loan book violated Chinese\n\nregulations and might have to be shut-down because of regulatory issues.\u201d Am. Compl. \u00b6 370.\n\nHowever, Qudian\u2019s Form 20-F contained the following disclosures:\n\n Among other things, Circular 141 provides restrictions on banks\u2019 collaboration with\n third parties in cash loan business. Pursuant to Circular 141, a bank may not outsource\n its core business functions, such as credit assessment and risk management, to third\n parties. Circular 141 also prohibits a bank participating in loan facilitation transactions\n from accepting credit enhancement services from a third party which has not obtained\n any license or approval to provide guarantees, including credit enhancement service in\n the form of a commitment to assume default risks. As Circular 141 is relatively new,\n it remains uncertain how the regulatory authorities will interpret and enforce the\n requirements. We have entered into arrangements with several banks which directly\n fund credit drawdowns to borrowers. We refer to such banks qualified credit\n applications from borrowers, including our assessment of their credit profiles and our\n suggested credit limits. They will then review the credit applications and approve\n credit for drawdown.\n\n ....\n\n We have entered into cooperative agreements with banks in China and started to fund\n credit drawdowns to borrowers under such arrangements in April 2017. The banks\n are able to utilize our data-driven credit assessment model to screen potential\n borrowers who are traditionally underserved by banks due to the lack of credit data.\n Under such agreements, we refer to such banks qualified credit applications from\n borrowers, including our assessment of their credit profiles and our suggested credit\n limits. They will then review the credit applications independently in accordance with\n their credit assessment standards and approve credit for drawdown.\n\nKreissman Decl., Ex. K at 12\u201313, 63; see also Am. Compl. \u00b6\u00b6 66\u201367. Lead Plaintiffs have not\n\nadequately alleged that these disclosures were insufficient. Further, as discussed, the amended\n\ncomplaint does not adequately plead scienter with respect to Lead Plaintiffs\u2019 allegations regarding\n\n\n 50\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 51 of 52\n\n\n\nCircular 141. \u201cThe failure to plead scienter mandates dismissal of Plaintiff\u2019s claim under Item 303.\u201d\n\nIn re Fed Ex Corp. Sec. Litig., 517 F. Supp. 3d 216, 239 (S.D.N.Y. 2021).\n\n Second, Lead Plaintiffs broadly allege that Defendants had a duty \u201cto disclose the true nature\n\nof Open Platform and the trends of which borrowers were populating Open Platform and the core\n\nloan book.\u201d Am. Compl. \u00b6 371. Beyond stating that there were trends that Qudian had the duty to\n\ndisclose, Lead Plaintiffs do not identify the nature of the alleged trends or explain why the alleged\n\ntrends were reasonably likely to have a material impact on Qudian\u2019s financial condition. Lead\n\nPlaintiffs also fail to allege that the unspecified omitted information was material under the\n\n\u201cprobability/magnitude test\u201d for assessing Item 303 violations. See Stratte-McClure, 776 F.3d at 103.\n\nAs discussed above, Lead Plaintiffs\u2019 theory that the core loan book would suffer because of Open\n\nPlatform is premised on hindsight. Accordingly, Lead Plaintiffs\u2019 claims under Item 5 of Form 20-F\n\nare dismissed.\n\n B. Control Person Liability Under Section 20(a)\n\n Under Section 20(a) of the Securities Exchange Act, \u201c[e]very person who, directly or\n\nindirectly, controls any person liable under [the Exchange Act and its regulations] shall also be liable\n\njointly and severally with and to the same extent as such controlled person to any person to whom\n\nsuch controlled person is liable . . . unless the controlling person acted in good faith and did not\n\ndirectly or indirectly induce the act or acts constituting the violation or cause of action.\u201d 15 U.S.C.\n\n\u00a7 78t(a). \u201cAny claim for \u2018control person\u2019 liability under \u00a7 20(a) of the Exchange Act must be\n\npredicated on a primary violation of securities law.\u201d Pac. Inv. Mgmt. Co. LLC v. Mayer Brown LLP,\n\n603 F.3d 144, 160 (2d Cir. 2010). To plausibly allege a claim for control person liability, a plaintiff\n\nmust allege \u201c(1) a primary violation by the controlled person, (2) control of the primary violator by\n\nthe defendant, and (3) that the defendant was, in some meaningful sense, a culpable participant in\n\nthe controlled person\u2019s fraud.\u201d Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC, 750 F.3d 227,\n\n236 (2d Cir. 2014). Because Lead Plaintiffs failed to adequately plead a violation of Section 10(b) or\n\n 51\n\f Case 1:20-cv-00577-GHW Document 61 Filed 09/13/22 Page 52 of 52\n\n\n\nRule 10b-5, their Section 20(a) claims also fail. See Gray v. Alpha & Omega Semiconductor Ltd., 2021\n\nWL 4429499, at *12 (S.D.N.Y. Sept. 27, 2021).\n\n C. Leave to Amend\n\n Lead Plaintiffs are granted leave to amend their complaint. In this circuit, \u201c[i]t is the usual\n\npractice upon granting a motion to dismiss to allow leave to replead.\u201d Cortec Indus., Inc. v. Sum\n\nHolding L.P., 949 F.2d 42, 48 (2d Cir. 1991); see also Fed. R. Civ. P. 15(a)(2) (\u201cThe court should freely\n\ngive leave [to amend] when justice so requires.\u201d). \u201cComplaints dismissed under Rule 9(b) are almost\n\nalways dismissed with leave to amend,\u201d unless the plaintiff has had a prior opportunity to amend its\n\ncomplaint or the allegations were made after full discovery in a related case. Luce v. Edelstein, 802\n\nF.2d 49, 56 (2d Cir. 1986) (quotation omitted). Although Lead Plaintiffs have already amended their\n\ncomplaint, they have not yet had an opportunity to do so in response to an opinion of the Court.\n\nAccordingly, the Court does not conclude that allowing them to amend once again would be futile.\n\nIV. CONCLUSION\n\n Defendants\u2019 motion to dismiss the amended complaint is GRANTED. Lead Plaintiffs are\n\ngranted leave to amend their complaint. Lead Plaintiffs are directed to file any amended complaint\n\nwithin thirty (30) days of the date of this order.\n\n The Clerk of Court is directed to terminate the motion pending at Dkt. No. 54.\n\n SO ORDERED.\n\n Dated: September 13, 2022 _____________________________________\n New York, New York GREGORY H. WOODS\n United States District Judge\n\n\n\n\n 52\n\f","ocr_status":2,"date_upload":"2022-09-13T08:11:50.124188-07:00","document_number":"61","attachment_number":null,"pacer_doc_id":"127031937415","is_available":true,"is_free_on_pacer":true,"is_sealed":null,"document_type":1,"description":"Memorandum & Opinion","acms_document_guid":""}],"date_created":"2022-09-13T08:10:16.611652-07:00","date_modified":"2023-05-30T08:47:59.170845-07:00","date_filed":"2022-09-13","time_filed":null,"entry_number":61,"recap_sequence_number":"2022-09-13.001","pacer_sequence_number":224,"description":"MEMORANDUM OPINION AND ORDER re: 54 MOTION to Dismiss Plaintiffs' Amended Class Action Complaint. filed by Qudian Inc., Carl Yeung, Min Luo. Defendants' motion to dismiss the amended complaint is GRANTED. Lead Plaintiffs are granted leave to amend their complaint. Lead Plaintiffs are directed to file any amended complaint within thirty (30) days of the date of this order. The Clerk of Court is directed to terminate the motion pending at Dkt. No. 54. (Signed by Judge Gregory H. Woods on 9/13/2022) (rro) (Entered: 09/13/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/193894302/","id":193894302,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/199526807/","id":199526807,"tags":[],"absolute_url":"","date_created":"2022-04-29T08:10:48.146667-07:00","date_modified":"2022-04-29T08:10:48.149629-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Notice of Redesignation to Magistrate Judge","acms_document_guid":""}],"date_created":"2022-04-29T08:10:48.142883-07:00","date_modified":"2022-04-29T08:10:48.142899-07:00","date_filed":"2022-04-29","time_filed":null,"entry_number":null,"recap_sequence_number":"2022-04-29T13:34:30+00:00.001","pacer_sequence_number":null,"description":"","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/190240772/","id":190240772,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/195819710/","id":195819710,"tags":[],"absolute_url":"/docket/16738894/60/greco-v-qudian-inc/","date_created":"2022-03-17T12:08:19.836985-07:00","date_modified":"2023-05-30T08:47:59.139719-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"60","attachment_number":null,"pacer_doc_id":"127030883809","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Letter","acms_document_guid":""}],"date_created":"2022-03-17T12:08:19.830954-07:00","date_modified":"2023-05-30T08:47:59.070084-07:00","date_filed":"2022-03-17","time_filed":null,"entry_number":60,"recap_sequence_number":"2022-03-17.001","pacer_sequence_number":220,"description":"LETTER addressed to Judge Gregory H. Woods from James G. Kreissman dated March 17, 2022 re: Plaintiffs' March 10, 2022 Notice of Supplemental Authority. Document filed by Min Luo, Qudian Inc., Carl Yeung..(Kreissman, James) (Entered: 03/17/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/189644662/","id":189644662,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/195214854/","id":195214854,"tags":[],"absolute_url":"/docket/16738894/59/greco-v-qudian-inc/","date_created":"2022-03-10T11:09:12.103549-08:00","date_modified":"2026-07-02T03:17:19.658207-07:00","sha1":"8bbcf579da7ef526af9da4289876a7041e098099","page_count":2,"file_size":215936,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.59.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.59.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 59 Filed 03/10/22 Page 1 of 2\n\n\n\n\n Michael Grunfeld\n Partner\n\n\n\n\nVIA ECF March 10, 2022\n\nThe Honorable Gregory H. Woods\nUnited States District Court\nSouthern District of New York\nDaniel Patrick Moynihan United States Courthouse\n500 Pearl Street, Room 2260\nNew York, NY 10007\n\nRE: Di Benedetto v. Qudian Inc., et al., No. 1:20-cv-00577-GHW\n\nDear Judge Woods:\n\n We represent Co-Lead Plaintiffs Juan Pablo di Benedetto and Galessi Holding Corp and Pablo\nGreco (collectively, \u201cPlaintiffs\u201d), in the above captioned securities class action. Defendants moved to\ndismiss Plaintiffs\u2019 Amended Class Action Complaint (\u201cComplaint\u201d) on September 4, 2020 (ECF No.\n54) and that motion is pending.\n\n Plaintiffs write to notify the Court of supplemental authority relevant to this action.1 On February\n16, 2022, Justice Andrew Borrok of the Commercial Division of the New York Supreme Court issued a\ndecision denying the defendants\u2019 motion to dismiss in France v. Jiayin Group, Inc., et al., Index No.\n654398/2020 (N.Y. Sup. Ct.) (attached as Exhibit A). Jiayin addressed a financial technology company\nin China that misrepresented in its offering materials how it was changing its business model because of\nChina\u2019s strict regulations of peer-to-peer lending services. The Court ruled that the complaint adequately\npled a claim based on the allegation \u201cthat the offering documents were materially misleading because\nthe Defendants told the investors that they were planning on exploiting a business opportunity in the P2P\nbusiness market and that they did not believe that they would be affected by Circular 175 when in reality\nthey believed the opposite and secretly had a plan to transform the Company into a fintech company as\nsoon as they raised the money.\u201d (Ex. A at 11).\n\n\n\n1\n Plaintiffs also note Qudian\u2019s recent announcement, on February 10, 2022, that it \u201creceived a letter from the New York Stock\nExchange (the \u2018NYSE\u2019) dated February 7, 2022, notifying the Company that it is below the NYSE's continued listing\nstandards.\u201d (Exhibit B, attached). This notification resulted from the price of Qudian\u2019s American depositary shares (\u201cADSs\u201d)\nfalling below $1.00 on average over a 30 trading-day period. (Id.). If Qudian does not cure this defect withing six months,\n\u201cthe NYSE will commence suspension and delisting procedures.\u201d (Id.). Should Qudian\u2019s financial health continue to\ndeteriorate, it might make it more difficult for Plaintiffs and the proposed Class to recover for Defendants\u2019 fraud.\n 600 Third Avenue, New York, New York 10016 tel: 212.661.1100 www.pomerantzlaw.com\n\n NEW YORK CHICAGO LOS ANGELES PARIS\n\f Case 1:20-cv-00577-GHW Document 59 Filed 03/10/22 Page 2 of 2\n\n\n\n\nHon. Gregory H. Woods\nMarch 10, 2022\nPage 2\n The Complaint here similarly alleges that Defendants misrepresented how Qudian\u2019s business\nresponded to China\u2019s recent regulations on financial technology and internet lending companies. For\nexample, the Complaint alleges that \u201c[b]y the end of 2018, China\u2019s strict regulation of the online\nconsumer lending industry\u2014including Circular 141, which Chinese regulators issued in December\n2017\u2014posed an existential threat to Qudian\u2019s core loan book.\u201d (Complaint \u00b6 3). In response, Qudian\nshifted its best borrowers from the core loan book \u201cto the more regulatory-compliant Open Platform\nbusiness.\u201d (Id.). But rather than tell investors the true nature of Qudian\u2019s new Open Platform, which was\ncausing a deterioration in credit quality by cannibalizing the highest-quality borrowers from the core\nloan book, Defendants misrepresented Open Platform as a great new business initiative. Defendants\nfalsely described Qudian\u2019s core loan book as continuing to grow alongside Open Platform while\nmaintaining conservative lending standards. (Id. \u00b6\u00b6 4-17).\n\n The Jiayin decision, in addition to all of the authority that Plaintiffs cite in their Opposition to\nDefendants\u2019 Motion to Dismiss (ECF No. 57), supports Plaintiffs\u2019 claims and the denial of Defendants\u2019\nMotion to Dismiss.\n\nRespectfully submitted,\n\n /s/ Kim E. Miller____________ /s/ Michael Grunfeld____________\n Kim E. Miller Michael Grunfeld\n\n KAHN SWICK & FOTI, LLC POMERANTZ LLP\n 250 Park Avenue, Suite 2040 600 Third Avenue, 20th Floor\n New York, NY 10177 New York, NY 10016\n Telephone: (212) 696-3730 Telephone: (212) 661-1100\n Facsimile: (504) 455-1498 Facsimile: (212) 661-8665\n Email: kim.miller@ksfcounsel.com Email: mgrunfeld@pomlaw.com\n\n Co-Lead Counsel for Co-Lead Plaintiff Co-Lead Counsel for Co-Lead Plaintiff Juan\n Pablo Greco Pablo di Benedetto and Galessi Holding Corp\n\n\n\n\n 600 Third Avenue, New York, New York 10016 tel: 212.661.1100 www.pomerantzlaw.com\n\n NEW YORK CHICAGO LOS ANGELES PARIS\n\f","ocr_status":1,"date_upload":"2026-07-01T06:51:25.160771-07:00","document_number":"59","attachment_number":null,"pacer_doc_id":"127030841565","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Notice (Other)","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/484718420/","id":484718420,"tags":[],"absolute_url":"/docket/16738894/59/1/greco-v-qudian-inc/","date_created":"2026-07-01T06:51:15.188372-07:00","date_modified":"2026-07-02T03:18:57.787441-07:00","sha1":"66c964bdc26f2e2c4c147631ac288df75179372b","page_count":13,"file_size":1411902,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.59.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.59.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 1 of 13\n\n\n\n\n EXHIBIT A\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 2 of 13\n\n\n\n\nSUPREME COURT OF THE STATE OF NEW YORK\nCOUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53\n----------------------------------------------------------------------------------- X\n\n TODD FRANCE, INDEX NO. 654398/2020\n\n Plaintiff,\n MOTION DATE\n -v-\n MOTION SEQ. NO. 001\n JIAYIN GROUP INC., DINGGUI YAN, CHUNLIN FAN,\n JIONG FENG, YIFANG XU, ROTH CAPITAL PARTNERS,\n LLC, SHENWAN HONGYUAN SECURITIES (H.K.) DECISION + ORDER ON\n LIMITED MOTION\n Defendant.\n----------------------------------------------------------------------------------- X\n\nHON. ANDREW BORROK:\n\nThe following e-filed documents, listed by NYSCEF document number (Motion 001) 27, 28, 29, 30, 31,\n32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58,\n59, 60, 61, 62, 63, 64, 65, 79, 80, 81, 83, 88\nwere read on this motion to/for DISMISS .\n\nJiayin Group Inc. (the Company), Roth Capital Partners, LLC (the Underwriter), Jiong Feng,\n\n the Company, the Underwriter, Mr. Feng and Mr. Xu, hereinafter, collectively,\n\nthe Defendants) motion to dismiss the putative class action alleging violations of the Securities\n\nAct of 1933 (the 1933 Act) pursuant to CPLR 3016(b) and 3211(a)(1), (a)(5), and (a)(7) must be\n\ndenied.\n\n\n\nSimply put, the well pled complaint adequately alleges that the Defendants violated Sections 11\n\nand 15 of the 1933 because the Defendants offered and sold American Depository Shares\n\n(ADSs) based on the Company having a particular business model and touting certain\n\ncompetitive advantages when, in fact, they knew that they did not have those competitive\n\nadvantages and did not intend to maintain that business because of a known regulatory change\n\nthat was being promulgated (In re Douyu Intl. Holdings Ltd. Sec. Litig., 2021 WL 979297, 2021\n 654398/2020 vs. Page 1 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 3 of 13\n\n\n\n\nNY Slip Op 30822[U], *1, *2 [Sup Ct, NY County 2021]) which they said would not affect\n\nthem. This, the plaintiffs allege was false and materially misleading i.e., the defendants\n\nbelieved that such regulations would affect them and, without prompting, intended to transform\n\nits business into a different business because of that very regulatory change at the time of the\n\nIPO (hereinafter defined).\n\n\n\n . The Defendants told\n\nthe market in the May 10, 2019 Initial Public Offering (the IPO) documents that the business\n\nwas well positioned to capitalize on the fewer number of market participants in the peer-to-peer\n\n(P2P) business sector (which was its core business) as a result of Circular 175 (NYSCEF Doc.\n\nNo. 33, at 22) when, in fact, like other P2P businesses, the Company intended to transform and\n\nexit the P2P market in order to survive, have fewer funding sources and rely principally on\n\ninstitutional investors. That the government did not take action against the Company and that\n\nthere were no other intervening events between when the IPO occurred and when the Company\n\nalmost immediately following such IPO announced the beginning of its metamorphose is prima\n\nfacie evidence that this was pre-planned at the time of the IPO. Following the IPO, whenever the\n\nDefendants slow rolled information about this allegedly pre-IPO planned transmogrify, the stock\n\nfurther tanked. This is sufficient to state a claim under the 1933 Act.\n\n\n\nMore specifically, the Defendants argument that they disclosed Circular 175 in their offering\n\ndocuments, or that the offering documents must be evaluated at the time they were issued and\n\nnot in hindsight, or that they indicated that they would have to respond to changes in the\n\n\n\n\n 654398/2020 vs. Page 2 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 4 of 13\n\n\n\n\nregulatory environment, or that they may have to in the future reevaluate Circular 175 such that\n\ndismissal is required, while all true, entirely misses the point.\n\n\n\nThe gravamen of the complaint is that the offering documents misled investors by telling them\n\nthat Circular 175 would not harm and in fact might help their P2P business and that the\n\nCompany made changes in its fundamental business model without any prompting from\n\ngovernment authority or material change in the public information about Circular 175 almost\n\nimmediately following the IPO by executing a pre-IPO undisclosed plan to transform the\n\nCompany from a P2P business (which is what they sold investors) into a fintech company. This\n\nis not what was sold to the investors in the IPO pursuant to offering documents. It is the\n\nopposite. As such, viewing the offering documents at the time they were issued and not in\n\nhindsight, the complaint states a claim under the 1933 Act (In re Netshoes Sec. Litig., 68 Misc.3d\n\n788 [Sup Ct, NY County 2020]; In re PPDAI Group Sec. Litig., 66 Misc.3d 1226[A] [Sup Ct,\n\nNY County 2020]; Hoffman v AT&T Inc., 67 Misc.3d 1212[A] [Sup Ct, NY County 2020].\n\n\n\n\n The Relevant Facts and Circumstances\n\nThe Company was founded in China in 2011 as a P2P company that connected individual\n\nborrowers and individual lenders, targeting borrowers who were underserved by institutional\n\nfunding sources. As relevant, the Company began talks with U.S. regulators regarding an IPO in\n\n2018, and conducted its IPO on May 10, 2019. The Company filed a Prospectus (the\n\nProspectus, NYSCEF Doc. No. 33), which included a previous registration statement and\n\namendments made after communications with the Securities and Exchange Commission (the\n\n 654398/2020 vs. Page 3 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 5 of 13\n\n\n\n\nSEC). One such amendment was made in response to the Circular on The Classification and\n\nDisposal of Risks of Online Lending Institutions and Risk Prevention (Circular 175) which\n\nmandated that P2P lenders not demonstrate any high-risk characteristics and be designated a\n\n Normal Marketplace .\n\n\n\nCircular 175 classified P2P marketplaces as either (i) marketplaces on which investors were not\n\n\n\ninvolved in such incidents and were either (a) shell companies with zero loan balance or loan\n\norigination for more than three months, (b) small-scale marketplaces, or (c) large-scale\n\nmarketplaces (NYSCEF Doc. No. 33, at 21). Circular 175 also set forth factors that would\n\nconsider P2P lenders as high risk, including marketplaces that fund loans to themselves or\n\nfacilitate sham loans, marketplaces with unclear fund flows, marketplaces with negative\n\npublicity and complaints, and marketplaces that refuse or are reluctant to rectify non-compliant\n\noperations (id.).\n\n\n\nIn the Prospectus, the Company indicated that it did not believe it would fall into category (i) or\n\n(ii)(a) above (id., at 22). The Prospectus also stated that the Company anticipated it would be\n\nconsidered a large-scale marketplace and that it did not possess any high-risk characteristics\n\n(id.). This according to the plaintiffs was false and materially misleading:\n\n\n\n under considerable regulatory pressure to cease operating as a P2P business. But\n an investor would not have known that from reading any of the materials the\n Company submitted to the SEC in connection with the IPO in fact, investors\n were led to believe that, despite the regulations, the Company was staying the\n course. In fact, when the SEC specifically requested Jiayin expand its\n disclosure on the Circular on the Classification and Disposal of Risks of Online\n 654398/2020 vs. Page 4 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 6 of 13\n\n\n\n\n of these regulations, the Company stated in a February 22, 2019\n would not be materially and adversely impacted\n by Circ That same statement was later incorporated into the prospectus filed\n with the SEC\n\n(NYSCEF Doc. No. 16, \u00b6 6 [emphasis added).\n\n\n\nIn the offering documents, the Company explained that given Circular 175 and the decreasing\n\nnumber of market participant participant. In\n\nfact, in the Prospectus, the Defendants\n\nMarketplace, -risk characteristics, and that Circular 175 would\n\n\n\nNo. 33, at 22).\n\n\n\nIn other words, the Company sold itself to the investors in the IPO as a Normal Marketplace\n\nlender who would not only be unaffected by Circular 175 but also was well positioned to take\n\nadvantage of a real business opportunity i.e., the opportunity to buy into a business where the\n\nnumber of market participants was shrinking and where demand remained high. However, as the\n\nPlaintiffs allege:\n\n\n 7. Despite these assurances, the Company was materially impacted by Circular\n 175. The regulatory headwinds were much stronger than it disclosed.\n\n 8. Circular 175 mandated that the only P2P lenders that could stay in business had\n to be so-called normal marketplaces that had not demonstrated any high-risk\n\n that it believed it would be considered a Normal Marketplace.\n\n 9. However, Jiayin had many high-risk characteristics. For example, the\n organization had massive negative publicity and complaints, a history of failure to\n\n 654398/2020 vs. Page 5 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 7 of 13\n\n\n\n\n comply with mandated fee maximums and a recurring problem with its\n delinquency rates.\n\n 10. Numerous articles were written about problems with Jiayin, including articles\n written about (i) its abusive collection methods; and (ii) its over-charging on fees.\n\n 11. The Company had a recent history of flouting Chinese rules and regulations\n concerning the maximum amount of fees it could charge for its loans. While P2P\n lenders were only allowed to charge a maximum of 36% in fees, and Jiayin\n reported in its Offering Documents it was in compliance with that limit, it was\n often in violation of the cap. A civil court had in fact recently found Jiayin was\n charging over 50% in fees.\n\n 12. Circular 175 also codified a long-discussed policy requiring each business\n reduce the number of lenders, the scale of business and the number of borrowers\n\n\n 13. The Offering Materials did not properly disclose what impact complying with\n\n\n\n(NYSCEF Doc. No. 16, \u00b6\u00b6 7-13).\n\n\n\nAdditionally, the Defendants touted the strength of its business model based on its relationship\n\nwith its affiliate, Shanghai Caiyin Asset Management Co., Ltd. (Shanghai Caiyin). Shanghai\n\nCaiyin provided post-origination loan management services (NYSCEF Doc. No. 33, at 4), was\n\nused by the Company as part of its investor assurance program to provide guarantees to investors\n\nwho invested in unsecured loans (id., at 107), and\n\nfund used to repay investors for loans that were past due (id., at 156).\n\n\n\nTo be sure, the Company disclosed Circular 175 in the offering documents. In fact, it disclosed\n\nthat there were uncertainties about the meaning and application of Circular 175 because it had\n\nnot been officially issued by any government agency (NYSCEF Doc. No. 33, at 22). Based on\n\nthese uncertainties, the Company indicated that it would be materially adversely affected if it\n 654398/2020 vs. Page 6 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 8 of 13\n\n\n\n\nwere ultimately deemed to not be a Normal Marketplace (id.). The Prospectus further indicated\n\nthat the Company had not received any notices from the government requiring it to set limits on\n\nits loan balance or number of investors. Significantly, the Prospectus further provided that,\n\nrelying on advice of counsel, the Company believed that Circular 175 would not have a\n\nmaterial adverse effect on them. (id.) The Plaintiffs allege, however:\n\n\n\n generic risk warnings typical to this type of business, behind the scenes the\n Company was preparing to totally transform its business model away from\n being a P2P lender. Its violations of Chinese rules and regulations made it\n unlikely to be officially categorized as a Normal Marketplace. Additionally, its\n financial figures reported in the Offering Materials would inevitably drop because\n of -in-place Three\n Drops Policy and certain inevitable decisions regarding business combinations\n\n(NYSCEF Doc. No. 16, \u00b6 14).\n\n\n\nWith respect to these disclosures however, it is undisputed that none of these risks came to pass\n\nor that any of these risks caused the Company to fundamentally begin changing its business\n\nwithin one month of the IPO. The government did not deem the Company not to be a Normal\n\nMarketplace. The Company did not receive or respond to any notice from the government\n\nrequiring it to set limits on its loan balances or number of investors. In fact, as alleged, nothing\n\nthat the Perspective disclosed as a potential risk associated with Circular 175 came to pass.\n\nInstead, as alleged, the Defendants unilaterally had decided prior to the IPO that because of\n\nCircular 175, they would need to fundamentally change the business and they began to execute\n\ntheir plan soon after they raised the investors money based on the false promises of capitalizing\n\non shrinking competition in the P2P business model.\n\n\n\n\n 654398/2020 vs. Page 7 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 9 of 13\n\n\n\n\nThis carefully considered plan was only disclosed to investors after the IPO and in dribs and\n\ndrabs. For example, approximately one month after the IPO, on the June 11, 2019 earnings call,\n\nMr. Yan announced that the Company was ramping up its marketing efforts to institutional\n\nlenders (NYSCEF Doc. No. 42, at 2). On an earnings call on September 4, 2019, Shelley Bai,\n\n s] focus aggressively to\n\n As alleged in\n\nthe complaint:\n\n\n 15. Almost immediately after the Company went public, Defendant Dinggui\n Yan ( Yan ) announced on a June 11, 2019 earnings call that the Company\n was ramping up [its] marketing to institutional lenders. In other words, the\n Company was changing its business model entirely. While it told the public in\n the documents it submitted in conjunction with the IPO that its P2P model was\n succeeding, the Company omitted the truth. It could not survive as a P2P\n company. However, rather than disclose that right then, Defendant Chunlin\n Fan ( Fan ) stressed that the major hit from uncertainty [was] behind the\n Company and he expected conditions to stabilize.\n\n\n deteriorate, Yan again referenced that the Company was shifting its funding from\n individuals toward institutions. He blamed the Three Drops Policy for the\n\n Offering Materials even though that policy was not a new one; it was codified\n before the IPO\n\n (NYSCEF Doc. No. 16, \u00b6\u00b6 15-16 [emphasis added]).\n\n\n\nOn September 16, 2019, remarkably, the Company announced that Shanghai Caiyin the\n\ncompany it had told the marketplace in the IPO in May 2019 (i.e., a few months earlier) provided\n\na competitive advantage -- would no longer be an affiliated entity of the Company (NYSCEF\n\nDoc. No. 44). This was without any prompting from the government or the market and was only\n\ndone because\n\n 654398/2020 vs. Page 8 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 10 of 13\n\n\n\n\ninstitutional investors and its pre-IPO secret plan to transform from a P2P company to a fintech\n\ncompany. This caused the stock to drop another 4.35% (NYSCEF Doc. No. 16, \u00b6\u00b6 17-18).\n\n\n\nOn November on an\n\nearnings call\n\ntransition our funding sources from the individual funding sources towards the institutional\n\nfunding is caused the stock to drop further -- to $7.50.\n\n\n\nSignificantly, on April 1, 2020, Ms. Bai admitted right after the IPO, we started\n\n , at 5 [emphasis\n\nadded]). The Company released its unaudited financial results for the first quarter of 2020 on\n\nJune 11, 2020 (NYSCEF Doc. No. 48), and the stock price dropped to $3.90:\n\n\n 19. On November 26, 2019, during pre-market hours, Jiayin issued a press\n\n\n - origination services was RMB59.3 million\n (US$8.3 milli\n - consolidated\n affiliated company Shanghai Caiyin . . . which provided certain post-origination\n ngs call that same day, Defendant Yifang Xu stated\n -to-\n\n transition was notably absent in the Offering Documents just months prior,\n despite the fact that the relevant regulations had not changed.\n\n\n 1.32%, to close at $7.50 per share on November 26, 2019.\n\n 21. On April 1, 2020, Jiayin\n financial results for the fourth quarter and full year 2019. That press release\n\n volume[] was RMB2,900 million (US$417 million), representing a decrease of\n\n 654398/2020 vs. Page 9 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 11 of 13\n\n\n\n\n million), representing a decrease of 51.0% from the same period of 2018,\n primari -\n origination services was RMB48.6 million (US$7.0 million), representing a\n\n decreased loan origination as well as the cease of post-origination loan services\n\n related to the same metrics for full year 2019\n\n(NYSCEF Doc. No. 16, \u00b6\u00b6 19-21).\n\n\n\nFinally, on September 2, 2020, Ms. Bai admitted that the Company had successfully executed its\n\nplan to transform from a P2P company to a financial technology company (NYSCEF Doc. No.\n\n49, at 4). The stock price dropped to $2.90 per share.\n\n\n\n\n Discussion\n\nOn a motion to dismiss pursuant to CPLR 3211, the court must afford the pleading a liberal\n\nconstruction, accepting the facts as alleged as true and accord the plaintiffs the benefit of every\n\npossible favorable inference, determining only whether the facts as alleged fit within any\n\ncognizable legal theory (Leon v Martinez, 84 NY2d 83, 87-88 [1994]).\n\n\nIt is well settled that to survive a motion to dismiss brought pursuant to CPLR 3211, a claim\n\nbrought under the 1933 Act need not satisfy the heightened pleading standard of CPLR 3016 (b)\n\nand must only satisfy CPLR 3013:\n\n\n In our view, claims based on the Securities Act should not be seen through the\n prism of fraud and/or misrepresentation. This approach is consistent with the one\n taken by federal courts in interpreting similar claims brought under the Securities\n Act. Federal courts have held that since fraud is not an element or a prerequisite\n to such a claim, ordinary notice pleading standards apply. We are persuaded by\n this reasoning and hold that the heightened pleading standard should not have\n 654398/2020 vs. Page 10 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 12 of 13\n\n\n\n\n b\n common-law fraud\n\n (Feinberg v Marathon Patent Group Inc., 193 AD3d 568, 570-571 [1st Dept 2021]; In re\n\nNetshoes Sec. Litig., 68 Misc.3d at 794-795; In re PPDAI Group Sec. Litig., 66 Misc.3d\n\n1226[A], at *6; In re Uxin Limited Sec. Litig., 2020 WL 1146636, at *6 [Sup Ct, NY County\n\n2020]).1\n\n\nSection 11 of the Securities Act is a strict liability statute that holds issuers liable for the contents\n\nof a registration statement, both for what it includes and for what it omits (Omnicare, Inc. v\n\nLaborers Dist. Council Const. Industry Pension Fund, 575 US 175, 186-191 [2015]; In re Uxin\n\nLimited Sec. Litig., 2020 WL 1146636 at *7). To be actionable, statements or omissions must be\n\nsupported by concrete allegations that the issuer knew that such statements or omissions were\n\nfalse or misleading when made (In re Netshoes Sec. Litig. 64 Misc.3d 926, 932 [Sup Ct, NY\n\nCounty 2019]).\n\n\nAs discussed above, the core of the plaintiffs allegations are that the offering documents were\n\nmaterially misleading because the Defendants told the investors that they were planning on\n\nexploiting a business opportunity in the P2P business market and that they did not believe that\n\nthey would be affected by Circular 175 when in reality they believed the opposite and secretly\n\nhad a plan to transform the Company into a fintech company as soon as they raised the money.\n\nThis is sufficient to ground liability under the 1933 Act at this stage of the pleadings (In re\n\nDouyu Intl. Holdings Ltd. Sec. Litig., 2021 WL 979297, 2021 NY Slip Op 30822[U], *1, *2 [Sup\n\nCt, NY County 2021]). It does not matter that the Defendants disclosed Circular 175 or that they\n\n\n\n\n1\n For completeness, were CPLR 3016(b) to apply, the well pled complaint satisfies this standard as well.\n 654398/2020 vs. Page 11 of 12\n Motion No. 001\n\f Case 1:20-cv-00577-GHW Document 59-1 Filed 03/10/22 Page 13 of 13\n\n\n\n\ndisclosed that they may have to reevaluate the impact of Circular 175 or that they may have to\n\nrespond to government action in connection with Circular 175. As alleged, none of that\n\nhappened and the plan was in place prior to the IPO and inapposite to what the Defendants told\n\nthe investors. Thus, the motion to dismiss must be denied.\n\n\nThe Defendants motion to dismiss the complaint as against the Underwriter pursuant to 15 USC\n\n\u00a777m must be granted. The claims are untimely. Additionally, the court notes that the plaintiffs\n\n\n\n\nTo state a claim under Section 15,\n\n In re Netshoes Sec. Litig., 68\n\nMisc.3d at 805). The well pled complaint satisfies these requirements (NYSCEF Doc. No. 16,\n\n\u00b6\u00b6 150-152). Thus, the Section 15 claims are also not dismissed.\n\n\nIt is hereby ORDERED that the Defendants motion to dismiss is denied except as to the\n\nUnderwriter; and it is further\n\n\nORDERED that the claims against the Underwriter are dismissed.\n\n\n\n\n 2/16/2022\n DATE ANDREW BORROK, J.S.C.\n CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION\n\n GRANTED X DENIED GRANTED IN PART OTHER\n\n APPLICATION: SETTLE ORDER SUBMIT ORDER\n\n CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE\n\n\n\n\n 654398/2020 vs. Page 12 of 12\n Motion No. 001\n\f","ocr_status":1,"date_upload":"2026-07-01T06:51:49.575659-07:00","document_number":"59","attachment_number":1,"pacer_doc_id":"127030841566","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit A - 2/16/22 Decision Order on Motion","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/484718421/","id":484718421,"tags":[],"absolute_url":"/docket/16738894/59/2/greco-v-qudian-inc/","date_created":"2026-07-01T06:51:15.228563-07:00","date_modified":"2026-07-02T02:36:31.650094-07:00","sha1":"3b149482cbf34191687d2db74be954acc36775ac","page_count":3,"file_size":55285,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.59.2.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.59.2.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 1:20-cv-00577-GHW Document 59-2 Filed 03/10/22 Page 1 of 3\n\n\n\n\n EXHIBIT B\n\f Case 1:20-cv-00577-GHW Document 59-2 Filed 03/10/22 Page 2 of 3\n\n\n\n\nQudian Inc. Receives Notice Regarding NYSE Continued Listing Standards\nFebruary 10, 2022\n\nXIAMEN, China, Feb. 10, 2022 /PRNewswire/ -- Qudian Inc. (\"Qudian\" or the \"Company\") (NYSE: QD), a leading technology platform empowering the\nenhancement of the online consumer finance experience in China, today announced that it has received a letter from the New York Stock\nExchange (the \"NYSE\") dated February 7, 2022, notifying the Company that it is below the NYSE's continued listing standards due to the trading price\nof Qudian's American depositary shares (the \"ADSs\").\n\nPursuant to Section 802.01C of the NYSE's Listed Company Manual, a company will be considered to be below compliance standards if the average\nclosing price of its security as reported on the consolidated tape is less than US$1.00 over a consecutive 30 trading-day period. The Company has six\nmonths (\"the Cure Period\") following receipt of the notice to regain compliance with the minimum share price requirement. The Company can regain\ncompliance at any time during the Cure Period if on the last trading day of any calendar month during the Cure Period the Company has a closing\nshare price of at least US$1.00 per ADS and an average closing share price of at least US$1.00 per ADS over the 30 trading-day period ending on the\nlast trading day of that month. In the event that at the expiration of the six-month Cure Period, both a US$1.00 per ADS closing share price on the last\ntrading day of the Cure Period and a US$1.00 per ADS average closing share price over the 30 trading-day period ending on the last trading day of the\nCure Period are not attained, the NYSE will commence suspension and delisting procedures.\n\nTo address this issue, the Company intends to monitor the market conditions of its listed securities and is still considering its options. The Company\nhas notified the NYSE on February 10, 2022 of its intent to cure the deficiency. During the Cure Period, the Company's ADSs will continue to be listed\nand traded on the NYSE, subject to its compliance with other NYSE continued listing standards and other rights of the NYSE to delist the ADSs. The\nNYSE notification does not affect the Company's business operations, its U.S. Securities and Exchange Commission reporting requirements or\ncontractual obligations.\n\nAbout Qudian Inc.\n\nQudian Inc. (\"Qudian\") is a leading technology platform empowering the enhancement of online consumer finance experience in China. The\nCompany's mission is to use technology to make personalized credit accessible to hundreds of millions of young, mobile-active consumers\nin China who need access to small credit for their discretionary spending but are underserved by traditional financial institutions due to lack of\ntraditional credit data or high cost of servicing. Qudian's credit solutions enable licensed, regulated financial institutions and ecosystem partners to\noffer affordable and customized loans to this young generation of consumers.\n\nFor more information, please visit http://ir.qudian.com.\n\nSafe Harbor Statement\n\nThis announcement contains forward-looking statements. These statements are made under the \"safe harbor\" provisions of the United States Private\nSecurities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as \"will,\" \"expects,\" \"anticipates,\"\n\"future,\" \"intends,\" \"plans,\" \"believes,\" \"estimates\" and similar statements. Among other things, the expectation of its collection efficiency and\ndelinquency contains forward-looking statements. Qudian may also make written or oral forward-looking statements in its periodic reports to the SEC,\nin its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to\nthird parties. Statements that are not historical facts, including statements about Qudian's beliefs and expectations, are forward-looking statements.\nForward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those\ncontained in any forward-looking statement, including but not limited to the following: Qudian's goal and strategies; Qudian's expansion\nplans; Qudian's future business development, financial condition and results of operations; Qudian's expectations regarding demand for, and market\nacceptance of, its credit products; Qudian's expectations regarding keeping and strengthening its relationships with borrowers, institutional funding\npartners, merchandise suppliers and other parties it collaborates with; general economic and business conditions; and assumptions underlying or\nrelated to any of the foregoing. Further information regarding these and other risks is included in Qudian's filings with the SEC. All information provided\nin this press release and in the attachments is as of the date of this press release, and Qudian does not undertake any obligation to update any\nforward-looking statement, except as required under applicable law.\n\nFor investor and media inquiries, please contact:\n\nIn China:\n\nQudian Inc.\nTel: +86-592-596-8208\nE-mail: ir@qudian.com\n\nThe Piacente Group, Inc.\nJenny Cai\nTel: +86 (10) 6508-0677\n\f Case 1:20-cv-00577-GHW Document 59-2 Filed 03/10/22 Page 3 of 3\nE-mail: qudian@tpg-ir.com\n\nIn the United States:\n\nThe Piacente Group, Inc.\nBrandi Piacente\nTel: +1-212-481-2050\nE-mail: qudian@tpg-ir.com\n\n View original content:https://www.prnewswire.com/news-releases/qudian-inc-receives-notice-regarding-nyse-continued-listing-standards-\n301479503.html\n\nSOURCE Qudian Inc.\n\f","ocr_status":1,"date_upload":"2026-07-01T06:52:01.811581-07:00","document_number":"59","attachment_number":2,"pacer_doc_id":"127030841567","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit B - Notice Regarding NYSE Continued Listing Standards","acms_document_guid":""}],"date_created":"2022-03-10T11:09:12.098501-08:00","date_modified":"2023-05-30T08:47:58.980229-07:00","date_filed":"2022-03-10","time_filed":null,"entry_number":59,"recap_sequence_number":"2022-03-10.001","pacer_sequence_number":218,"description":"NOTICE of Supplemental Authority. Document filed by Juan Pablo Di Benedetto, Galessi Holding Corp., Pablo Greco. (Attachments: # 1 Exhibit A - 2/16/22 Decision Order on Motion, # 2 Exhibit B - Notice Regarding NYSE Continued Listing Standards).(Grunfeld, Michael) (Entered: 03/10/2022)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/172980626/","id":172980626,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/178289368/","id":178289368,"tags":[],"absolute_url":"/docket/16738894/53/greco-v-qudian-inc/","date_created":"2021-08-20T11:59:52.789506-07:00","date_modified":"2023-05-30T08:47:58.648657-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"53","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2021-08-20T11:59:52.775669-07:00","date_modified":"2023-05-30T08:47:58.638455-07:00","date_filed":"2020-09-03","time_filed":null,"entry_number":53,"recap_sequence_number":"2020-09-03.001","pacer_sequence_number":null,"description":"ORDER granting 52 Motion for J. Ryan Lopatka to Appear Pro Hac Vice. (HEREBY ORDERED by Judge Gregory H. Woods)(Text Only Order) (Daniels, Anthony) (Entered: 09/03/2020)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/172980625/","id":172980625,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/178289367/","id":178289367,"tags":[],"absolute_url":"","date_created":"2021-08-20T11:59:52.761795-07:00","date_modified":"2023-05-30T08:47:58.565618-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2021-08-20T11:59:52.752393-07:00","date_modified":"2023-05-30T08:47:58.555887-07:00","date_filed":"2020-08-31","time_filed":null,"entry_number":null,"recap_sequence_number":"2020-08-31.002","pacer_sequence_number":null,"description":">>>NOTICE REGARDING PRO HAC VICE MOTION. Regarding Document No. 52 MOTION for J. Ryan Lopatka to Appear Pro Hac Vice . Filing fee $ 200.00, receipt number ANYSDC-21409826. Motion and supporting papers to be reviewed by Clerk's Office staff. The document has been reviewed and there are no deficiencies. (aea)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/172980624/","id":172980624,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/178289366/","id":178289366,"tags":[],"absolute_url":"/docket/16738894/50/greco-v-qudian-inc/","date_created":"2021-08-20T11:59:52.699472-07:00","date_modified":"2023-05-30T08:47:58.442054-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"50","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2021-08-20T11:59:52.682602-07:00","date_modified":"2023-05-30T08:47:58.377790-07:00","date_filed":"2020-07-15","time_filed":null,"entry_number":50,"recap_sequence_number":"2020-07-15.001","pacer_sequence_number":null,"description":"ORDER. As discussed on the record during the telephone conference held on July 14, 2020, Defendants' motion to dismiss and accompanying papers are due by September 4, 2020. Plaintiffs' opposition is due no later than four weeks following service of Defendants' motion. Defendants' reply is due no later than two weeks following service of Plaintiffs' opposition. The page limitations for the parties' briefs are as follows: 35 pages for the moving brief, 35 pages for the opposition, and 20 pages for any reply. (HEREBY ORDERED by Judge Gregory H. Woods) (Text Only Order) (Daniels, Anthony) (Entered: 07/15/2020)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/172980623/","id":172980623,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/178289365/","id":178289365,"tags":[],"absolute_url":"","date_created":"2021-08-20T11:59:52.489126-07:00","date_modified":"2023-05-30T08:47:57.938399-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2021-08-20T11:59:52.479506-07:00","date_modified":"2023-05-30T08:47:57.872950-07:00","date_filed":"2020-06-15","time_filed":null,"entry_number":null,"recap_sequence_number":"2020-06-15.001","pacer_sequence_number":null,"description":"***NOTICE TO ATTORNEY REGARDING DEFICIENT PLEADING. Notice to Attorney Michael Grunfeld to RE-FILE re: Document No. 40 Amended Complaint. The filing is deficient for the following reason(s): the PDF attached to the docket entry for the pleading is not correct; the PDF case caption must list all of the filers; all of the filers were not selected for the pleading; due to deficient filing on the due date, Court's leave must be granted. Re-file the pleading using the event type Amended Complaint found under the event list Complaints and Other Initiating Documents - attach the correct signed PDF - select the individually named filer/filers - select the individually named party/parties the pleading is against. File the Exhibit to Pleading event found under the event list Other Documents and attach either opposing party's written consent or Court's leave. (jgo)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/144323276/","id":144323276,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/149027753/","id":149027753,"tags":[],"absolute_url":"/docket/16738894/58/greco-v-qudian-inc/","date_created":"2020-10-16T18:04:05.917280-07:00","date_modified":"2023-05-30T08:47:58.962138-07:00","sha1":"aa2b0a7e999d52520810fc00d02208e30da690ba","page_count":26,"file_size":917727,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.58.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.58.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 1 of 26\n\n\n\n\n UNITED STATES DISTRICT COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n\nJUAN PABLO DI BENEDETTO, Case No.: 1:20-cv-00577-GHW\nGALESSI HOLDING CORP., AND\nPABLO GRECO, Individually and On ORAL ARGUMENT REQUESTED\nBehalf of All Others Similarly Situated,\n\n Plaintiff,\n\n v.\n\nQUDIAN INC., MIN LUO, and CARL\nYEUNG,\n\n Defendants.\n\n\n\n\n REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANTS\n QUDIAN INC., MIN LUO, AND CARL YEUNG\u2019S MOTION TO DISMISS\n PLAINTIFFS\u2019 AMENDED CLASS ACTION COMPLAINT\n\n\n\n\n James G. Kreissman\n jkreissman@stblaw.com\n Stephen P. Blake\n sblake@stblaw.com\n 425 Lexington Avenue\n New York, NY 10017\n Telephone: (212) 455-2000\n Facsimile: (212) 455-2502\n\n Counsel for Defendants Qudian Inc., Min\n Luo, and Carl Yeung\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 2 of 26\n\n\n\n\n TABLE OF CONTENTS\n\n\n Page\n\n\nINTRODUCTION .......................................................................................................................... 1\n\nARGUMENT .................................................................................................................................. 3\n\n I. PLAINTIFFS FAIL TO ADEQUATELY ALLEGE A MATERIALLY FALSE\n OR MISLEADING STATEMENT OR OMISSION ....................................................3\n\n A. The PSLRA Safe Harbor Protects Qudian\u2019s Forward-Looking Statements ......3\n\n B. Plaintiffs Plead No Other Actionable Misrepresentations Or Omissions ..........5\n\n 1. Plaintiffs Fail To Plead A Valid Misrepresentation Or Omission\n Regarding Regulatory Developments Affecting Qudian\u2019s CLB ...........5\n\n 2. Qudian Accurately Disclosed Its Open Platform Initiative ...................9\n\n 3. Qudian Accurately Disclosed The Credit Trial Program .....................13\n\n II. PLAINTIFFS FAIL TO PLEAD FACTS GIVING RISE TO A STRONG\n INFERENCE OF SCIENTER .....................................................................................15\n\n A. Plaintiffs Fail To Adequately Allege Motive And Opportunity ......................15\n\n B. Plaintiffs Fail To Allege Facts That Constitute Strong Circumstantial\n Evidence Of Conscious Misbehavior Or Recklessness ...................................16\n\n C. The Totality Of Plaintiffs\u2019 Allegations Do Not Support A Finding Of\n Scienter ............................................................................................................19\n\n\n\n\n -i-\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 3 of 26\n\n\n\n\n TABLE OF AUTHORITIES\n\n Cases\n\nBd. of Trustees of City of Ft. Lauderdale Gen. Emp. Ret. Sys. v. Mechel OAO,\n 811 F. Supp. 2d 853 (S.D.N.Y. 2011)............................................................................... 18\n\nCampo v. Sears Holdings Corp.,\n 371 Fed. Appx. 212 (2d Cir. 2010) ..................................................................................... 9\n\nE*Trade, Freudenberg v. E*Trade Fin. Corp.,\n 712 F. Supp. 2d 171 (S.D.N.Y. 2010)............................................................................... 14\n\nECA, Local 134 IBEW Joint Pension Tr. of Chi. v. JP Morgan Chase Co.,\n 553 F.3d 187 (2d Cir. 2009).............................................................................................. 15\n\nEmp. Ret. Sys. v. Blanford,\n 794 F.3d 297 (2d Cir. 2015)................................................................................................ 9\n\nFrankfurt-Tr. Inv. Luxemburg AG v. United Techs. Corp.,\n 336 F. Supp. 3d 196 (S.D.N.Y. 2018)................................................................................. 8\n\nGlaser v. The9, Ltd.,\n 772 F. Supp. 2d 573, 594 (S.D.N.Y. 2011)......................................................................... 8\n\nHaw. Structural Ironworkers Pension Tr. Fund v. AMC Entm\u2019t Holdings, Inc.,\n 422 F. Supp. 3d 821 (S.D.N.Y. 2019 .................................................................................. 5\n\nIn re Bear Stearns Cos. Inc. Sec., Deriv., and ERISA Litig.,\n 763 F. Supp. 2d 423 (S.D.N.Y. 2011)................................................................................. 9\n\nIn re Eletrobras Sec. Litig.,\n 245 F. Supp. 3d 450 (S.D.N.Y. 2017)............................................................................... 17\n\nIn re Manulife Fin. Corp. Sec. Litig.,\n 276 F.R.D. 87 (S.D.N.Y. 2011) .................................................................................. 17, 20\n\nIn re Petrobras Sec. Litig.,\n 116 F. Supp. 3d 368 (S.D.N.Y. 2015)................................................................................. 9\n\nIn re Refco, Inc. Sec. Litig.,\n 503 F. Supp. 2d 611 (S.D.N.Y. 2007)............................................................................... 19\n\nIn re Sadia, S.A. Sec. Litig.,\n 643 F. Supp. 2d 521 (S.D.N.Y. 2009)............................................................................... 17\n\nIn re Scholastic Corp. Sec. Litig.,\n 252 F.3d 63 (2d Cir. 2001).................................................................................................. 9\n\n\n - ii -\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 4 of 26\n\n\n\n\nIn re Sina Corp. Sec. Litig.,\n No. 05CIV2154, 2006 WL 2742048 (S.D.N.Y. Sept. 26, 2006) ...................................... 10\n\nIn re Vale S.A. Sec. Litig.,\n No. 1:15-CV-9539-GHW, 2017 WL 1102666 (S.D.N.Y. Mar. 23, 2017) ......................... 4\n\nIn re Vivendi Univ., S.A. Sec. Litig.,\n 765 F. Supp. 2d 512 (S.D.N.Y. 2011)................................................................................. 5\n\nIn SLM Corp. Sec. Litig.,\n 740 F. Supp. 2d 542 (S.D.N.Y. 2010)................................................................................. 5\n\nLadmen Partners, Inc. v. Globalstar, Inc.,\n No. 07 Civ. 0976, 2008 WL 4449280 (S.D.N.Y. Sept. 30, 2008) .............................. 11, 12\n\nLewy v. Skypeople Fruit Juice, Inc.,\n No. 11 CIV. 2700 PKC, 2012 WL 3957916 (S.D.N.Y. Sept. 10, 2012) .......................... 18\n\nLickteig v. Cerberus Capital Mgmt.,\n No. 19-cv-5263-GHW, 2020 WL 1989424 (S.D.N.Y. Apr. 26, 2020) .............................. 8\n\nLocal No. 38 Int'l Bhd. of Elec. Workers Pension Fund v. Am. Exp. Co.,\n 724 F. Supp. 2d 447 (S.D.N.Y. 2010)............................................................................... 18\n\nLong Miao v. Fanhua Inc.,\n 442 F. Supp. 3d 774 (S.D.N.Y. 2020)........................................................................... 9, 18\n\nMartinich v. Ward,\n 2017 U.S. Dist. LEXIS 3713 (E.D.N.Y. Jan. 7, 2017) ..................................................... 20\n\nMonec Holding AG v. Motorola Mobility, Inc.,\n No. CV 11-798-LPS-SRF, 2014 WL 4402825\n (D. Del. Sept. 5, 2014) ...................................................................................................... 20\n\nN. Collier Fire Control and Rescue Dist. Firefighter Pension\n Plan et al. v. MDC Partners, Inc.,\n No. 15 Civ. 6034, 2016 WL 5794774 (S.D.N.Y. Sept. 30, 2016) ...................................... 9\n\nNew Orl. Empl. Ret. Sys. v. Cel., Inc.,\n 455 F. App\u2019x 10 (2d Cir. 2011) .......................................................................................... 4\n\nPlumbers & Steamfitters Local 773 Pension Fund v. Can. Imperial Bank of Comm.,\n 694 F. Supp. 2d 287 (S.D.N.Y. 2010)............................................................................... 20\n\nPolycast Tech. Corp. v. Uniroyal, Inc.,\n No. 87CIV3297, 1988 WL 96586 (S.D.N.Y. Aug. 31, 1988) .......................................... 18\n\n\n\n\n iii\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 5 of 26\n\n\n\n\nShanawaz v. Intellipharms. Int\u2019l Inc.,\n 348 F. Supp. 3d 313 (S.D.N.Y. 2018)............................................................................... 15\n\nTellabs, Inc. v. Makor Issues & Rights, Ltd.,\n 551 U.S. 308 (2007) .......................................................................................................... 19\n\n Statutes\n\n15 U.S.C. \u00a7 78u-4 ......................................................................................................................... 15\n\n15 U.S.C. \u00a7 78u-5 ........................................................................................................................... 5\n\n\n\n\n iv\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 6 of 26\n\n\n\n\n INTRODUCTION\n\n Plaintiffs\u2019 opposition confirms that the AC fails to adequately allege either any false or\n\nmisleading statement of material fact or facts giving rise to a strong inference of scienter.\n\n Qudian\u2019s Forward-Looking Statements: Defendants seek dismissal of claims based on\n\ncertain forward-looking statements, such as earnings guidance. Plaintiffs\u2019 claim that the\n\ncautionary language in those statements was \u201cboilerplate\u201d ignores the detailed warnings Qudian\n\nprovided both in those statements and in the SEC filings to which they refer. Plaintiffs also fail\n\nto adequately plead actual knowledge, a separate basis to render those statements non-actionable.\n\n No Other Materially False or Misleading Statements: Plaintiffs fail to plead a material\n\nmisstatement or omission of historical fact.\n\n License Restriction: Plaintiffs\u2019 claim that Qudian failed to disclose a lending license\n\nrestriction in May 2019 is eviscerated by their concession that Qudian disclosed in December\n\n2017 that it stopped funding loans through the entity in question. While Plaintiffs\u2019 claim that\n\nQudian\u2019s disclosure only refers to a \u201ctemporary\u201d lending halt, they ignore Qudian\u2019s many\n\nsubsequent disclosures, which reaffirm that it ceased making loans under this license.\n\n Circular 141: Plaintiffs\u2019 next claim, that Qudian failed to disclose that it was violating\n\nCircular 141, is undermined by (a) Qudian\u2019s repeated disclosures that its provision of credit\n\nassessments to banks created regulatory risk because the interpretation and enforcement of\n\nCircular 141 were uncertain, and (b) Plaintiffs\u2019 failure to allege that Qudian has ever even been\n\naccused of violating Circular 141. In response, Plaintiffs rely solely on CW4 for their claim that\n\nbanks failed to perform independent credit assessments and thus violated Circular 141. CW4\u2019s\n\nstatement is vague, conclusory, made by someone who left Qudian months before the Class\n\nPeriod, and insufficiently particularized. Therefore, it cannot form the basis for this claim.\n\n\n\n 1\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 7 of 26\n\n\n\n\n Open Platform: Plaintiffs\u2019 OP claims also fail. Plaintiffs cannot claim that Qudian\n\nsimply \u201crebranded\u201d its CLB business as OP because Plaintiffs concede that OP\u2014which did not\n\nguarantee the loans it referred\u2014employed a different business model than CLB. Nor can\n\nPlaintiffs credibly claim that OP was created to avoid Circular 141\u2019s credit assessment rules\n\nbecause Plaintiffs concede that Qudian provided such services under both CLB and OP. While\n\nPlaintiffs now claim OP was created to avoid other regulatory issues, this claim was not pleaded.\n\n Plaintiffs\u2019 argument that Qudian\u2019s statement that OP would be a source of growth was\n\nmisleading because that growth would come at CLB\u2019s expense also lacks merit. Plaintiffs point\n\nto no statement by Qudian that OP borrowers would not include CLB borrowers. Moreover,\n\nPlaintiffs claim that a \u201cmathematical analysis\u201d shows that the number of CLB borrowers\n\ndeclined in Q3 2019, while the documents they rely on show that this number was stable from\n\nQ2 to Q3 2019 and that CLB borrowing grew overall after OP was created.\n\n Plaintiffs also make the related argument that Qudian failed to disclose that OP took the\n\n\u201chighest-quality\u201d borrowers from CLB, negatively affecting CLB\u2019s business. Yet, Qudian never\n\ntold investors that OP would not focus on the \u201chighest-quality\u201d borrowers. And the disclosures\n\nPlaintiffs cite show that, while Plaintiffs assume that high-quality OP borrowers would not also\n\nborrow from CLB, the opposite proved to be true.\n\n Credit Trial Program: Plaintiffs cannot claim that Qudian\u2019s Credit Trial Program\n\ndisclosures were inadequate because they concede that Qudian disclosed that: (i) it loosened its\n\ncredit standards from time to time and (ii) it loosened its credit standards \u201ca lot more\u201d in Q4\n\n2018, at the beginning of the class period. Plaintiffs also concede that Qudian never disclosed its\n\nspecific credit standards. As such, Qudian had no duty to disclose the details of changes to those\n\nstandards. Moreover, while Plaintiffs claim Qudian should have disclosed that 20% of CLB\n\n\n\n\n 2\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 8 of 26\n\n\n\n\nborrowers were part of the Credit Trial Program in late 2019, they fail to allege that this was\n\nmaterially different from Qudian\u2019s usual percentage of lower-quality borrowers or past trials.\n\n No Scienter: Plaintiffs also fail to plead facts giving rise to a strong inference of scienter.\n\nThe only motive they assert is Defendant Luo\u2019s decision to forgo a salary and bonus until\n\nQudian\u2019s market cap reached $100 billion\u201420 times its level during the class period. Plaintiffs\u2019\n\nclaim\u2014that Luo intentionally created short-term growth that quickly led Qudian\u2019s business to\n\ndecline\u2014is inconsistent with such a motive. Plaintiffs\u2019 effort to rely on supposed admissions by\n\nLuo and Yeung in late 2019 also fails because, as Plaintiffs\u2019 brief shows, the statements in\n\nquestion were not admissions, and in fact were consistent with Defendants\u2019 prior statements.\n\nPlaintiffs\u2019 remaining scienter arguments are mere boilerplate that should be readily rejected.\n\n In sum, the far stronger inference, based on Plaintiffs\u2019 own cited documents and other\n\nmaterials properly before the Court, is that Qudian continued to prosper in 2019, while\n\nperforming slightly worse than initially expected in the face of a nationwide credit slowdown and\n\nnegative regulatory developments. Plaintiffs\u2019 primary response is that Defendants impermissibly\n\nrely upon \u201cdocuments and facts\u201d outside the pleadings. But Defendants attached those materials\n\nonly to aid the Court in its comparative scienter inquiry, not to refute Plaintiffs\u2019 falsity\n\nallegations. Courts routinely consider public reports of regulatory developments or broad\n\neconomic trends in determining whether an inference of fraud is at least as compelling as\n\ncompeting inferences. With or without considering these sources, the Court should reject\n\nPlaintiffs\u2019 implausible allegations and dismiss the AC on this separate basis as well.\n\n ARGUMENT\n\nI. PLAINTIFFS FAIL TO ADEQUATELY ALLEGE A MATERIALLY FALSE OR\n MISLEADING STATEMENT OR OMISSION\n\n A. The PSLRA Safe Harbor Protects Qudian\u2019s Forward-Looking Statements\n\n\n\n 3\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 9 of 26\n\n\n\n\n Defendants\u2019 opening brief showed that a number of the statements Plaintiffs allege were\n\nfalse or misleading are forward-looking and thus protected by the PSLRA safe harbor. See Op.\n\nBr. at 14; Kreissman Decl. \u00b6 14, Ex. M (list). Plaintiffs respond that \u201c[t]he statements at issue. . .\n\nare statements of current and historical fact.\u201d Opp. at 22. But Plaintiffs notably fail to cite even\n\na single statement that they allege to be one of historical fact. Id. at 22-23. Indeed, even a\n\ncursory review of the disclosures shows that they are classic forward-looking statements. See,\n\ne.g., AC \u00b6 199 (\u201cthe Company expects that its total non-GAAP net income for the full year of\n\n2019 will be greater than RMB3.5 billion\u201d); id. \u00b6 261 (citing \u201cpreliminary expectations of the\n\nrelevant regulatory environment in the near future\u201d) (emphasis omitted).1\n\n Plaintiffs also claim the cautionary language in these statements is inadequate, arguing\n\nthat it \u201crefer[s] to only general risks.\u201d Opp. at 23. But Plaintiffs ignore the detailed warnings\n\ngiven to investors in these earnings releases and analyst calls. See, e.g., Op. Br. at 15 (discussing\n\nrisk disclosures). Moreover, while conceding that these forward-looking statements expressly\n\nrefer investors to Qudian\u2019s annual SEC filings, Opp. at 24, Plaintiffs also ignore more than 50\n\npages of detailed disclosures in each of those filings covering, among other things, numerous\n\nregulatory and business risks. Op. Br. at 15 and n.5. Notably, Plaintiffs\u2019 lone case involved only\n\nboilerplate statements about \u201cexecution risks\u201d and \u201cunspecified \u2018known . . . risks [and]\n\nuncertainties,\u2019\u201d Haw. Structural Ironworkers Pension Tr. Fund v. AMC Entm\u2019t Holdings, Inc.,\n\n422 F. Supp. 3d 821, 847 (S.D.N.Y. 2019), a far cry from Qudian\u2019s detailed cautionary language.\n\n\n\n1\n Qudian\u2019s opening brief cited numerous cases holding earnings guidance and similar statements\nare protected by the safe harbor. Op. Br. at 14-16. By contrast, Plaintiffs\u2019 cases are easily\ndistinguishable, because they involve historical fact statements that \u201cpresent inventory was under\ncontrol,\u201d New Orl. Empl. Ret. Sys. v. Cel., Inc., 455 F. App\u2019x 10, 15 (2d Cir. 2011), or defendant\nused \u201coperational procedures\u201d and \u201caudits\u201d to \u201cminimize the risks of its operations.\u201d In re Vale\nS.A. Sec. Litig., No. 1:15-CV-9539-GHW, 2017 WL 1102666, at *10 (S.D.N.Y. Mar. 23, 2017).\n\n\n\n 4\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 10 of 26\n\n\n\n\n Finally, Plaintiffs claim that the Safe Harbor is inapplicable because Defendants knew\n\ntheir forward-looking statements were false. Opp. at 23. This argument fails for two reasons.\n\nFirst, Plaintiffs misstate the law, which, as even Plaintiffs\u2019 cases show, holds that the safe harbor\n\napplies if there is meaningful cautionary language or insufficient actual knowledge allegations.\n\nSee 15 U.S.C. \u00a7 78u\u20135(c)(1); In SLM Corp. Sec. Litig., 740 F. Supp. 2d 542, 555 (S.D.N.Y.\n\n2010) (explaining disjunctive nature of safe harbor requirements). In any event, Plaintiffs fail to\n\nallege facts giving rise to an inference of actual knowledge, as set out below. See infra Part II.2\n\n B. Plaintiffs Plead No Other Actionable Misrepresentations Or Omissions\n\n Plaintiffs also identify no actionable misrepresentation or omission based on statements\n\nof historical fact concerning regulatory issues, Qudian\u2019s OP, or Qudian\u2019s Credit Trial Program.3\n\n 1. Plaintiffs Fail To Plead A Valid Misrepresentation Or Omission\n Regarding Regulatory Developments Affecting Qudian\u2019s CLB\n\n License Restriction: The AC alleges that Qudian failed to disclose that in May 2019, one\n\nof its subsidiaries, Fuzhou Microcredit, had its lending license restricted, and that this omission\n\nwas material because it \u201csubstantially narrowed the amount of loans that Qudian was able to\n\n\n\n\n2\n As the opening brief explains, many statements at issue also fail because they merely express\n\u201cconfidence\u201d that Qudian will meet its earnings guidance, and thus are non-actionable puffery.\nSee Op. Br. at 16 n.6 (list). In response, Plaintiffs offer only the ipse dixit that \u201c[t]hese\nstatements are . . . not \u2018so vague, broad, and non-specific that a reasonable investor would not\nrely on [them].\u2019\u201d Opp. at 25 (quoting In re Vivendi Univ., S.A. Sec. Litig., 765 F. Supp. 2d 512,\n572 (S.D.N.Y. 2011)). But unlike Qudian\u2019s cases showing \u201cconfidence\u201d statements are puffery,\nOp. Br. at 16 n.6\u2014which Plaintiffs ignore\u2014Vivendi involved specific, verifiable fact statements\nsuch as that Vivendi had \u201c\u2018zero net debt\u2019 and \u2018free cash flow.\u2019\u201d Vivendi, 765 F. Supp. 2d at 573.\n3\n Plaintiffs claim that, in arguing the AC fails to plead falsity, \u201cDefendants impermissibly offer\ndocuments and facts outside the Complaint,\u201d citing to news articles and Qudian\u2019s competitors\u2019\nSEC filings attached to Defendants\u2019 opening brief. Opp. at 4. Plaintiffs are mistaken.\nDefendants provide these materials solely for the comparative scienter analysis discussed infra at\nPart II, not to rebut Plaintiffs\u2019 falsity allegations. Plaintiffs\u2019 failure to adequately plead falsity\ncan and should be determined solely from the AC, documents incorporated therein by reference,\nand related SEC filings by Defendants, which Plaintiffs do not challenge. See Opp. at 4-5.\n\n\n 5\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 11 of 26\n\n\n\n\nmake itself.\u201d AC \u00b6\u00b6 72-73. Defendants\u2019 opening brief showed that Qudian had no duty to\n\ndisclose this development because it disclosed in December 2017 that it had \u201cceased funding\n\ncredit drawdowns through [its] online small credit companies,\u201d including Fuzhou Microcredit.\n\nOp. Br. at 17 (quoting 2017 20-F at 12). Plaintiffs now claim that Qudian\u2019s disclosure was\n\nirrelevant because it only announced a temporary halt and because it did not explicitly mention\n\nQudian\u2019s lending licenses. Opp. at 12. Neither argument makes sense.\n\n First, Qudian disclosed that it stopped using this entity for \u201cfunding credit drawdowns.\u201d\n\nOp. Br. at 17; Kreissman Decl. \u00b6 11, Ex. J (2017 20-F) at 87. This disclosure advised investors\n\nthat Qudian was not using this entity (or its license) to make loans in any form. Plaintiffs\u2019 claim\n\nthat this conclusion requires a \u201cfactual leap\u201d or resolving \u201cambiguities,\u201d Opp. at 12, is misplaced.\n\n Second, after disclosing it temporarily ceased using the subsidiary in December 2017,\n\nQudian then disclosed in each subsequent 20-F that its use of this entity was \u201c\u2018historical[]\u2019\u201d and\n\nthat Qudian no longer used it to make loans. Op. Br. at 9 (\u201c\u2018We historically funded credit\n\ndrawdowns through online small credit companies . . . .\u2019\u201d) (quoting 2018 20-F at 9) (emphasis\n\nadded).4 Qudian explained that it instead \u201c\u2018rel[ied] on institutional funding partners and trusts . .\n\n. to fund . . . credit drawdowns.\u2019\u201d Op. Br. at 9 (quoting 2018 20-F at 9). Thus, long before May\n\n2019, Qudian made clear that it was no longer relying on the license in question to fund loans.\n\n Third, Plaintiffs\u2019 claim that the license restriction harmed Qudian\u2019s business is not well-\n\npleaded. Plaintiffs incorrectly claim that Qudian experienced a decline in revenue from its \u201con-\n\nbalance sheet\u201d transactions (where Qudian funds the loans itself) beginning in Q2 2019, citing\n\n\n\n\n4\n Plaintiffs also point to Qudian\u2019s 2017 20-F disclosure that \u201c[w]e fund credit directly to our\nborrowers through . . . Fuzhou Microcredit.\u201d Opp. at 12 (quoting 2017 20-F at 62). But this\nstatement clearly referred to Qudian\u2019s practice before it suspended the entity in December 2017;\nafterwards, Qudian consistently referred to its use of the entity as \u201chistorical.\u201d See Op. Br. at 9.\n\n\n 6\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 12 of 26\n\n\n\n\nwhat it purports were Qudian\u2019s reported results. See AC \u00b6 74. However, Qudian\u2019s results for\n\nthat period\u2014which Plaintiffs do not challenge\u2014show that on-balance sheet revenue grew YOY\n\nby 10% in Q2 2019\u2014the quarter in which the restriction allegedly occurred. Kreissman Decl.\n\n\u00b6\u00b6 3-5, Exs. B-D (full-year 2018 and Q1-Q2 2019 earnings releases). These facts bely any claim\n\nthat the lending license restriction had a significant effect on Qudian\u2019s business. Cf. AC \u00b6 74.5\n\n Circular 141: Plaintiffs claim Qudian failed to disclose that it was violating Circular 141\n\nby providing credit assessment services to its partner banks. AC \u00b6 80. Defendants explained that\n\nQudian disclosed its credit assessment services, the uncertainty surrounding Circular 141, and\n\nthe regulatory risk it faces. Op. Br. at 18-19. Qudian had no obligation to go further and\n\ncharacterize its activities as unlawful\u2014especially because Plaintiffs fail to allege that a regulator\n\nhas ever found, or even alleged, that Qudian violated Circular 141. See id. at 19-20 and citations.\n\n Plaintiffs concede that Qudian was not \u201cobligated to disclose legal conclusions or legal\n\ninterpretations.\u201d Opp. at 13. Instead, they claim Qudian should have disclosed \u201cthat banks were\n\noutsourcing credit assessments to it and not conducting their own, independent evaluations of\n\ncredit files.\u201d Id. The AC bases this claim on a single, conclusory sentence from CW4: \u201cThe\n\nwitness also described how certain financial institutions that \u2018had a good relationship with the\n\nlocal regulator\u2019 would rely on Qudian\u2019s risk assessment rather than conducting their own\n\nindependent risk assessment after receiving Qudian\u2019s initial review.\u201d AC \u00b6 69. However, the\n\nAC provides no meaningful information about CW4, including his or her position or\n\n\n\n5\n Plaintiffs\u2019 claim that the license restriction caused a decline in on-balance sheet CLB loan\nrevenue in the second half of 2019, id., is also incorrect. Qudian\u2019s quarterly results, upon which\nPlaintiffs purport to rely, show that CLB\u2019s on-balance sheet loan book revenue and its \u201cloan\nfacilitation\u201d revenue (i.e., revenue from loans Qudian did not fund itself, id.) each declined by\n20.6% in Q4 2019, undercutting any suggestion that the license restriction impacted the decline.\nKreissman Decl. \u00b6 9, Ex. H at 5. Indeed, Plaintiffs themselves claim the decline resulted from\ncustomers migrating to OP, not from the license restriction. AC \u00b6 146. See infra Part I.B.2.\n\n\n 7\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 13 of 26\n\n\n\n\nresponsibilities, describing CW4 only as \u201ca former employee who directly assisted Defendant\n\nLuo\u201d from \u201cearly 2018 until the summer of 2018.\u201d AC \u00b6 69. Moreover, the only alleged contact\n\nbetween CW4 and the unspecified \u201cfinancial institutions\u201d is that CW4 \u201cworked with Qudian\u2019s\n\nfunding partners\u201d during those few months. Id. Plaintiffs offer no facts suggesting how CW4\n\nsupposedly knew what the institutions were doing. See id. Without such well-pleaded facts,\n\nPlaintiffs cannot rely on CW4 to support their claim. See, e.g., Glaser v. The9, Ltd., 772 F.\n\nSupp. 2d 573, 594 (S.D.N.Y. 2011) (rejecting CW statements about business partner conduct\n\nwhere CWs were never employed by the partner); Frankfurt-Tr. Inv. Luxemburg AG v. United\n\nTechs. Corp., 336 F. Supp. 3d 196, 223 (S.D.N.Y. 2018) (dismissing complaint that failed to\n\nexplain how or why CWs would have access to the information they purported to possess).\n\n In addition to failing to describe CW4\u2019s position or his or her basis to make the claim on\n\nwhich Plaintiffs rely, this allegation also fails because it lacks the specificity required by the\n\nPSLRA. See Op. Br. at 13, 23-24. CW4 fails to identify who the \u201ccertain\u201d financial institutions\n\nwere, how many there were, when this conduct occurred, what actions the banks took, and how\n\nprevalent the conduct was. Thus, the allegation falls far short of setting forth the \u201cparticularized\n\nfacts\u201d required to meet the heightened pleading standard under the PSLRA. Lickteig v. Cerberus\n\nCapital Mgmt., No. 19-cv-5263-GHW, 2020 WL 1989424, at *9 (S.D.N.Y. Apr. 26, 2020).\n\n Finally, CW4\u2019s allegations are insufficient because he or she left Qudian months before\n\nthe class period, AC \u00b6 69, and thus cannot speak to what Qudian or its banking partners were\n\ndoing during the class period. See Op. Br. at 19 n.9; 6 N. Collier Fire Control and Rescue\n\n\n\n6\n Plaintiffs argue that witnesses in Defendants\u2019 cases either \u201crecanted,\u201d Opp. at 10 n.11 (citing\nCampo v. Sears Holdings Corp., 371 Fed. Appx. 212 (2d Cir. 2010)), or were not \u201cdescribed\nwith sufficient particularity.\u2019\u201d Id. (quoting Long Miao v. Fanhua Inc., 442 F. Supp. 3d 774, 804\n(S.D.N.Y. 2020)). These claims are wrong. See, e.g., Campo, 371 Fed. Appx. at 216-17 (two\nCWs \u201chad no personal knowledge\u201d of individual defendants\u2019 awareness of real estate reports).\n\n\n 8\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 14 of 26\n\n\n\n\nDistrict Firefighter Pension Plan et al. v. MDC Partners, Inc., No. 15 Civ. 6034, 2016 WL\n\n5794774, at *10 (S.D.N.Y. Sept. 30, 2016) (rejecting CW allegation \u201cregarding nonpublic\n\ninformation that postdates his tenure\u201d). While Plaintiffs dispute this well-established legal\n\nprinciple, the cases they cite either (i) involved CWs who were present during the relevant time\n\nperiod or (ii) did not involve CWs at all. Cf. Emp. Ret. Sys. v. Blanford, 794 F.3d 297, 307 (2d\n\nCir. 2015) (relying on allegations of CWs employed by the company during the class period); In\n\nre Scholastic Corp. Sec. Litig., 252 F.3d 63, 72 (2d Cir. 2001) (crediting \u201csales data\u201d trend\n\nincluding pre-class period quarters, not CW statements regarding pre-class conduct).7\n\n 2. Qudian Accurately Disclosed Its Open Platform Initiative\n\n Defendants\u2019 opening brief explained that Qudian accurately disclosed that OP was a\n\ndifferent business model from CLB, dispelling Plaintiffs\u2019 claim that it was merely a rebranding\n\nof the CLB business. Op. Br. at 23. In response, Plaintiffs appear to drop their \u201crebranding\u201d\n\nclaim, Opp. at 15, arguing instead that: (1) Qudian failed to disclose that it launched OP because\n\nCLB was violating Circular 141; (2) Qudian failed to disclose that OP\u2019s growth was the result of\n\nits cannibalization of CLB\u2019s borrowers; and (3) Qudian failed to disclose OP would take the\n\n\u201cbest borrowers\u201d from the CLB. Id. at 14-18. Each of these remaining arguments fails.\n\n Launch of OP to Avoid Circular 141 Violations: Plaintiffs\u2019 allegation is premised\n\nentirely on their assertion that CLB violated Circular 141, which is not well-pleaded. See supra\n\n\n\nIn any event, as discussed above, CW4 also is not \u201cdescribed with sufficient particularity.\u201d\n7\n As the opening brief explains, this claim also fails because many of the alleged misstatements\nconcerning regulatory compliance are immaterial puffery. See Op. Br. at 20-21 and n.11. Rather\nthan respond to Defendants\u2019 precedent, Plaintiffs merely deny that the statements in question\nconstitute puffery, Opp. at 26, relying on case law that involved far more specific compliance-\nrelated statements. Cf., e.g., In re Bear Stearns Cos. Inc. Sec., Deriv., and ERISA Litig., 763 F.\nSupp. 2d 423, 459 (S.D.N.Y. 2011) (defendant was in compliance with specific \u201ccapital\nrequirements\u201d); In re Petrobras Sec. Litig., 116 F. Supp. 3d 368, 372, 381 (S.D.N.Y. 2015)\n(company denied involvement in bribery in case alleging multi-billion dollar bribery scheme).\n\n\n 9\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 15 of 26\n\n\n\n\nPart I.B.1. Plaintiffs\u2019 failure to allege facts suggesting that Qudian violated Circular 141 renders\n\nany claim that Qudian failed to disclose that it created OP to rectify this issue deficient.\n\n Plaintiffs also do not dispute the fact that Qudian repeatedly disclosed from OP\u2019s\n\ninception that it viewed OP as more conservative from a regulatory standpoint. See Op. Br. at\n\n23-24; Opp. at 14-15. Indeed, there is no material difference between Qudian\u2019s initial comments\n\nregarding OP and the alleged \u201cadmissions\u201d on which Plaintiffs rely in late 2019. Compare\n\nKreissman Decl. \u00b6 13, Ex. L (Q2 2019 call) at 13 (touting advantage of OP over CLB in terms of\n\nbeing \u201cregulatory compliant\u201d because under OP \u201cwe have taken this to an even further step by\n\nnot touching the loan in itself\u201d) (emphasis added), with AC \u00b6 170 (alleging that Qudian \u201cfinally\n\nrevealed\u201d one quarter later that \u201c\u2018[w]e found a better way, the way where we do open platform,\n\nwhere we allow licensed lenders . . . to lend, we don\u2019t touch the loan\u2019\u201d) (emphasis added).8\n\n Plaintiffs\u2019 position is also untenable for the independent reason that, as they concede,\n\nQudian provided credit assessments in both CLB and OP. See Op. Br. at 24; Opp. 15-16. Thus,\n\nQudian could not have started OP to avoid Circular 141\u2019s prohibition on outsourcing credit\n\ndecisions where it provided the same services to banks in OP and CLB. Unable to respond,\n\nPlaintiffs assert that they \u201cdo not argue that OP was created only to address Circular 141\u2019s ban\n\non outsourcing credit assessments, but rather, that it was intended to resolve the problem that\n\nCLB guaranteed loans for other financial institutions.\u201d Opp. at 16 (emphasis in original). This\n\nabout-face is inconsistent with the AC, which focused exclusively on alleged credit assessment\n\nviolations. At most, the AC makes vague assertions about \u201cregulatory concerns\u201d with respect to\n\n\n\n\n8\n In any event, Qudian was not required to disclose every reason for its business decisions as a\nmatter of law. See, e.g., In re Sina Corp. Sec. Litig., No. 05CIV2154, 2006 WL 2742048, at *6-8\n(S.D.N.Y. Sept. 26, 2006) (fact that defendant provided some reasons for business change that\nincreased revenue did not require it to disclose other motivations related to regulatory concerns).\n\n\n 10\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 16 of 26\n\n\n\n\n\u201can intermediary such as Qudian guaranteeing loans,\u201d AC \u00b6 76, but it fails to allege this practice\n\nviolated Chinese law. Indeed, it explicitly notes that such guarantees are permitted if a party is\n\nlicensed to make them. Id. \u00b6 62. Having conceded that Qudian had such licenses, AC \u00b6\u00b6 71-72,\n\nPlaintiffs cannot now claim that making such guarantees exposed Qudian to regulatory penalties.\n\n OP as an \u201cIndependent\u201d Source of Growth: Plaintiffs next argue that Qudian falsely\n\nclaimed that OP provided it with \u201cthe ability to attain additional \u2018growth beyond [the core] loan\n\nbook,\u2019\u201d when, in reality, it grew by taking borrowers from the CLB. Opp. at 16 (quoting 2019\n\nManagement Presentation). This argument fails for multiple reasons. First, Plaintiffs fail to cite\n\nany disclosure in which Qudian suggested OP would not include CLB borrowers. See id. at\n\n16-17. Because Qudian never promised that OP would consist entirely of unique borrowers, it\n\nhad no obligation to disclose that some might come from the CLB. See, e.g., Ladmen Partners,\n\nInc. v. Globalstar, Inc., No. 07 Civ. 0976, 2008 WL 4449280, at *16 n.16 (S.D.N.Y. Sept. 30,\n\n2008) (omitted facts must be \u201cnecessarily inconsistent\u201d with the disclosures to be actionable).\n\n Moreover, Plaintiffs fail to plead any facts suggesting that OP \u201ccannibalized\u201d borrowers\n\nfrom the CLB. See Opp. at 16. The primary basis for this assertion is Plaintiffs\u2019 \u201cmathematical\n\nanalysis\u201d showing that the number of CLB borrowers declined from 5,700,000 to 5,300,000\n\nbetween Q2 and Q3 2019. Opp. at 16-17. However, the earnings call transcripts on which\n\nPlaintiffs rely for this claim show that CLB borrowers remained steady at 6 million in both\n\nquarters. Compare Kreissman Decl. \u00b6 13, Ex. L (Q2 2019 call) at 4, with Kreissman Decl. \u00b6 7,\n\nEx. F (Q3 2019 call) at 9. In other words, OP did not take borrowers away from CLB. Instead, a\n\nmajority of OP borrowers used both platforms. Op. Br. at 25.9 Additionally, the documents\n\n\n\n9\n These documents\u2014relied on by Plaintiffs\u2014show that OP borrowers increased from 440,000 to\none million borrowers from Q2 to Q3 2019, see AC \u00b6 181, while CLB borrowers remained stable\nat 6 million. It appears that Plaintiffs mistakenly assumed that any OP borrower was not also a\n\n\n 11\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 17 of 26\n\n\n\n\nrelied on by Plaintiffs show that, from the time of its inception in Q3 2018 to the end of 2019,\n\nOP borrowers grew from zero to one million, while CLB borrowers grew from 4.9 to 6 million.\n\nCompare Kreissman Decl. \u00b6 3, Ex. B, with id. \u00b6 7, Ex. F. Thus, Plaintiffs\u2019 own cited documents\n\nshow OP grew independently, rather than by taking borrowers from CLB.\n\n OP\u2019s Alleged Appropriation of CLB\u2019s \u201cBest Borrowers\u201d: Plaintiffs also make the\n\nrelated argument that Qudian failed to disclose that OP \u201cwas taking the \u2018highest-quality,\u2019 most\n\ncredit-worthy borrowers\u201d from CLB, leaving \u201clower quality borrowers who were more likely to\n\ndefault on their loans.\u201d Opp. at 16. This argument similarly fails because Plaintiffs identify no\n\nstatement by Qudian suggesting that OP would not focus on CLB\u2019s \u201chighest-quality\u201d borrowers\n\nor that no high-quality borrowers would migrate from CLB to OP. See Opp. at 16-18; Op. Br. at\n\n25-26. Qudian thus had no duty to disclose that OP would take high-quality CLB borrowers.\n\nLadmen, 2008 WL 4449280, at *16 n.16. In any event, however, Plaintiffs concede that Qudian\n\ndisclosed from the inception of OP that it would look to lend to, among others, CLB borrowers\n\nwith \u201cbetter credit profiles\u201d who sought larger loans than Qudian wanted to approve for the CLB.\n\nOpp. at 18 (quoting 2018 20-F); see Kreissman Decl. \u00b6 12, Ex. K (2018 20-F) at 16 (explaining\n\nthat OP \u201coffers our large user base with more choices,\u201d including users who \u201cmeet our credit\n\nrequirements\u201d for CLB but seek \u201clarger loan amounts\u201d) (emphasis added); see also AC \u00b6 46\n\n(discussing pre-OP earnings call in which Defendant Luo described \u201cthe large number of\n\nQudian\u2019s 62.4 million registered users who \u2018sought a larger credit size\u2019\u201d).10 Indeed, these early\n\n\n\nCLB borrower, an assumption that is directly contradicted by the documents on which Plaintiffs\nrely, which show that 700,000 out of the one million OP borrowers in Q3 2019 were also CLB\nborrowers. See Kreissman Decl. \u00b6 7, Ex. F (Q3 2019 earnings call transcript) at 3, 9.\n10\n Plaintiffs\u2019 claim that, \u201ceven if OP\u2019s borrowers were taking out larger loans . . . they still were\nno longer taking out loans in CLB,\u201d Opp. at 17-18, is not well-pleaded because Plaintiffs\u2019\ndocuments show 70% of OP borrowers also borrowed from CLB in Q3 2019. See supra n.9.\n\n\n 12\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 18 of 26\n\n\n\n\ndisclosures are materially indistinguishable from the later supposed \u201cadmissions\u201d on which\n\nPlaintiffs rely. See AC \u00b6 179 (November 2019 statement that \u201c\u2018good borrowers\u2019\u201d could \u201c\u2018get\n\naccess to the credit enhancement, get to a more appropriate credit size\u2019\u201d) (emphasis added); id.\n\n\u00b6 290 (OP platform was \u201cfor larger ticket size\u201d).\n\n 3. Qudian Accurately Disclosed The Credit Trial Program\n\n Plaintiffs claim Qudian failed to disclose it materially lowered credit standards during\n\nthe Class Period by adopting the Credit Trial Program. The opening brief explained that Qudian:\n\n \uf0b7 Disclosed that it relaxes its credit standards from time to time. Op. Br. at 26-27.\n\n \uf0b7 Disclosed that its credit standards would \u201crelax a lot more into [Q4 2018],\u201d when\n the Credit Trial Program was initiated. Id.\n\n \uf0b7 Warned investors that it \u201cexpect[s] to experience higher delinquency rates\u201d for\n these new borrowers. Id. at 19.\n\n \uf0b7 Disclosed the Credit Trial Program in detail during the Class Period, including an\n increase in delinquencies. See Op. Br. at 26-27.\n\nPlaintiffs\u2019 claim that Qudian \u201cprovided only vague warnings that the Company might expand its\n\nborrower base\u201d is directly contradicted by this language, dooming this claim.\n\n Plaintiffs cannot revive this claim by focusing on generic statements that Qudian made\n\ndescribing its lending practices as \u201cconservative,\u201d notwithstanding the Credit Trial Program. See\n\nOpp. at 18-19. This theory fails because the term \u201cconservative\u201d is non-actionable puffery in\n\nthis context. See Op. Br. at 28 n.17.11 Plaintiffs also claim that Defendants\u2019 disclosures were\n\n\n\n11\n Plaintiffs ignore Defendants\u2019 precedent and claim that Defendants\u2019 statements were not\npuffery, because Qudian had drastically lowered credit standards. Opp. at 27. The lone case\nPlaintiffs cite is readily distinguishable, because it involved a very specific representation, in\ncontrast to the generic statement at issue here. See E*Trade, Freudenberg v. E*Trade Fin.\nCorp., 712 F. Supp. 2d 171, 178, 182-83 (S.D.N.Y. 2010) (investment firm\u2019s description of\n\u201cconservative approach\u201d actionable because claimed approach included \u201chigh FICOs, low LTVs\n[loan-to-value ratio] and high owner occupancy levels,\u201d which was demonstrably false).\n\n\n 13\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 19 of 26\n\n\n\n\ninsufficient because the risk had already materialized. Opp. at 18-19. This argument is\n\nmisplaced. Qudian did not disclose a \u201cpossible\u201d decline of credit standards or increase in\n\ndelinquencies; it specifically disclosed a relaxation of standards beginning in Q4 2018 and an\n\nexpectation of resulting increased delinquencies. See 2018 20-F at 7; Op. Br. at 26. Any\n\nreasonable investor would thus expect higher delinquencies during the Class Period.12\n\n Finally, Plaintiffs claim that Qudian should have disclosed that 20% of its CLB\n\nborrowers were part of the Credit Trial Program prior to Q3 2019 (when Qudian announced this\n\nfigure). However, Plaintiffs plead no facts suggesting what percentage of CLB borrowers were\n\npart of the Credit Trial Program before Q3 2019. Moreover, because Qudian had not previously\n\ndisclosed its specific lending standards or how many borrowers failed to meet those standards, it\n\nhad no obligation to disclose that data in any particular quarter. See Op. Br. at 26. Similarly,\n\nPlaintiffs\u2019 claim that Qudian inaccurately labelled the Credit Trial Program as \u201csmall,\u201d Opp. at\n\n18, is not well-pleaded. The term \u201csmall\u201d is Plaintiffs\u2019 characterization, but, contrary to their\n\nclaim, Defendant Yeung did not characterize the program as small or otherwise seek to quantify\n\nit during the call in question. Kreissman Decl. \u00b6 16, Ex. O at 12. Plaintiffs fail to allege how the\n\nsize of the Credit Trial Program compared to Qudian\u2019s prior relaxation of credit standards, and\n\nthus they have no basis to allege that any description of the size of the program was inaccurate.13\n\n\n12\n Moreover, Plaintiffs fail to allege that Qudian\u2019s CLB delinquency rate increased materially\nuntil late 2019. Indeed, through Q2 2019, the Qudian disclosures cited in the AC show that\ndelinquencies had only increased by 0.5% due to the Credit Trial Program borrowers. Kreissman\nDecl. \u00b6 13, Ex. L (Q2 2019 call) at 4. While delinquency rates attributed to the Credit Trial\nProgram increased in the second half of 2019, those increases followed Qudian\u2019s numerous\ndisclosures in which it told investors to expect higher delinquencies. See supra Part I.B.3.\n13\n Plaintiffs\u2019 claims based on an affirmative duty to disclose under Item 303 of Regulation S-K\nfail for similar reasons (i.e., that Qudian disclosed all purported \u201ctrends\u201d that Plaintiffs allege\nwere concealed). Op. Br. at 28. Plaintiffs\u2019 opposition does nothing more than rehash its\ndeficient \u201ctrends\u201d allegations. Opp. at 20-22. Moreover, Plaintiffs concede they must also plead\nactual knowledge under Item 303. Id. As set forth below, they also fail to make this showing.\n\n\n 14\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 20 of 26\n\n\n\n\nII. PLAINTIFFS FAIL TO PLEAD FACTS GIVING RISE TO A STRONG\n INFERENCE OF SCIENTER\n\n The opening brief showed Plaintiffs fail to allege \u201cwith particularity facts giving rise to a\n\nstrong inference that the defendant acted with the required state of mind,\u201d 15 U.S.C. \u00a7 78u-\n\n4(b)(2)(A), by pleading either (i) motive and opportunity or (ii) strong circumstantial evidence of\n\nconscious misbehavior or recklessness. Op. Br. at 29-35. Plaintiffs offer little response.\n\n A. Plaintiffs Fail To Adequately Allege Motive And Opportunity\n\n Plaintiffs concede that they allege no stock sales or other traditional motive to commit\n\nfraud. See Opp. at 32-33. Instead, they rely on Luo\u2019s plan to forego his salary and bonus until\n\nQudian\u2019s market capitalization reached $100 billion. Id. As the opening brief explains, this\n\nargument fails as a matter of law, because a general desire \u201cto keep stock prices high to increase\n\nofficer compensation . . . do[es] not constitute \u2018motive.\u2019\u201d ECA, Local 134 IBEW Joint Pension\n\nTr. of Chi. v. JP Morgan Chase Co., 553 F.3d 187, 198 (2d Cir. 2009) (emphasis added).14\n\n Moreover, Plaintiffs\u2019 argument is illogical. Plaintiffs concede that, when Luo instituted\n\nthis arrangement, Qudian\u2019s market capitalization was just over $5 billion, requiring a twenty-fold\n\nincrease to reach the $100 billion market cap target. See Opp. at 32. Yet Plaintiffs ask the Court\n\nto accept the inference that Luo intentionally drove up delinquencies to conceal slowing growth,\n\nfacts that were quickly revealed in Qudian\u2019s 2019 financial results. Plaintiffs\u2019 suggestion that\n\nLuo intentionally jeopardized Qudian\u2019s business (of which he owned 20%, 2018 20-F at 133), to\n\nachieve a short-term result with no prospect of taking Qudian\u2019s market capitalization to $100\n\nbillion, is so implausible that it cannot give rise to any inference of scienter.\n\n\n14\n Plaintiffs\u2019 case law is not to the contrary. In those cases, courts relied on stock sales or other\nconcrete motive to commit fraud, not compensation arrangements tied to the stock price. Cf.,\ne.g., Shanawaz v. Intellipharms. Int\u2019l Inc., 348 F. Supp. 3d 313, 326 (S.D.N.Y. 2018) (declining\nto determine whether incentive arrangements amounted to anything more than \u201ctypical . . .\nexecutive incentive packages,\u201d where stock sales supported scienter) (emphasis added).\n\n\n 15\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 21 of 26\n\n\n\n\n B. Plaintiffs Fail To Allege Facts That Constitute Strong Circumstantial\n Evidence Of Conscious Misbehavior Or Recklessness\n\n Alleged Admissions: While Plaintiffs claim supposed \u201cdamning admissions\u201d by Luo and\n\nYeung, see Opp. at 28-29, a review of those statements shows that neither Defendant admitted to\n\nPlaintiffs\u2019 claims. Plaintiffs argue that, in November 2019, Luo and Yeung \u201cadmitted that OP\u2019s\n\npurpose for both Qudian and its funding partners was to be the \u2018ultimate form of regulatory\n\ncompliant fintech in China.\u2019\u201d Opp. at 29. But these statements include Luo\u2019s assertion that CLB\n\nalready \u201cwas \u2018in full compliance with Circular 141,\u2019\u201d id., not in violation of it.\n\n Similarly, Plaintiffs misrepresent Defendant Yeung\u2019s supposed November 25, 2019\n\napology. Plaintiffs claim Yeung explained that Qudian had \u201conly allowed 5.5 million out of the\n\n21 million [approved borrowers] access to [OP]\u201d and then apologized for not disclosing OP had\n\ntaken CLB\u2019s best borrowers. Opp. at 17 (quoting AC \u00b6 184). But Yeung never characterized the\n\n5.5 million borrowers as Qudian\u2019s highest quality borrowers. Instead, he explained that OP had\n\nroom for further growth, saying \u201c[w]e haven\u2019t opened the entire open-platform to our borrower\n\nbase yet. This is so that we don\u2019t get a too large a flow . . . . .\u201d Kreissman Decl. \u00b6 17, Ex. P\n\n(Nov. 25, 2019 Call) at 9 (emphasis added). He concluded, \u201cSo, I think we are in a fairly good\n\nposition that there\u2019s still a deep pocket for open-platform . . . . I\u2019m sorry that this may not have\n\nbeen apparent to the market yet, but it will be over time.\u201d Id. (emphasis added); see also AC \u00b6\n\n157 (showing this comment followed Yeung\u2019s statement that \u201c[w]e are perplexed, first of all, on\n\nhow the market reacted\u201d to Q3 financial results following stock drop). Rather than an admission,\n\nYeung\u2019s statement is an effort to educate investors about OP\u2019s potential for further growth.\n\n Finally, Plaintiffs point to Yeung\u2019s statement on Qudian\u2019s Q3 2019 earnings call that\n\n\u201c\u2018the economics [for OP] only makes sense to my funding partner if the loss rate is lower.\u2019\u201d\n\nOpp. at 28 (quoting AC \u00b6\u00b6 178-79, 189). However, Yeung did not attribute OP\u2019s lower loss rate\n\n\n\n 16\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 22 of 26\n\n\n\n\nto Qudian sending OP the \u201cbest borrowers\u201d from CLB. Rather, he referred to Qudian\u2019s credit\n\ntightening across CLB and OP in that quarter. Compare Kreissman Decl. \u00b6 7, Ex. F at 4 (noting\n\nQudian \u201cswiftly reduced credit volumes and paused credit trial programs\u201d in CLB), with id. at 5\n\n(\u201c[I]t's our overall direction with our funding partners in an overall macroeconomic down cycle\n\nto focus on the high-quality borrowers.\u201d); see also id. at 5-6 (describing OP\u2019s technological\n\nadvantages and explaining that OP borrowers were a \u201cgold mine\u201d that Qudian \u201cdidn\u2019t mine . . .\n\nbefore\u201d because CLB does not offer large enough loans). Yeung thus made no admission.\n\nYeung\u2019s Resignation: Plaintiffs claim Yeung\u2019s March 2020 resignation was suspicious and thus\n\nsupports scienter. Opp. at 29. But resignations only give rise to a scienter inference if there is \u201ca\n\nspecific allegation that the resignation resulted from . . . wrongdoing.\u201d In re Manulife Fin. Corp.\n\nSec. Litig., 276 F.R.D. 87, 102 (S.D.N.Y. 2011); see also Op. Br. at 31 n. 19. Here, as Plaintiffs\n\nconcede, Yeung stated he resigned for personal reasons. Opp. at 29. Qudian also did not face a\n\nrestatement or accounting/financial scandal, and Yeung left two months after Qudian withdrew\n\nguidance in January 2020. By contrast, Plaintiffs\u2019 cases involve departures occurring in close\n\nproximity to serious misconduct. Cf., e.g., In re Eletrobras Sec. Litig., 245 F. Supp. 3d 450, 469\n\nn.12 (S.D.N.Y. 2017) (\u201c[T]he CEO and board were replaced, at least in part, because of the\n\nfindings of . . . the internal investigation\u201d); In re Sadia, S.A. Sec. Litig., 643 F. Supp. 2d 521,\n\n523-24 (S.D.N.Y. 2009) (company fired CFO one day after discovering fraud and accepted other\n\nresignations less than two weeks later). Thus, there is no basis for a scienter inference here.\n\nCW Allegations: Finally, Plaintiffs argue that their scienter allegations are bolstered by nine\n\nCWs\u2019 statements which allegedly establish that OP cannibalized CLB and that Qudian was\n\nviolating Circular 141. Opp. at 30. First, Plaintiffs fail adequately to plead that either of those\n\nthings actually happened. See supra Part I. Moreover, only one confidential witness, CW4, is\n\n\n\n\n 17\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 23 of 26\n\n\n\n\nalleged to have had any contact with any senior executive,15 and the AC fails to allege that CW4\n\ncommunicated any alleged wrongdoing to them. See, e.g., AC \u00b6 69. This deficiency alone\n\ndooms the CW allegations. See, e.g., Bd. of Trustees of City of Ft. Lauderdale Gen. Emp. Ret.\n\nSys. v. Mechel OAO, 811 F. Supp. 2d 853, 880 (S.D.N.Y. 2011) (rejecting CW allegation that\n\n\u201cd[id] not describe any communications with the Defendants or provide grounds to believe they\n\nwere aware of the alleged scheme\u201d). Moreover, CW4 left Qudian well before the class period,\n\nsee supra at 8-9, and is not alleged to have communicated with Luo during the class period. See\n\nLong Miao, 442 F. Supp. 3d at 805.16\n\n\n\n15\n Because Plaintiffs do not allege that any of the other eight CWs communicated with senior\nmanagement about anything, Op. Br. at 32; Opp. at 30, these CWs\u2019 statements cannot give rise to\nany inference of scienter. See, e.g., Local No. 38 Int'l Bhd. of Elec. Workers Pension Fund v.\nAm. Exp. Co., 724 F. Supp. 2d 447, 460 (S.D.N.Y. 2010), aff\u2019d sub nom. Local No. 38 Int'l Bhd.\nof Elec. Workers Pension Fund v. Am. Express Co., 430 F. App'x 63 (2d Cir. 2011) (rejecting\nCW statements by \u201clow-level employees [who] had no contact with the Individual Defendants\u201d).\nMoreover, even these conclusory CW allegations fail to support Plaintiffs\u2019 falsity claims. See,\ne.g., AC \u00b6 98 (CW1 was low-level employee who erroneously \u201cdescribed Open Platform as\nsubstantially the same as Qudian\u2019s prior loan business\u201d); id. \u00b6 83 (CW6 was \u201cfinancial analyst\u201d\nwho left before class period and \u201cdescribed Open Platform as being Defendant Yeung\u2019s idea\u201d)\n16\n Plaintiffs other scienter arguments are easily dispatched. While Plaintiffs claim Yeung had\nconfidential information about the Credit Trial Program, Opp. at 30, access to such information\ncan only give rise to an inference of scienter if Plaintiffs show he made a statement inconsistent\nwith that information. See, e.g., Polycast Tech. Corp. v. Uniroyal, Inc., No. 87CIV3297, 1988\nWL 96586, at *6 (S.D.N.Y. Aug. 31, 1988) (access to confidential information, standing alone,\ninsufficient to support inference of scienter). Because Plaintiffs fail to allege that this\ninformation was inconsistent with any of Yeung\u2019s statements or gave rise to a disclosure duty,\nsee supra Part I, Plaintiffs\u2019 precedent is inapposite. Cf., e.g., Lewy v. Skypeople Fruit Juice, Inc.,\nNo. 11 CIV. 2700 PKC, 2012 WL 3957916, at *16 (S.D.N.Y. Sept. 10, 2012) (CFO failed to\n\u201cheed\u201d regulatory filings in China that revealed \u201cbasic facts about her company\u2019s structure and\nperformance\u201d that were inconsistent with company\u2019s disclosures). Plaintiffs next rely on the\n\u201ccore operations doctrine,\u201d but concede that it cannot establish scienter \u201cindependently.\u201d Opp. at\n31 n.19. Finally, Plaintiffs allege Luo and Yeung \u201cwere directly involved in Qudian\u2019s day-to-\nday operations\u201d and \u201csigned and/or certified the relevant SEC filings.\u201d The opening brief cited\ncontrolling authority rejecting such allegations. Op. Br. at 30-31. Plaintiffs ignore them, relying\non inapposite cases where, unlike here, \u201cred flags\u201d put management on notice of misconduct.\nCf., e.g., In re Refco, Inc. Sec. Litig., 503 F. Supp. 2d 611, 652 (S.D.N.Y. 2007) (suspicious\n\u201creceivable\u201d that appeared at the end of each quarter was \u201cglaring red flag\u201d for management).\n\n\n 18\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 24 of 26\n\n\n\n\n C. The Totality Of Plaintiffs\u2019 Allegations Do Not Support A Finding Of Scienter\n\n Finally, the opening brief showed that Plaintiffs\u2019 allegations are not \u201cat least as likely as\n\nany plausible opposing inference\u201d based on the \u201ctotality\u201d of the allegations. See Tellabs, Inc. v.\n\nMakor Issues & Rights, Ltd., 551 U.S. 308, 328 (2007). Indeed, the AC and the documents\n\nproperly before the Court on this motion support the far more plausible inference that Qudian\n\nnarrowly missed its original 2019 guidance after unexpected economic and regulatory events led\n\nto an industry-wide downturn. Op. Br. at 34-35.\n\n Plaintiffs ask the Court to \u201cdisregard[]\u201d Defendants \u201cproffered \u2018facts\u2019 and requests for\n\ninferences in their favor,\u201d asserting that \u201cDefendants may not rewrite the Complaint with their\n\nown purported facts, and they are not entitled to inferences from the facts in their favor.\u201d Id. at\n\n5-6. But Defendants only seek to draw inferences from facts properly before the Court, the very\n\npurpose for the Tellabs comparative scienter analysis. See Tellabs, 551 U.S. at 328.\n\n Plaintiffs do not dispute the fact that the Court may consider documents incorporated by\n\nreference in the AC. See Opp. at 5; Op. Br. at 4 n.1. Plaintiffs further agree that \u201cthe Court may\n\ntake judicial notice of the publication of a news article on a motion to dismiss\u201d for the fact of\n\npublication, as well as public economic data. Opp. at 4-5 and n.6. Instead, Plaintiffs claim that\n\nDefendants improperly seek to raise a factual dispute about the reason for Qudian\u2019s guidance\n\nshortfall in the second half of 2020 by relying on publicly available information about the\n\nregulatory crackdown and general decline in Qudian\u2019s industry in the second half of 2019. Opp.\n\nat 4-5. However, this information is appropriate for consideration of a competing inference.\n\n As noted above, this information is submitted solely to allow the Court to consider\n\ncompeting scienter inferences. See Op. Br. at 34-35. As part of the Tellabs inquiry, courts\n\nroutinely consider publicly available information about broader regulatory, economic or financial\n\ntrends. See, e.g., Manulife, 276 F.R.D. at 102 (taking judicial notice of results of SEC\n\n\n 19\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 25 of 26\n\n\n\n\ninvestigation, as well as \u201cmassive economic and political changes taking place during the Class\n\nPeriod,\u201d and concluding that \u201cPlaintiffs\u2019 allegations do not give rise to a strong inference of\n\nscienter unless all competing inferences are ignored\u201d); Plumbers & Steamfitters Local 773\n\nPension Fund v. Can. Imperial Bank of Comm., 694 F. Supp. 2d 287, 301-02 (S.D.N.Y. 2010)\n\n(considering \u201cunprecedented paralysis of the credit market and a global recession\u201d as part of \u201cthe\n\nTellabs \u2018comparative\u2019 inquiry\u201d and finding defendant\u2019s \u201cincremental measured response, while\n\nerroneous in hindsight, is as plausible an explanation for the losses as an inference of fraud\u201d).17\n\n In any event, documents incorporated by reference in the AC (e.g., numerous Qudian\n\ndisclosures) give rise to the same inference as the additional documents submitted by\n\nDefendants\u2014that Qudian failed to meet its guidance in the second half of 2020 due to regulatory\n\nchanges and a broad industry downturn. See, e.g., AC \u00b6 343 and n.13 (detailing Qudian\n\ndisclosures concerning P2P and other regulatory crackdowns). Thus, regardless of which\n\nsources the Court considers, it is clear that Qudian and its competitors faced regulatory and\n\neconomic challenges in late 2019. Moreover, Plaintiffs\u2019 theory\u2014that Defendants intentionally\n\ntook on risky loans to create a short-term upswing in Qudian\u2019s performance and then failed to\n\nprofit from it, only to have Qudian fall short of expectations a few months later\u2014is neither\n\ncogent nor compelling and fails to give rise to a strong inference of scienter.\n\n\n\n17\n Plaintiffs\u2019 quibbles with Defendants\u2019 sources, Opp. at 4 and n.5, are irrelevant. Plaintiffs offer\nno basis to question the reliability of those sources. Similarly, their claim that Defendants should\nprovide comparative stock price information, not revenue data for Qudian competitors makes no\nsense. Both types of data allow consideration of competing inferences. Here, revenue data was\nsimply more relevant. Finally, Plaintiffs\u2019 claim that Defendants sought \u201cto circumvent the\nCourt\u2019s briefing limitations,\u201d Opp. at 4 n.4, is puzzling. The \u201carguments\u201d Plaintiffs cite were an\nindex of documents with brief descriptions, Kreissman Decl. \u00b6 8, Ex. G\u2014a far cry from\nPlaintiffs\u2019 cases. See Martinich v. Ward, 2017 U.S. Dist. LEXIS 3713, at *6 (E.D.N.Y. Jan. 7,\n2017) (\u201cthirteen-page affirmation\u201d and \u201cseventeen-page memorandum of law\u201d); Monec Holding\nAG v. Motorola Mobility, Inc., No. CV 11-798-LPS-SRF, 2014 WL 4402825, at *1 (D. Del.\nSept. 5, 2014) (finding plaintiff\u2019s chart comparable to exhibits containing \u201clegal argument\u201d).\n\n\n 20\n\f Case 1:20-cv-00577-GHW Document 58 Filed 10/16/20 Page 26 of 26\n\n\n\n\nDated: October 16, 2020 SIMPSON THACHER & BARTLETT LLP\n\n\n\n By: /s/ James G. Kreissman\n James G. Kreissman\n\n James G. Kreissman (jkreissman@stblaw.com)\n Stephen P. Blake (sblake@stblaw.com)\n 425 Lexington Avenue\n New York, NY 10017\n Telephone: (212) 455-2000\n Facsimile: (212) 455-2502\n\n Counsel for Defendants Qudian Inc., Min Luo,\n and Carl Yeung\n\f","ocr_status":2,"date_upload":"2021-02-04T10:14:57.059115-08:00","document_number":"58","attachment_number":null,"pacer_doc_id":"127027802178","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Reply Memorandum of Law in Support of Motion","acms_document_guid":""}],"date_created":"2020-10-16T18:04:05.908341-07:00","date_modified":"2023-05-30T08:47:58.948562-07:00","date_filed":"2020-10-16","time_filed":null,"entry_number":58,"recap_sequence_number":"2020-10-16.001","pacer_sequence_number":215,"description":"REPLY MEMORANDUM OF LAW in Support re: 54 MOTION to Dismiss Plaintiffs' Amended Class Action Complaint. . Document filed by Min Luo, Qudian Inc., Carl Yeung..(Kreissman, James) (Entered: 10/16/2020)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/142933512/","id":142933512,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/147612024/","id":147612024,"tags":[],"absolute_url":"/docket/16738894/57/greco-v-qudian-inc/","date_created":"2020-10-02T17:33:22.950315-07:00","date_modified":"2023-05-30T08:47:58.877462-07:00","sha1":"43a4f8664be9bd98e5c3cb593c05cceef93f9780","page_count":42,"file_size":460366,"filepath_local":"recap/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.57.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.nysd.530501/gov.uscourts.nysd.530501.57.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 1 of 42\n\n\n\n\n UNITED STATES DISTRICT COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n\n\n\nJUAN PABLO DI BENEDETTO, GALESSI Case No. 1:20-cv-00577-GHW\nHOLDING CORP, AND PABLO GRECO,\nIndividually and On Behalf of All Others Similarly\nSituated,\n Plaintiffs,\n v.\n\nQUDIAN INC., MIN LUO, and CARL YEUNG,\n\n Defendants.\n\n\n\n\n PLAINTIFFS\u2019 OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS\n THE AMENDED CLASS ACTION COMPLAINT\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 2 of 42\n\n\n\n\n TABLE OF CONTENTS\n\n PAGE\n\nTABLE OF AUTHORITIES ............................................................................................. ii\nPRELIMINARY STATEMENT ........................................................................................ 1\nARGUMENT ...................................................................................................................... 3\n I. Legal Standards ....................................................................................................... 3\n II. Improper Extraneous Materials and Requests for Inferences in Defendants\u2019\n Favor .............................................................................................................................. 4\n III. Detailed, Corroborative Statements from Nine Well-Positioned Former\n Employees Strongly Support Plaintiffs\u2019 Falsity and Scienter Allegations .................... 6\n IV. The Complaint Adequately Pleads Materially False and Misleading Statements\n and Omissions .............................................................................................................. 10\n A. Applicable Pleading Standards ....................................................................... 10\n B. Materially False and Misleading Statements and Omissions ......................... 11\n 1. Misrepresentations Regarding Qudian\u2019s Compliance with Applicable\n Regulations and Omissions of Regulatory Issues and Violations ........... 11\n 2. Misrepresentations About Why Qudian Developed OP .......................... 14\n 3. Misrepresentations about the Composition of OP ................................... 16\n 4. Misrepresentations and Omissions about the Credit Trial Program and\n Qudian\u2019s Lending Standards in CLB ....................................................... 18\n C. Defendants Violated Their Duty to Disclose Known Trends and\n Uncertainties ................................................................................................... 20\n D. The Safe Harbor Does Not Apply ................................................................... 22\n V. The Statements Are Neither Opinion nor Puffery ................................................ 25\n VI. The Complaint Adequately Pleads Scienter ......................................................... 27\n A. Applicable Pleading Standards ....................................................................... 27\n B. Indicia Supporting a Strong Inference of Scienter .......................................... 27\n C. Luo and Yeong Had Motive and Opportunity to Commit Fraud.................... 32\n D. Corporate Scienter is Adequately Alleged ...................................................... 33\n VII. Plaintiffs Adequately Plead Liability Under Section 20(a) .................................. 34\nCONCLUSION ................................................................................................................. 34\n\n\n\n\n i\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 3 of 42\n\n\n\n\n TABLE OF AUTHORITIES\n\n\nCASES\n\nAbramson v. NewLink Genetics Corp.,\n 965 F.3d 165 (2d Cir. 2020).......................................................................................... 9, 26\n\nAldridge v. A.T. Cross Corp.,\n 284 F.3d 72 (1st Cir. 2002) ............................................................................................... 32\n\nAlpha Capital Anstalt v. Schwell Wimpfheimer & Assocs. LLP,\n 2019 U.S. Dist. LEXIS 55977 (S.D.N.Y. Mar. 30, 2019) ................................................ 13\n\nBell Atl. v. Twombly,\n 550 U.S. 544 (2007) .................................................................................................... 2, 3, 5\n\nBison Capital Corp. v. ATP Oil & Gas Corp.,\n 2010 U.S. Dist. LEXIS 62836 (S.D.N.Y. June 24, 2010)................................................... 3\n\nCampo v. Sears Holdings Corp.,\n 635 F.Supp. 2d 323 (S.D.N.Y. 2009), aff\u2019d, 371 Fed. Appx. 212 (2d Cir. 2010) ........... 10\n\nCity of Warren Police & Fire Ret. Sys. v. World Wrestling Entm\u2019t, Inc.,\n 2020 U.S. Dist. LEXIS 140925 (S.D.N.Y. Aug. 6, 2020) ......................................... passim\n\nDandong v. Pinnacle Performance Ltd.,\n 2011 U.S. Dist. LEXIS 126552 (S.D.N.Y. Oct. 31, 2011) ............................................... 19\n\nDodona I, LLC v. Goldman, Sachs & Co.,\n 847 F. Supp. 2d 624 (S.D.N.Y. 2012)......................................................................... 19, 20\n\nEmployees\u2019 Ret. Sys. v. Blanford,\n 794 F.3d 297 (2d Cir. 2015).................................................................................... 8, 27, 31\n\nFreudenberg v. E*Trade Fin. Corp.,\n 712 F.Supp. 2d 171 (S.D.N.Y. 2010).................................................................... 20, 24, 27\n\nGentry v. Kaltner,\n 2020 U.S. Dist. LEXIS 54182 (S.D.N.Y. Mar. 25, 2020) .................................................. 4\n\nGlaser v. The9, Ltd.,\n 772 F.Supp. 2d 573 (S.D.N.Y. 2011)................................................................................ 10\n\nGolesorkhi v. Green Mountain Coffee Roasters, Inc.,\n 973 F. Supp. 2d 541 (D.Vt. 2013), aff\u2019d 569 Fed. Appx. 43 (2d Cir. 2014) .................... 10\n\n ii\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 4 of 42\n\n\n\n\nHalperin v. eBanker USA.com, Inc.,\n 295 F.3d 352 (2d Cir. 2002).............................................................................................. 19\n\nHaw. Structural Ironworkers Pension Tr. Fund v. AMC Entm\u2019t Holdings, Inc.,\n 422 F.Supp. 3d 821 (S.D.N.Y. 2019)......................................................................... passim\n\nIn re Bear Stearns Cos. Inc. Sec., Derivative, and ERISA Litig., 763 F. Supp. 2d 423, 459\n (S.D.N.Y. 2011) ................................................................................................................ 26\n\nIn re BISYS Sec. Litig.,\n 397 F. Supp. 2d 430 (S.D.N.Y. 2005)............................................................................... 30\n\nIn re Facebook, Inc.,\n 986 F.Supp. 2d 487 (S.D.N.Y. 2013)................................................................................ 20\n\nIn re Hi-Crush Partners L.P. Sec. Litig.,\n 2013 U.S. Dist. LEXIS 171110 (S.D.N.Y. Dec. 2, 2013) .................................................. 3\n\nIn re Inv. Tech. Grp., Inc. Sec. Litig.,\n 251 F. Supp. 3d 596 (S.D.N.Y. 2017)............................................................................... 11\n\nIn re Merrill Lynch & Co. Research Reports Sec. Litig.,\n 272 F.Supp. 2d 243 (S.D.N.Y. 2003).................................................................................. 5\n\nIn re Molycorp Sec. Litig.,\n 2015 U.S. Dist. LEXIS 30892 (S.D.N.Y. Mar. 12, 2015) ................................................ 10\n\nIn re Petrobras Sec. Litig.,\n 116 F. Supp. 3d 368 (S.D.N.Y. 2015)......................................................................... 26, 29\n\nIn re Refco, Inc. Sec. Litig.,\n 503 F. Supp. 2d 611 (S.D.N.Y. 2007)............................................................................... 32\n\nIn re Scholastic Corp. Sec. Litig.,\n 252 F.3d 63 (2d Cir. 2001).................................................................................................. 8\n\nIn re Signet Jewelers Ltd. Sec. Litig.,\n 2018 U.S. Dist. LEXIS 199809 (S.D.N.Y. Nov. 26, 2018) .............................................. 31\n\nIn re Vale S.A. Sec. Litig.,\n 2017 U.S. Dist. LEXIS 42513 (S.D.N.Y. Mar. 23, 2017) ................................................ 23\n\nIn re Vivendi, S.A. Sec. Litig.,\n 838 F.3d 223 (2d Cir. 2016).............................................................................................. 10\n\n\n\n iii\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 5 of 42\n\n\n\n\nIn re Vivendi Universal, S.A. Sec. Litig.,\n 765 F. Supp. 2d 512 (S.D.N.Y. 2011)............................................................................... 25\n\nIn re Warnaco Grp. Inc. Sec. Litig.,\n 388 F.Supp. 2d 307 (S.D.N.Y. 2005)................................................................................ 10\n\nKhoja v. Orexigen Therapeutics, Inc.,\n 899 F.3d 988 (9th Cir. 2018) ............................................................................................... 4\n\nLewy v. Skypeople Fruit Juice, Inc.,\n 2012 U.S. Dist. LEXIS 128416 (S.D.N.Y. Sept. 7, 2012) ................................................ 31\n\nLickteig v. Cerberus Capital Mgmt., L.P.,\n 2020 U.S. Dist. LEXIS 74575 (S.D.N.Y. Apr. 26, 2020) ........................................... 13, 18\n\nLitwin v. Blackstone Grp., L.P.,\n 634 F.3d 706 (2d Cir. 2011).............................................................................................. 21\n\nMartinich v. Ward,\n 2017 U.S. Dist. LEXIS 3713 (E.D.N.Y. Jan. 7, 2017) ....................................................... 4\n\nMiao v. Fanhua,\n 442 F.Supp. 3d 774 (S.D.N.Y. 2020)................................................................................ 10\n\nMonec Holding AG v. Motorola Mobility, Inc.,\n 2014 U.S. Dist. LEXIS 123898 (D. Del. Sep. 5, 2014) ...................................................... 4\n\nMoshell v. Sasol Ltd.,\n 2020 U.S. Dist. LEXIS 153314 (S.D.N.Y. Aug. 24, 2020) ................................................ 8\n\nNew Orleans Emples. Ret. Sys. v. Celestica, Inc.,\n 455 F. App\u2019x 10 (2d Cir. 2011) .............................................................................. 9, 22, 31\n\nNguyen v. New Link Genetics Corp.,\n 297 F. Supp. 3d 472 (S.D.N.Y. 2018)........................................................................... 9, 10\n\nNovak v. Kasaks,\n 216 F.3d 300 (2d Cir. 2000).......................................................................................... 3, 10\n\nOkla. Firefighters Pension & Ret. Sys. v. Lexmark Int'l, Inc.,\n 367 F. Supp. 3d 16, 36 (S.D.N.Y. 2019) ......................................................................... 33\n\nOmnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund,\n 135 S.Ct. 1318 (2015) ...................................................................................................... 26\n\n\n\n\n iv\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 6 of 42\n\n\n\n\nPanther v. Jianpu Technology Inc.,\n 2020 U.S. Dist. LEXIS 177272 (S.D.N.Y. Sept. 27, 2020) .................................. 21, 24, 25\n\nPatel v. L-3 Communs. Holdings, Inc.,\n 2016 U.S. Dist. LEXIS 42978 (S.D.N.Y. Mar. 30, 2016) ................................................ 33\n\nPlumbers & Pipefitters Local Union No. 630 Pension-Annuity Tr. Fund v. Arbitron Inc.,\n 741 F. Supp. 2d 474 (S.D.N.Y. 2010)............................................................................... 32\n\nPlumbers & Pipefitters Nat'l Pension Fund v. Davis, 2020 U.S. Dist. LEXIS 66016\n (S.D.N.Y. Apr. 14, 2020) ..................................................................................... 22, 24, 27\n\nRombach v. Chang,\n 355 F.3d 164, 173 (2d Cir. 2004)...................................................................................... 24\n\nShanawaz v. Intellipharmaceutics Int\u2019l Inc.,\n 348 F.Supp. 3d 313 (S.D.N.Y. 2018)................................................................................ 32\n\nSkiadas v. Acer Therapeutics Inc.,\n 2020 U.S. Dist. LEXIS 105814 (S.D.N.Y. June 16, 2020), reconsid. denied,\n 2020 U.S. Dist. LEXIS 129104 (July 21, 2020) ........................................................ passim\n\nSlayton v. Am. Exp. Co.,\n 604 F.3d 758 (2d Cir. 2010).............................................................................................. 23\n\nTellabs, Inc. v. Makor Issues & Rights, Ltd.,\n 551 U.S. 308 (2007) .................................................................................................... 27, 32\n\n\nSTATUTES\n15 U.S.C. 78u-4(b)(2) .................................................................................................................. 22\n15 U.S.C. \u00a778u-5(c)(1) ................................................................................................................ 20\n\n\nRULES\nRule 12(b)(6) ................................................................................................................................... 3\n\nREGULATIONS\n17 C.F.R. \u00a7 229.303(a)(3)(ii) ........................................................................................................ 20\nForm 20-F, Item 503(d) ................................................................................................................ 20\n\n\n\n\n v\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 7 of 42\n\n\n\n\n Lead Plaintiffs Juan Pablo di Benedetto, Galessi Holding Corp, and Pablo Greco\n\n(\u201cPlaintiffs\u201d) respectfully submit this memorandum in opposition to the Motion to Dismiss\n\nPlaintiffs\u2019 Amended Class Action Complaint filed by defendants Qudian Inc. (\u201cQudian,\u201d or the\n\n\u201cCompany\u201d), Min Luo (\u201cLuo\u201d), and Carl Yeung (\u201cYeung\u201d) (collectively, \u201cDefendants\u201d).1\n\n PRELIMINARY STATEMENT\n\n Despite Defendants\u2019 repeated efforts to argue that Plaintiffs have \u201crecast\u201d their complaint\n\n(Def. Br. at 1, 7), the Amended Class Action Complaint (\u201cComplaint\u201d) is the first and only\n\ncomplaint filed by Lead Plaintiffs in this case. The Complaint details how, between December 13,\n\n2019 and January 15, 2020 (the \u201cClass Period\u201d), Defendants made materially false and misleading\n\nstatements and omissions concerning the current nature of Qudian\u2019s consumer lending business\n\nand its regulatory compliance, creating the false impression that the business was experiencing\n\nsignificant growth. Those misstatements of current and historical fact were followed by disastrous\n\nresults for the third quarter of 2019, and even worse results for the fourth quarter of 2019, just a\n\nfew months after the Company raised \u2013 and then reaffirmed \u2013 its fiscal guidance for 2019, shortly\n\nbefore abandoning its guidance altogether.\n\n In particular, Defendants materially misrepresented the nature of the relationship between\n\nQudian\u2019s legacy Core Loan Book (\u201cCLB\u201d) and Open Platform (\u201cOP\u201d), a purportedly new initiative\n\nlaunched in the third quarter of 2018. First, Defendants misrepresented that Qudian was in\n\ncompliance with applicable regulations when its lending partners were improperly outsourcing\n\ncredit assessments to the Company in violation of Circular 141,2 Qudian lost key lending licenses\n\n\n\n\n1\n Citations to the Complaint are indicated as \u201c\u00b6_.\u201d\n2\n Circular 141, issued by Chinese regulators on December 1, 2017, bars financial institutions from outsourcing core\nparts of the loan process, such as credit assessment and risk management, to third parties like Qudian. \u00b6\u00b65, 61, 62.\n\n 1\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 8 of 42\n\n\n\n\nthat it needed for CLB,3 and Qudian\u2019s multiple regulatory problems made its partners stop\n\nproviding funding for CLB. \u00b6\u00b65-7, 61-81. Second, Defendants described OP as a promising new\n\nbusiness line that allowed the Company to draw new borrowers from its large untapped user base\n\nwhile it continued to grow CLB. \u00b6\u00b68, 65, 92-94. In reality, however, OP was created to address\n\ndeep-seated regulatory concerns with CLB and, in fact, took the best borrowers away from CLB.\n\n\u00b6\u00b685, 92, 103-06, 125-27, 167-90. Third, Qudian tried to make up for this shortfall in CLB by\n\ndrastically lowering its lending standards as part of its \u201cCredit Trial Program\u201d to the point where\n\n\u2013 as finally disclosed by Defendants after the Company experienced terrible results in the third\n\nquarter of 2019, well over a year after beginning the Program \u2013 20% of CLB\u2019s borrowers did not\n\nmeet the Company\u2019s traditional lending standards. \u00b6\u00b69, 12, 105, 107-16, 128-36, 182, 191.\n\nDefendants, however, misrepresented that Qudian employed \u201cconservative\u201d lending standards that\n\nmaintained its strong asset quality. \u00b6\u00b64, 9, 112, 132-33, 253. Ultimately, Qudian\u2019s relaxing of\n\ncredit standards caused massive delinquencies that led to losses of billions of yuan. \u00b6115.\n\n Unable to squarely address the Complaint, which alleges \u201cenough facts to state a claim to\n\nrelief that is plausible on its face,\u201d Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007), Defendants\n\ninstead offer myriad documents outside the four corners of the Complaint for their truth and ask\n\nthe Court to ignore the well-pleaded allegations, choose Defendants\u2019 preferred set of facts, and\n\nfind in Defendants\u2019 favor at the pleading stage prior to discovery. These strained arguments ignore\n\nthe basic rule that the Court cannot resolve factual disputes at this stage and that well-pleaded\n\nallegations must be construed in favor of Plaintiffs. See Skiadas v. Acer Therapeutics Inc., 2020\n\nU.S. Dist. LEXIS 105814, at *26-27 (S.D.N.Y. June 16, 2020), reconsid. denied, 2020 U.S. Dist.\n\n\n3\n In May 2019, the Chinese government restricted the scope of business Qudian could conduct with one of its two\nonline lending licenses \u2013 Fuzhou Gaoxin District Qufenqi Microlending Co. Ltd. (the \u201cFuzhou License\u201d) \u2013 from a\nbroad, geographically-unlimited license to a narrow one limited to Ganzhou district and its surrounding counties. \u00b6\u00b66,\n72. This significantly impacted CLB, as it substantially limited the amount of loans Qudian could make. \u00b6\u00b673-74.\n\n 2\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 9 of 42\n\n\n\n\nLEXIS 129104 (July 21, 2020) (Woods, J.).\n\n Plaintiffs have also adequately alleged scienter, including through Defendants Yeung and\n\nLuo\u2019s own admissions regarding the nature of OP, their lack of transparency about OP\u2019s borrower\n\ncomposition, and Yeung\u2019s abrupt departure from the Company on the very same day that Qudian\n\nreleased its abysmal full-year 2019 results. Plaintiffs\u2019 allegations are further supported by\n\nstatements from nine former employees \u2013 including management-level employees and an\n\nemployee who dealt directly with Defendant Luo on a daily basis \u2013 whose statements are\n\ncorroborative and who were well positioned at the Company to \u201csupport the probability that [they]\n\n[ ] possess the information alleged.\u201d City of Warren Police & Fire Ret. Sys. v. World Wrestling\n\nEntm\u2019t, Inc., 2020 U.S. Dist. LEXIS 140925, at *17-18 (S.D.N.Y. Aug. 6, 2020) (citing Novak v.\n\nKasaks, 216 F.3d 300, 314 (2d Cir. 2000)).\n\n Defendants\u2019 motion should be denied in full.\n\n ARGUMENT\n\nI. Legal Standards\n\n To survive a Rule 12(b)(6) motion to dismiss, a complaint must simply allege sufficient\n\nfacts \u201cto raise a reasonable expectation that discovery will reveal evidence\u201d corroborating the\n\nclaims. Twombly, 550 U.S. at 556. When deciding a motion to dismiss under the PSLRA, \u201cthe\n\nCourt must liberally construe all claims, accept all factual allegations in the complaint as true, and\n\ndraw all reasonable inferences in favor of the plaintiff.\u201d In re Hi-Crush Partners L.P. Sec. Litig.,\n\n2013 U.S. Dist. LEXIS 171110, at *14 (S.D.N.Y. Dec. 2, 2013) (citations omitted). \u201c[T]he Court\u2019s\n\nrole . . . \u2018is merely to assess the legal feasibility of the complaint, not to assay the weight of the\n\nevidence which might be offered in support thereof.\u2019\u201d Bison Capital Corp. v. ATP Oil & Gas\n\nCorp., 2010 U.S. Dist. LEXIS 62836, at *14 (S.D.N.Y. June 24, 2010) (citations omitted).\n\n\n\n 3\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 10 of 42\n\n\n\n\nII. Improper Extraneous Materials and Requests for Inferences in Defendants\u2019 Favor\n\n Attempting to avoid the Complaint\u2019s well-pleaded allegations, Defendants impermissibly\n\noffer documents and facts outside the Complaint. \u201cAlthough the Court may take judicial notice of\n\nthe publication of a news article on a motion to dismiss, its consideration must be limited to the\n\n\u2018fact that press coverage . . . contained certain information, without regard to the truth of [its]\n\ncontents.\u2019\u201d Gentry v. Kaltner, 2020 U.S. Dist. LEXIS 54182, at *19 (S.D.N.Y. Mar. 25, 2020)\n\n(citing Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 425 (2d Cir. 2008)); see also Khoja\n\nv. Orexigen Therapeutics, Inc., 899 F.3d 988, 998-99 (9th Cir. 2018) (noting \u201cconcerning pattern\n\nin securities cases\u201d of \u201coveruse and improper application\u201d of incorporation-by-reference and\n\njudicial notice doctrines \u201cto defeat what would otherwise constitute adequately stated claims at the\n\npleading stage\u201d).\n\n Defendants attach to their Motion 28 articles from various media sources regarding\n\n\u201cregulatory developments\u201d in China, none of which relate to Qudian,4 as well as SEC filings from\n\ntwo of Qudian\u2019s purported \u201ccompetitors,\u201d 360 Finance, Inc. and Finolution Group. Def. Br. at 6-7\n\n& n.3, 34-35 & n.22; Kreissman Decl., Exs. G.1-G.29 & Q.1-Q.5. Many of these purported \u201cnews\n\narticles\u201d are, in reality, blog posts or stories from websites of unknown reliability.5\n\n Despite their averments to the contrary, Defendants offer these articles and SEC filings for\n\n\n4\n Defendants\u2019 four-page index contains a \u201cTopic\u201d column which purports to summarize the articles and highlight their\nlegal significance. See Kreissman Decl., Ex. G.1 at 1 (e.g., topic of Ex. G.8: \u201cNew regulation imposes mandatory data\nreporting obligations on P2P operators, leading to tightened regulation and greater oversight over P2P lending\nindustry\u201d) (emphasis added). Defendants should not be permitted to circumvent the Court\u2019s briefing limitations\nthrough the use of exhibits that make additional arguments; Ex. G.1 should be disregarded. See Martinich v. Ward,\n2017 U.S. Dist. LEXIS 3713, at *6 (E.D.N.Y. Jan. 7, 2017) (admonishing counsel for attempting to evade page\nlimitations for motions by attaching multiple exhibits and a lengthy affirmation); see also Monec Holding AG v.\nMotorola Mobility, Inc., 2014 U.S. Dist. LEXIS 123898, at *3-4 (D. Del. Sep. 5, 2014) (\u201cThis court has recognized\nthe impropriety of including legal analyses in charts attached as exhibits to the briefing, as opposed to including them\nin the briefing itself, for purposes of circumventing page limitations\u201d) (citations omitted).\n5\n See, e.g., Exs. G.2, G.6, G.8, G.18, G.22, G.25 (\u201cTechnode\u201d); G.3 (\u201cNew America\u201d); G.7 (\u201cMingtiandi\u201d); G.9\n(\u201cCrowdfund Insider\u201d); G.10, G.13, G.14, G.21 (\u201cCaixin\u201d); G.17 (\u201cThe Epoch Times\u201d); G.19 (\u201cAnalytics Insight\u201d);\nG.24 (\u201cPymnts.com\u201d); G.26 (\u201cJqknews.com\u201d). Perhaps this is why Defendants did not include the sources\u2019 names in\nthe index. See Ex. G.1. Plaintiffs do not challenge Ex. G.12, as this source is cited in the Complaint.\n\n 4\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 11 of 42\n\n\n\n\ntheir truth, as they cite to them as evidence that \u201cQudian\u2019s business continued to slow down in the\n\nfourth quarter of 2019 as the credit and regulatory environments deteriorated further.\u201d Def. Br. at\n\n6-7 & n.3; see also id. at 34-35.6 Thus, Defendants are impermissibly trying to use these extraneous\n\nsources to refute Plaintiffs\u2019 well-pleaded allegations that it was Qudian\u2019s lowering of its credit\n\nstandards \u2013 and not regulatory developments \u2013 that caused the Company\u2019s substantial losses from\n\nborrower delinquencies and falling revenues at the end of 2019. However, under Twombly, the\n\nquestion is whether Plaintiffs\u2019 claims \u2013 construed in Plaintiffs\u2019 favor \u2013 are \u201cplausible.\u201d 550 U.S.\n\nat 570. Defendants may not rewrite the Complaint with their own purported facts, and they are not\n\nentitled to inferences from the facts in their favor. See Acer, 2020 U.S. Dist. LEXIS 105814, at\n\n*26-27 (\u201cAt the motion to dismiss stage of a securities fraud action, \u2018the court reads ambiguities\u2019\n\nin challenged statements \u2018in [the plaintiff\u2019s] favor[.]\u201d) (citation omitted).\n\n Moreover, Defendants\u2019 alternative factual narrative is particularly implausible because\n\nthey admitted, and market analysts disappointingly observed, that Qudian\u2019s lowering its credit\n\nstandards led to its increased delinquencies and poor performance at the end of 2019. \u00b6\u00b6147-55,\n\n189. Similarly, Defendants\u2019 interpretation of Qudian\u2019s results (see Def. Br. at 1, 5-7) is misplaced\n\nbecause the Company\u2019s results in the first half of 2019 were a mirage fueled by Defendants\u2019\n\nacceptance of lower-quality borrowers in CLB. When the Company\u2019s share price then collapsed\n\nafter the truth was revealed, investors reacted not just to Qudian\u2019s failure to meet its inflated\n\nexpectations, but also to the fact that its performance \u201cprove[d] that the [Company\u2019s] business model\n\nis unsustainable.\u201d \u00b6332; see also \u00b6\u00b6 53-57.\n\n Defendants\u2019 Exhibits G.1-G.29 and Q.1-Q.5, as well as their various proffered \u201cfacts\u201d and\n\n\n6\n If Defendants wanted to simply present \u201cpublicly available economic data\u201d to the Court, as they claim (Def. Br. at\n34-35 n.22), they could have cited to historical stock prices from a website such as Yahoo Finance, as was done in the\ncase cited by Defendants, In re Merrill Lynch & Co. Research Reports Sec. Litig., 272 F.Supp. 2d 243, 254 (S.D.N.Y.\n2003). Instead, Defendants attached 98 pages of other companies\u2019 SEC filings to their brief.\n\n 5\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 12 of 42\n\n\n\n\nrequests for inferences in their favor, should be disregarded.\n\nIII. Detailed, Corroborative Statements from Nine Well-Positioned Former Employees\n Strongly Support Plaintiffs\u2019 Falsity and Scienter Allegations\n\n Plaintiffs\u2019 allegations include detailed, corroborative statements of nine CWs that strongly\n\nsupport falsity and scienter.\n\n The CWs establish that Qudian was in crisis at the end of 2018 because of the loss of\n\nbusiness from finance company Ant Financial (\u201cAnt\u201d) and the failure of its projects outside of its\n\nconsumer lending business. \u00b6\u00b640, 41, 44, 107.7 CW 4 explained that China\u2019s strict online lending\n\nregulations made many of the financial institutions that provided Qudian with funding reluctant to\n\ndo business with Qudian, because of regulatory concerns with an intermediary guaranteeing loans.\n\n\u00b6\u00b67, 76, 77. This decreased funding for the CLB,8 which put pressure on Qudian to secure funding\n\nand, combined with regulatory concerns, posed a threat to the viability of Qudian\u2019s business. \u00b6\u00b67,\n\n70, 75-77, 187.\n\n Indeed, according to a former management trainee who worked on multiple projects at\n\nQudian during the Class Period (CW 5), Qudian developed many new businesses because the \u201ccash\n\nloan business was affected by government regulations. They were afraid that regulatory changes\n\n\n7\n When Qudian was founded by Defendant Luo in 2014, it focused on facilitating high-interest loans to Chinese college\nstudents. \u00b631. As a result of increasing scrutiny of such businesses, which resulted in Chinese regulations banning on-\ncampus student lending due to a rash of student suicides in response to threatening collection tactics (\u00b631 & n.2), the\nCompany changed its business model several times and suffered a variety of failed projects prior to the beginning of\nthe Class Period. For example, in 2015, Qudian established a business partnership with Ant, which allowed Qudian to\nsource borrowers Ant\u2019s mobile third-party payment service provider. \u00b636. The agreement was not renewed in August\n2018, hurting the Company\u2019s performance. \u00b6\u00b637-42, 107. Shortly after its October 2017 IPO, Qudian launched a\nbudget auto financing business, Dabai Auto, which Qudian shut down by the second quarter of 2019 after it sustained\nheavy losses. \u00b6\u00b64, 45-47. Qudian then decided to focus on its consumer lending business. \u00b6\u00b62, 53, 196.\n8\n Qudian\u2019s consumer lending business focuses on making online, short-term loans to younger consumers in China\nwith inadequate credit history \u00b6\u00b62, 28, 33. Such loans typically charge annualized fee rates of up to 36%. \u00b634. There\nare two components to this business: CLB and OP. CLB consists of \u201con-balance sheet\u201d transactions, which are loans\nQudian funds with its own capital and loans funded by its institutional funding partners, and \u201coff-balance sheet\u201d\ntransactions, where Qudian refers qualified credit applications to banks, who fund the borrowers directly and pay\nQudian a loan facilitation fee. \u00b6\u00b62, 59. In OP, similar to Qudian\u2019s preexisting off-balance sheet loan facilitation\nbusiness, Qudian refers borrowers to other financial institutions that make loans directly to the borrowers, for which\nit receives a commission. \u00b6\u00b62, 82, 92, 103. The main difference between OP and Qudian\u2019s loan facilitation business\nwas that Qudian guaranteed the direct off-balance sheet loans that it facilitated, but did not guarantee OP loans. \u00b6103.\n\n 6\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 13 of 42\n\n\n\n\nwould destroy the whole business, so they needed to have some backup plans.\u201d \u00b675. A former\n\nbusiness manager at Qudian during the Class Period (CW 7) similarly explained that Qudian tried\n\nso many new businesses because CLB violated government regulations and needed to be shut\n\ndown entirely. \u00b699. A former regional manager in Qudian\u2019s Dubai Auto and online education\n\nbusinesses until the month the Class Period began (CW 2) described Qudian\u2019s repeated attempts\n\nto start new businesses as \u201cblind innovations,\u201d of which the Company tried so many that employees\n\n\u201cthought they were just a joke.\u201d \u00b650. And CW 4 explained that regulatory concerns were one\n\nreason why Qudian was constantly trying to start new businesses outside of CLB; Qudian was\n\n\u201clooking for new ways to generate income.\u201d \u00b676.\n\n CW 4, who directly assisted Luo, communicated with Luo on a daily basis and worked\n\nwith Qudian\u2019s funding partners, avers that Qudian was violating Circular 141 because it was\n\nconducting credit assessments for banks, particularly where the banks \u201chad a good relationship\n\nwith the local regulator,\u201d and banks were relying upon Qudian\u2019s risk assessments rather than\n\nconducting their own independent assessments. \u00b6\u00b65, 69. This demonstrates the falsity of\n\nDefendants\u2019 statements throughout the Class Period that Qudian was in compliance with banking\n\nregulations by having banks conduct their own independent review of credit applications. \u00b667.\n\nThese CW statements also support the falsity of Defendants\u2019 repeated assurances to investors that\n\nQudian had a \u201ccurrent regulatory compliant and stable operating structure.\u201d \u00b6\u00b678-81, 122.\n\n The CW statements further support the allegations that OP was Yeung\u2019s idea, was created\n\nto address regulatory concerns with CLB, and was not a new product, but was a slightly modified\n\nversion of Qudian\u2019s preexisting loan facilitation business to address those concerns, despite\n\nDefendants\u2019 representations to the contrary. \u00b6\u00b683, 95, 96, 98, 100, 101, 357, 359. A former\n\nmanager in Qudian\u2019s loan business (CW 1) explained that Qudian described OP as a new line of\n\n\n\n 7\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 14 of 42\n\n\n\n\nbusiness \u201c[f]or compliance reasons,\u201d and that the preexisting loan business was simply \u201crenamed\n\nas [OP] around the time he left the Company\u201d (May 1, 2019). \u00b698. Similarly, according to a former\n\npublic relations specialist at Qudian (CW 8), OP was not a \u201cnew product,\u201d but \u201cbecame more\n\nimportant\u201d in late 2018 due to regulatory concerns. \u00b6101. Further corroborating this is CW 4, who\n\nexplained that OP was \u201cjust a PR story\u201d and that it \u201cdid not change Qudian\u2019s practice because\n\n\u201cQudian also facilitated loans before it had [OP].\u201d \u00b696. Moreover, CW 7 averred that OP took\n\nbusiness away from CLB so that while OP \u201cmade much profit in the short term, in the long term,\n\nit was just using up its own customers.\u201d \u00b6100. This supports the falsity of Defendants\u2019 statements\n\nthroughout the Class Period that OP was created as a promising new venture that was adding to\n\nQudian\u2019s business alongside the continued growth of CLB. \u00b6\u00b64, 8, 10, 11, 55, 108, 130-31.\n\n Defendants predictably argue that none of the CW statements should be credited but their\n\nreasoning is faulty or factually wrong. First, they attack CW 4 because he or she left the Company\n\nthree months before the Class Period began. But this does nothing to undermine the veracity of the\n\nstatements and instead draws attention to the fact that CW 4\u2019s allegations establish that Defendants\n\nhad knowledge of Circular 141 violations shortly before the Class Period began and before the\n\nfirst false and misleading statement was issued. See Employees\u2019 Ret. Sys. v. Blanford, 794 F.3d\n\n297, 307 (2d Cir. 2015) (rejecting argument that CW statements \u201cmust be linked to specific\n\nquarters to meet the pleading standard,\u201d because \u201callegations concerning activity in one period can\n\nsupport an inference of similar circumstances in a subsequent period\u201d) (citation omitted); see also\n\nIn re Scholastic Corp. Sec. Litig., 252 F.3d 63, 72 (2d Cir. 2001) (holding that pre-class period\n\ninformation may \u201cestablish that at the start of the class period, defendants had a basis for knowing\u201d\n\ncertain information); Moshell v. Sasol Ltd., 2020 U.S. Dist. LEXIS 153314, at *17 (S.D.N.Y. Aug.\n\n24, 2020) (rejecting challenge to CW based on time period of his knowledge). CW 4 also continued\n\n\n\n 8\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 15 of 42\n\n\n\n\nto receive information about OP from former colleagues during the Class Period, in addition to\n\nCW 4\u2019s firsthand observations about Qudian\u2019s funding pressure. \u00b6\u00b676-77.\n\n Defendants also complain that CW 4\u2019s statements should be rejected because he or she did\n\nnot provide the names of the specific banks that violated Circular 141 with Qudian, but, again, this\n\ndoes not bear on the reliability of his or her statements and is not required. \u201cAt the pleadings stage,\n\n\u2018Plaintiff[s] [are] only required to show that the source of the belief is someone in a position to\n\nhave had personal knowledge.\u2019\u201d Nguyen v. New Link Genetics Corp., 297 F. Supp. 3d 472, 484-\n\n85 (S.D.N.Y. 2018) (rejecting \u201cdemand [for] more details\u201d about CW, noting that his \u201cknowledge\n\nand credibility regarding the relevant information can be tested in discovery\u201d) (citation omitted);\n\naff\u2019d on other grounds sub nom. Abramson v. NewLink Genetics Corp., 965 F.3d 165 (2d Cir.\n\n2020)); New Orleans Emples. Ret. Sys. v. Celestica, Inc., 455 F. App\u2019x 10, 15 (2d Cir. 2011)\n\n(\u201cEven with the heightened pleading standard under Rule 9(b) and the [PSLRA] we do not require\n\nthe pleading of detailed evidentiary matter in securities litigation.\u201d) (citation omitted).\n\n Defendants\u2019 only remaining CW attack is directed at the eight additional CWs, seeking to\n\ndiscredit them as merely \u201clow-level employees\u201d who did not directly communicate with Luo or\n\nYeung. Def. Br. at 32.9 But these CWs included managers (one of whom reported to a director\n\nwho reported to Luo), regional managers, a public relations specialist, and a financial analyst, all\n\nof whom worked at the Company during the Class Period and have been described with \u201csufficient\n\nparticularity to support the probability that a person in the position occupied by the source would\n\npossess the information alleged.\u201d World Wrestling, 2020 U.S. Dist. LEXIS 140925, at *17-18\n\n\n\n\n9\n This attack was not leveled against CW 4, who spoke on a daily basis to Defendant Luo. \u00b669.\n\n 9\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 16 of 42\n\n\n\n\n(citing Novak, 216 F.3d at 314);10 see \u00b6\u00b640, 41, 83, 99, 101, 107.11 Further, \u201cthere is no baseline\n\nrequirement of [contact with individual defendants] in order to allege sufficient particularity . . .\n\nA plaintiff need only plead the \u2018probability that [the CW] know[s] what [he or she] is talking\n\nabout.\u2019\u201d New Link, 297 F. Supp. 3d at 484 (citation omitted). \u201cThis liberal standard make[s] sense;\n\nthe heightened demands of the PSLRA will often require plaintiffs to rely on the testimony of\n\nconfidential sources . . . .\u201d World Wrestling, 2020 U.S. Dist. LEXIS 140925, at *18.\n\nIV. The Complaint Adequately Pleads Materially False and Misleading Statements and\n Omissions\n\n A. Applicable Pleading Standards\n\n \u201c\u2018The test for whether a statement is materially misleading under Section 10(b)\u2019 is . . .\n\n\u2018whether the defendants\u2019 representations, taken together and in context, would have misled a\n\nreasonable investor.\u2019\u201d In re Vivendi, S.A. Sec. Litig., 838 F.3d 223, 250 (2d Cir. 2016) (emphasis\n\nin original) (citation omitted). Materiality \u201cis generally inappropriate for determination at the\n\npleading stage.\u201d In re Warnaco Grp. Inc. Sec. Litig., 388 F.Supp. 2d 307, 313 (S.D.N.Y. 2005)\n\n(citation omitted). \u201cThus, the matter must go to a jury unless the Court, drawing all reasonable\n\ninferences in favor of the plaintiff, determines that reasonable minds could not differ on the\n\n\n\n\n10\n See also In re Molycorp Sec. Litig., 2015 U.S. Dist. LEXIS 30892, at *3-4 n.2 (S.D.N.Y. Mar. 12, 2015) (accepting\nCWs identified by employment dates, positions, and direct supervisors); Glaser v. The9, Ltd., 772 F.Supp. 2d 573,\n590 (S.D.N.Y. 2011) (courts will \u201ccredit confidential sources . . . whose positions and/or job responsibilities are\ndescribed sufficiently to indicate a high likelihood that they actually knew facts underlying their allegations\u201d)\n(citations omitted).\n11\n The cases relied upon by Defendants are inapposite. In Campo v. Sears Holdings Corp., 635 F.Supp. 2d 323, 327\n(S.D.N.Y. 2009), aff\u2019d, 371 Fed. Appx. 212 (2d Cir. 2010), plaintiffs relied upon statements from CWs who recanted\nthe allegations attributed to them. 371 Fed. Appx. at 217. In Miao v. Fanhua, unlike here, plaintiff did \u201cnothing\nwhatsoever to confirm the identities or statements of the confidential sources\u201d and simply \u201clearned about [them]\nsecondhand from citations in a short-seller\u2019s report\u201d which had \u201csignificant factual errors.\u201d 442 F.Supp. 3d 774, 804\n(S.D.N.Y. 2020). Also, unlike here, the CWs\u2019 positions, job responsibilities, and employment periods were not\ndescribed with sufficient particularity, and the statements at issue were \u201centirely unmoored in time\u201d Id. at 802-03; see\nalso World Wrestling, 2020 U.S. Dist. LEXIS 140925, at *18 n.1 (distinguishing Fanhua for same reasons and\nrejecting challenge to CW statements). Finally, the CW statements in Golesorkhi v. Green Mountain Coffee Roasters,\nInc. related to meetings that occurred at least two years before the alleged false statements. 973 F. Supp. 2d 541, 556\n(D.Vt. 2013), aff\u2019d, 569 Fed. Appx. 43 (2d Cir. 2014).\n\n 10\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 17 of 42\n\n\n\n\nquestion of whether the statements alleged in the complaint were misleading in light of the\n\ncircumstances under which they were made.\u201d In re Inv. Tech. Grp., Inc. Sec. Litig., 251 F. Supp.\n\n3d 596, 609 (S.D.N.Y. 2017) (citation omitted).\n\n B. Materially False and Misleading Statements and Omissions\n\n 1. Misrepresentations Regarding Qudian\u2019s Compliance with Applicable\n Regulations and Omissions of Regulatory Issues and Violations\n\n Throughout the Class Period, Defendants claimed that Qudian complied with Circular 141,\n\nwhich \u2013 as they conceded \u2013 prohibited the \u201coutsourc[ing] [of] core business functions, such as\n\ncredit assessment and risk management, to third parties.\u201d \u00b6\u00b666, 67 (citing 2018 20-F). Yet\n\nDefendants did not disclose that that banks were outsourcing credit assessments to it and that these\n\nbanks were relying upon Qudian\u2019s credit assessments rather than conducting their own. \u00b6\u00b663, 69,\n\n80, 81. Rather, Defendants falsely represented that although Qudian referred credit applications to\n\nbanks, including \u201can assessment of their credit profiles and [Qudian\u2019s] suggested credit limits,\u201d\n\nthe banks would \u201creview the credit applications independently in accordance with their credit\n\nassessment standards and approve credit for drawdown.\u201d \u00b667. Further, Defendants failed to\n\ndisclose that the amount of loans that Qudian could make in CLB was severely limited in May\n\n2019 when the government narrowed the geographic scope of the Fuzhou License. \u00b6\u00b66, 64, 66, 72,\n\n73, 81. Defendants also failed to disclose that China\u2019s online lending regulations made many of\n\nthe financial institutions that provided Qudian with funding reluctant to do business with Qudian\n\nbecause of regulatory concerns with an intermediary guaranteeing loans. \u00b6\u00b67, 75-77. Worse, not\n\nonly did Defendants not disclose these regulatory issues, but they falsely represented CLB\n\ncomplied with applicable regulations, and that there were \u201cno material regulatory uncertainties\u201d\n\nfor the Company. \u00b6\u00b63, 78-81, 122, 206, 218, 222, 224, 230, 271, 278.\n\n Defendants argue that Qudian did, in fact, adequately disclose these regulatory issues. They\n\n\n 11\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 18 of 42\n\n\n\n\nclaim that Qudian disclosed it had not used the Fuzhou License since 2017, so the 2019 restriction\n\nof it was immaterial. Def. Br. at 17-18 (citing 2017 20-F). However, the filing that Defendants\n\nreference merely indicates that as of December 31, 2017, Qudian had \u201ctemporarily ceased funding\n\ncredit drawdowns through [its] online small credit companies\u201d earlier that month as a result of\n\nongoing \u201cinspections by the local regulatory authorities as part of a broader regulatory effort to\n\npromote compliance.\u201d 2017 20-F at 12, 73 (Kreissman Decl., Ex. J). In addition to being\n\n\u201ctemporary,\u201d this disclosure does not actually mention Qudian\u2019s lending licenses. Defendants ask\n\nthe Court to make the unfounded factual leap that the only way that Qudian used its lending\n\nlicenses was through its \u201conline small credit companies,\u201d and not for on-balance sheet loans that\n\nit indisputably continued to make with its \u201cown capital.\u201d \u00b6\u00b658, 71. Moreover, elsewhere in the\n\n2017 20-F that Defendants cite, Qudian states: \u201cWe fund credit directly to our borrowers through\n\n. . . Fuzhou Microcredit, and . . . Ganzhou Microcredit, both of which have obtained approval of\n\nthe relevant competent local authorities to provide credit.\u201d Id. at 62. These disclosures do not\n\nindicate that Qudian had \u201cabandoned the use of its micro-lending licenses,\u201d as Defendants suggest.\n\nDef. Br. at 17. At any rate, \u201c[a]t the motion to dismiss stage of a securities fraud action, \u2018the court\n\nreads ambiguities\u2019 in challenged statements \u2018in [the plaintiff\u2019s] favor.\u2019\u201d Acer, 2020 U.S. Dist.\n\nLEXIS 105814, at *26-27 (citation omitted).\n\n With respect to Circular 141, Defendants argue that they have not \u201cbeen accused,\n\ninvestigated, or found liable for violating Circular 141.\u201d Def. Br. at 19; see also id. at 23. But this\n\nignores Plaintiffs\u2019 well-pleaded allegations that banks were outsourcing credit assessments to\n\nQudian when regulators were willing to look the other way, and that these banks were therefore\n\nnot conducting \u201cindependent\u201d credit assessments, as Defendants falsely represented. \u00b669.\n\nDefendants also aver they \u201cdisclosed the credit assessment services [Qudian] provided to banks,\n\n\n\n 12\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 19 of 42\n\n\n\n\nthe uncertainty surrounding Circular 141, and the fact that [Qudian] could face regulatory action\n\nfor violating Circular 141.\u201d Def. Br. at 18. Similarly, Defendants argue that they \u201cdisclosed the\n\napplicable law and facts\u201d and \u201chad no legal obligation to draw negative conclusions or predict\n\nfuture legal consequences.\u201d Id. at 19. These are red herrings. Plaintiffs do not argue that Qudian\n\nwas obligated to disclose legal conclusions or legal interpretations; what Qudian was obligated to\n\ndisclose were material facts \u2013 i.e., that banks were outsourcing credit assessments to it and not\n\nconducting their own, independent evaluations of credit files.\n\n Further, while \u201c[a] corporation does not have a duty to disclose information simply because\n\nit is material\u201d or \u201cbecause a reasonable investor would very much like to know that fact,\u201d it does\n\nhave an obligation to do so when \u2018secret information renders prior public statements materially\n\nmisleading.\u2019\u201d Alpha Capital Anstalt v. Schwell Wimpfheimer & Assocs. LLP, 2019 U.S. Dist.\n\nLEXIS 55977, at *20 (S.D.N.Y. Mar. 30, 2019) (Woods, J.) (citation omitted); see also Lickteig\n\nv. Cerberus Capital Mgmt., L.P., 2020 U.S. Dist. LEXIS 74575, at *23 (S.D.N.Y. Apr. 26, 2020)\n\n(Woods, J.) (\u201cWhere a company does not have an obligation to speak but chooses to do so anyway,\n\nit assumes \u2018a duty to be both accurate and complete.\u2019\u201d) (citation omitted). Here, Defendants\n\ndisclosed: (i) the existence of Circular 141, (ii) that under Circular 141, \u201c[a] bank may not\n\noutsource its core business functions, such as credit assessment and risk management, to third\n\nparties,\u201d and (iii) that Qudian referred and transferred qualified credit applications and assessments\n\nto banks that supposedly conducted independent assessments of those files. \u00b6\u00b666-67. Having\n\ndisclosed these facts, Defendants had a duty to \u201ctell the whole truth\u201d by informing investors Qudian\n\nwas engaged in the very activities that it conceded violated Circular 141. Their failure to do so was\n\na material omission (in addition to their affirmatively misstating Qudian\u2019s regulatory compliance).\n\n Finally, Defendants argue \u2013 with no support\u2013 that Qudian was not governed by Circular\n\n\n\n 13\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 20 of 42\n\n\n\n\n141 because it \u201con its face, governs the actions of banks who rely on others for credit assessments,\n\nnot those who provide credit assessments to the banks.\u201d Def. Br. at 19 (emphasis in original). This\n\nis beside the point. Defendants did not inform investors that banks were outsourcing credit\n\nassessments to it \u2013 regardless of their self-serving position that they were not subject to Circular\n\n141. Of course, this assertion is belied by Defendants\u2019 own statements that show Defendants\n\nbelieved Qudian was subject to Circular 141: \u201cIf our arrangement with banks is deemed to be in\n\nviolation of Circular 141, we could be subject to penalties and/or be required to significantly\n\nchange our business model.\u201d 2018 20-F at 13 (Kreissman Decl. Ex. K). Further, the sections of\n\nthe Complaint and SEC filings that Defendants cite do not indicate that Circular 141 was limited\n\nonly to banks. See \u00b666 & 2018 20-F at 12-13 (simply stating that \u201ca bank may not outsource its\n\ncore business functions, such as credit assessment and risk management, to third parties.\u201d).\n\n 2. Misrepresentations About Why Qudian Developed OP\n\n Plaintiffs allege that Defendants falsely portrayed OP as a promising new business\n\ninitiative that would \u201cdrive additional profit growth\u201d alongside continued growth in CLB. \u00b6\u00b68, 65,\n\n82-83, 86, 120-21. For example, on March 19, 2019, when Luo discussed Qudian\u2019s results from\n\nthe fourth quarter and full year 2018, he described OP as supporting the Company\u2019s \u201cearnings\n\noutlook through activations in our existing user base\u201d and as a business that would \u201cdeliver[] long-\n\nterm growth for our shareholders.\u201d \u00b686. As the Class Period progressed, Defendants described this\n\ndual-track growth as already occurring. See \u00b6\u00b688-89, 121, 239, 248, 256 (Luo describing OP in\n\nthe first quarter of 2019 as \u201calready showing strong profit potential\u201d while CLB \u201ccontinue[d]\n\nrobust growth,\u201d with Yeung adding that OP already \u201ccontributed meaningful revenue\u201d); \u00b6\u00b6276,\n\n280, 282 (similar statements from Q2 2019). These were statements of current and historical fact\n\nbecause they described CLB\u2019s and OP\u2019s past performance as meeting Qudian\u2019s business goals.\n\n These statements were materially false and misleading because Qudian\u2019s true reason for\n 14\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 21 of 42\n\n\n\n\ndeveloping OP was that CLB violated China\u2019s strict online lending regulations and risked being\n\nshut down because of the violations of Circular 141 and other regulatory issues with CLB, and\n\nbecause Qudian was losing funding sources due to financial institutions\u2019 concerns about regulatory\n\nproblems. \u00b6\u00b685, 92, 98-99, 124, 167-76. Indeed, the Complaint adequately pleads that Defendants\n\ndid not view OP as an additional product that generated revenue on top of CLB, as described to\n\ninvestors, but rather as a revised business model that would allow Qudian to conduct its business\n\nin a regulatory compliant manner. \u00b6\u00b657, 65, 98, 124. It was also misleading to describe OP\u2019s and\n\nCLB\u2019s short-term growth without disclosing that this performance was fueled by Qudian\u2019s\n\nsubstantially lowering credit standards in CLB, and not by OP drawing on the Company\u2019s large\n\npool of previously untapped borrowers. See infra \u00a7 IV.B.3.\n\n In response, Defendants mischaracterize Plaintiffs\u2019 allegations regarding the relationship\n\nbetween OP and CLB. Def. Br. at 23. Plaintiffs do not allege that \u201c[g]uaranteeing loans and\n\nbearing losses in the case of a default is [ ] the same business as a risk-free commission-based\n\nreferral platform.\u201d Id. Rather, Plaintiffs\u2019 allegation is that OP served the same purpose in Qudian\u2019s\n\nbusiness plan as CLB\u2019s pre-existing loan-referral business. Both acted as vehicles for referring\n\nloans to other financial institutions, and any changes that Qudian made in OP were driven by\n\nQudian\u2019s regulatory concerns with CLB rather than Defendants\u2019 stated (but false) reason that OP\n\npresented a new business that would add to CLB. \u00b6\u00b6104, 117, 125, 186-90.12\n\n Defendants also argue that because Qudian continues to provide credit assessments as part\n\nof OP, \u201c[b]y definition, Qudian could not have created OP to avoid Circular 141 risk\u2026.\u201d Def. Br.\n\nat 24; see also id. at 33-34. But this argument mischaracterizes the regulatory risk that OP was\n\n\n\n12\n Defendants also proffer an alternative, logic-straining interpretation of Yeung\u2019s statement in the November 18, 2019\nearnings call that CLB and OP were doing the \u201csame business.\u201d Def. Br. at 23 n.13. Defendants are impermissibly\nasking the Court to draw inferences from the well-pleaded allegations of falsity in their favor.\n\n 15\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 22 of 42\n\n\n\n\ndesigned to address. Plaintiffs do not argue that OP was created only to address Circular 141\u2019s ban\n\non outsourcing credit assessments, but rather, that it was intended to resolve the problem that CLB\n\nguaranteed loans for other financial institutions. After Qudian\u2019s disastrous results for the third\n\nquarter of 2019, Yeung admitted that the \u201cmost important\u201d feature of OP for both Qudian and its\n\nfunding partners was that it \u201cis the most regulatory compliant structure because there is no third\n\nparty involved in guaranteeing risk.\u201d \u00b6171; see also \u00b6\u00b6170-76, 193-96. Defendants\u2019 failure to even\n\nmention this reason for OP in their Motion is telling. Indeed, these regulatory concerns were so\n\nstark that Qudian was losing funding sources for CLB because other financial institutions were\n\nconcerned about these regulatory problems. \u00b6\u00b67, 70, 75-77, 96, 124, 187, 359.\n\n 3. Misrepresentations About the Composition of OP\n\n Plaintiffs allege that Defendants falsely portrayed OP as serving a different set of borrowers\n\nin addition to those that were already approved to access CLB. For example, Qudian\u2019s March 18,\n\n2019 Management Presentation represented OP as providing the Company with the ability to attain\n\nadditional \u201cgrowth beyond [the core] loan book\u201d from Qudian\u2019s \u201cmassive dormant user base\u201d of\n\napproximately 65 million registered users who were not currently borrowing from CLB. \u00b6\u00b693, 125,\n\n212. Qudian perpetuated this false narrative in subsequent Management Presentations during the\n\nClass Period. \u00b6\u00b694, 243.\n\n These statements were materially false and misleading not only because OP was taking\n\nbusiness away from CLB but \u2013 as Luo and Yeung admitted \u2013 it was taking the \u201chighest-quality,\u201d\n\nmost credit-worthy borrowers, leaving lower quality borrowers who were more likely to default\n\non their loans. \u00b6\u00b68, 13, 53, 57, 65, 85, 103-06, 125-27, 177-91. A business manager who worked\n\nat Qudian from July 2017 to June 2019 (CW 7) explained how OP took business away from CLB,\n\nso that while OP \u201cmade much profit in the short term, in the long term, it was just using up its own\n\ncustomers.\u201d \u00b6100. Plaintiffs\u2019 well-pleaded allegations \u2013 which include a mathematical analysis\n 16\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 23 of 42\n\n\n\n\nbased on information Qudian disclosed after its poor performance in the third quarter of 2019 \u2013\n\nare more than sufficient to support the falsity of Defendants\u2019 statements, as they establish that even\n\nif the number of OP borrowers was growing, that came at the expense of the quality of borrowers\n\nin CLB. \u00b6181. Indeed, Qudian\u2019s 6.3 million total outstanding borrowers in the third quarter of\n\n2019 \u2013 after Qudian halted the Credit Trial Program \u2013 reflected a meager 3.4% increase from the\n\nprior quarter. \u00b6181. This became clear only after Qudian\u2019s disastrous third quarter of 2019. \u00b6181;13\n\nsee also \u00b6153 (analyst noting on Nov. 20, 2019 that Company was \u201cshifting its focus towards the\n\nopen-platform\u201d rather than growing both segments in tandem as Defendants had represented).\n\n Defendants argue that these allegations \u201cmisconstrue\u201d the Company\u2019s disclosures and that\n\n\u201cthe \u2018better\u2019 borrowers Plaintiffs claim that CLB supposedly lost to OP sought loans larger than\n\nCLB was authorized to make\u201d and, therefore, the Complaint does not adequately allege \u201cthat the\n\nOP business took the highest-quality borrowers from the CLB\u201d or that these borrowers \u201cotherwise\n\nwould have borrowed from the CLB.\u201d Def. Br. at 3, 25. But Defendants cannot seriously contest\n\nthat OP took CLB\u2019s \u201cbest\u201d or \u201chighest-quality\u201d borrowers, because Defendants admitted exactly\n\nthat and even apologized for not disclosing it earlier after Qudian\u2019s disastrous results from the third\n\nquarter of 2019. \u00b6\u00b6178-79, 183-84, 189. Yeung explained that Qudian had \u201conly allowed 5.5\n\nmillion out of the 21 million [approved borrowers] access to open-platform.\u201d \u00b6184. In other words,\n\nrather than activating more of Qudian\u2019s 65 million registered users that were not already using\n\nCLB, as Defendants had represented earlier (\u00b6\u00b693, 125, 212), the Company had done just the\n\nopposite, by limiting OP to just a subset of Qudian\u2019s highest quality borrowers. Defendants\u2019\n\nargument also ignores entirely that even if OP\u2019s borrowers were taking out larger loans (with the\n\n\n\n13\n In particular, Qudian told investors on its third quarter earnings call that 1 million of those borrowers were from\nOP, which means that 5.3 million were from CLB. \u00b6181. In the second quarter of 2019, Qudian disclosed that it had\n6.1 million total outstanding borrowers and 440,000 of those borrowers were from OP. \u00b6181.\n\n 17\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 24 of 42\n\n\n\n\nCompany earning a correspondingly lower percentage fee on each loan (\u00b6186)), they still were no\n\nlonger taking out loans in CLB because they were now borrowing from OP instead. Indeed,\n\nDefendants belatedly admitted \u2013 when they had no choice because of the Company\u2019s terrible\n\nperformance \u2013 that CLB\u2019s decline was a result of OP doing \u201cthe same business, focus[ing] on the\n\nhigh quality borrowers.\u201d \u00b6\u00b6178-79, 183-84, 189.\n\n Moreover, Defendants\u2019 prior disclosure that OP drew from both borrowers \u201cthat do not\n\nmeet our credit requirements\u201d (i.e., lower-quality customers), as well as users with \u201cbetter credit\n\nprofiles\u201d that sought larger loan amounts, in no way disclosed to investors that OP focused on\n\nCLB\u2019s best borrowers. Indeed, Defendants concede that they did not disclose this key feature of\n\nOP because they instead resort to the premature factual argument that OP did not in fact cannibalize\n\nCLB\u2019s highest-quality borrowers. Def. Br. at 3, 25. But this is contrary to the well-pleaded\n\nallegations, which the Court must construe in Plaintiffs\u2019 favor. See Cerberus Capital Mgmt., 2020\n\nU.S. Dist. LEXIS 74575, at *31 (holding that because plaintiff\u2019s allegations \u201care consistent with\n\n[plaintiff\u2019s] theory of liability . . . the Court cannot dismiss his claim as a matter of law\u201d).\n\n 4. Misrepresentations and Omissions about the Credit Trial Program and\n Qudian\u2019s Lending Standards in CLB\n\n Plaintiffs allege that in order to compensate for diverting its highest-quality borrowers to\n\nOP, Defendants aggressively lowered Qudian\u2019s credit standards and passed this off as its Credit\n\nTrial Program, while falsely representing that CLB\u2019s credit standards were \u201cconservative.\u201d \u00b6\u00b64, 9,\n\n57, 107-18, 128-36, 180, 187, 253, 292, 303, 319. Far from applying \u201cconservative\u201d standards,\n\nDefendants had lowered credit standards in CLB, thus drastically increasing the risk of borrower\n\ndefault. \u00b6\u00b64, 9, 107-11, 136. Further, when Defendants finally disclosed the existence of the Credit\n\nTrial Program, they falsely represented that it was small when, in reality, it represented at least\n\n20% of Qudian\u2019s loan portfolio. \u00b6\u00b610, 110-16, 182, 292-95.\n\n\n 18\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 25 of 42\n\n\n\n\n Defendants argue that their disclosures with respect to the Credit Trial Program were\n\nadequate because they disclosed that Qudian \u201cregularly adjusts\u201d its credit standards and they\n\ndisclosed the specific adjustments in question. Def. Br. at 26-27. But \u201crisk disclosures must\n\naccurately characterize the scope and specificity of the risk, as understood at the time the\n\nstatements are made.\u201d Dodona I, LLC v. Goldman, Sachs & Co., 847 F. Supp. 2d 624, 647\n\n(S.D.N.Y. 2012) (citation omitted). Thus, \u201cgeneric risk disclosures are inadequate to shield\n\ndefendants from liability for failing to disclose known specific risks.\u201d Id. (citation omitted); see\n\nalso Halperin v. eBanker USA.com, Inc., 295 F.3d 352, 359 (2d Cir. 2002) (plaintiff can overcome\n\nrisk disclosure statements and cautionary language if \u201cthe cautionary language did not expressly\n\nwarn of or did not directly relate to the risk that brought about plaintiffs\u2019 loss\u201d). \u201cPut differently,\n\n\u2018[g]eneral risk disclosures in the face of specific known risks which border on certainties\u2019 are not\n\nsufficient to defeat a securities fraud claim.\u201d Dandong v. Pinnacle Performance Ltd., 2011 U.S.\n\nDist. LEXIS 126552, at *34 (S.D.N.Y. Oct. 31, 2011) (citation omitted).\n\n The disclosures upon which Defendants rely here provided only vague warnings that the\n\nCompany might expand its borrower base, possibly causing higher delinquency rates; they do not\n\ndisclose that Qudian was planning to (or, in the case of those disclosures made in or after the third\n\nquarter of 2018, already had) lowered its credit standards in CLB after secretly shifting its best\n\nborrowers to OP to such a great extent that a full 20% of CLB\u2019s borrowers did not meet its\n\ntraditional credit standards. \u00b6\u00b657, 111, 116, 136, 182. See, e.g., Def. Br. at 26-27 (citing 2018 20-\n\nF at 5 (\u201cAs our business develops or in response to competition . . . [w]e will also seek to expand\n\nthe base of prospective borrower that we serve, which may result in higher delinquency rates.\u201d);\n\n3Q 18 earnings call (stating that Qudian\u2019s credit standards \u201cwill actually relax a lot more into\n\nfourth quarter,\u201d leading to a \u201chigher number of outstanding borrowers\u201d)). Indeed, Qudian\n\n\n\n 19\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 26 of 42\n\n\n\n\nestablished the Credit Trial Program in the third quarter of 2018 (\u00b6110) \u2013 around the same time as\n\nthe 3Q18 earnings call and before the 2018 20-F was issued (on April 15, 2019). \u00b6228. As such,\n\nthese disclosures are insufficient to defeat Plaintiffs\u2019 claims. See In re Facebook, Inc., 986 F.Supp.\n\n2d 487, 516 (S.D.N.Y. 2013) (liability for misrepresentations where Registration Statement\n\nrepresented that \u201crevenue cut was merely possible when, in fact, it had already materialized\u201d);\n\nDodona I, 847 F.Supp. 2d at 647 (actionable omission where defendants \u201cwere aware of a buildup\n\nof negative events in the subprime mortgage market\u201d but provided only \u201cboilerplate statements\n\nregarding . . . the possibility of market downturns, and the risks generally associated with\n\nmortgage-backed assets\u201d).14\n\n C. Defendants Violated Their Duty to Disclose Known Trends and Uncertainties\n\n Defendants had a duty, pursuant to Form 20-F Item 5(d), to disclose \u201cany known trends,\n\nuncertainties, . . . events that are reasonably likely to have a material effect on the company\u2019s net\n\nsales or revenues, income from continuing operations, profitability, liquidity or capital resources,\n\nor that would cause reported financial information not necessarily to be indicative of future\n\noperating results or financial condition.\u201d15 Further, \u201c[i]f a company . . . \u2018puts the topic of the cause\n\nof its financial success at issue, then it is obligated to disclose information concerning the source\n\nof its success, since reasonable investors would find that such information would significantly alter\n\nthe mix of available information.\u201d Freudenberg v. E*Trade Fin. Corp., 712 F.Supp. 2d 171, 179\n\n(S.D.N.Y. 2010) (citation omitted).\n\n Defendants repeatedly misrepresented that their positive performance was a result of\n\n\n\n14\n See also Freudenberg, 712 F.Supp. 2d at 179 (explaining that when assessing cautionary language, \u201cthe law provides\n\u2018no protection to someone who warns his hiking companion to walk slowly because there might be a ditch ahead when\nhe knows with near certainty that the Grand Canyon lies one foot away.\u2019\u201d) (citation omitted).\n15\n Item 5(d) is the corollary of SEC Regulation S-K, 17 C.F.R. \u00a7 229.303(a)(3)(ii) (\u201cItem 303\u201d) applicable to foreign\nissuers such as Qudian. \u201c[T]he SEC and courts have interpreted Item 303 and Item 5 to require the same disclosures.\u201d\nOnt. Teachers\u2019 Pension Plan Bd. v. Teva Pharm. Indus., 432 F. Supp. 3d 131, 163 (D. Conn. 2019) (citations omitted).\n\n 20\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 27 of 42\n\n\n\n\nQudian\u2019s \u201cconservative\u201d CLB growing alongside OP. \u00b6\u00b64, 9, 57, 132-34, 180, 253, 254. When\n\nmaking these affirmative representations, Defendants misleadingly omitted the reasons for the\n\ncreation and composition of OP and the nature and existence of the Credit Trial Program. Simply\n\nput, the risk and uncertainty that lowering the credit standards in CLB to compensate for shifting\n\nthe highest-quality borrowers to OP would cause an increase in borrower defaults and decrease in\n\nrevenues were both reasonably foreseeable and material to Qudian\u2019s future performance, and\n\ntherefore that trend was required to be (but was not) disclosed. Defendants even described the\n\nCompany\u2019s supposedly positive performance as a \u201cfantastic growth trend,\u201d an \u201cencouraging\n\ntrend,\u201d and as reflecting \u201cstrong momentum\u201d in OP with no \u201cdata or trends pointing otherwise.\u201d\n\n\u00b6\u00b689, 121, 137, 262, 297 (emphases added). Defendants were required to disclose the true\n\nunderlying trends that led to these fleeting, short-term results.\n\n Judge Gardephe\u2019s recent decision in Panther v. Jianpu Technology Inc., 2020 U.S. Dist.\n\nLEXIS 177272 (S.D.N.Y. Sept. 27, 2020), is highly instructive. In Jianpu, plaintiffs alleged that\n\ndefendant, a Chinese online lending platform, had failed to disclose impending government\n\nregulations for financial service providers in its IPO registration statement.16 Id. at *4-5. The court\n\nconcluded that that plaintiffs had adequately pled a known material trend \u2013 and, therefore, Jianpu\n\nwas obligated to disclose under Item 503 \u2013 information about financial services providers\u2019 non-\n\ncompliance with the Interim Measures, the fact that many of these providers used Jianpu\u2019s\n\nplatform, and the possible effects of their non-compliance on Jianpu\u2019s business. Id. at *26. See\n\nalso Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 716-17 (2d Cir. 2011) (disclosure required\n\nwhere management knew downward trend in real estate market was reasonably likely to have\n\n\n\n16\n The regulations at issue, called the \u201cInterim Measures,\u201d governed peer-to-peer (\u201cP2P\u201d) lenders on Jianpu\u2019s platform.\nJianpu, 2020 U.S. Dist. LEXIS 177272 at *5. Panther alleges that the Interim Measures were causing the number of\nP2P providers in China to decline. Id. at *4-5.\n\n 21\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 28 of 42\n\n\n\n\nmaterial impact on registrant\u2019s financial condition). This Court\u2019s recent decision in Plumbers &\n\nPipefitters Nat\u2019l Pension Fund v. Davis also shows why \u201cDefendants should have disclosed this\n\ntrend.\u201d 2020 U.S. Dist. LEXIS 66016, at *25 (S.D.N.Y. Apr. 14, 2020) (Woods, J.) (\u201cThe Fund\n\nhas adequately alleged that PSG\u2019s sales practices created a trend of increasing inventory . . . and\n\nthat . . . . It was both reasonably foreseeable and material to PSG\u2019s future performance that a\n\nbuildup of inventory would lead to a decline in PSG\u2019s future sales.\u201d) (citations omitted).\n\n D. The Safe Harbor Does Not Apply\n\n Defendants contend their statements constituting \u201cforward looking guidance\u201d (see\n\nKreissman Decl. Ex. M) are protected by the PSLRA\u2019s narrow safe harbor (15 U.S.C. \u00a7 78u-\n\n5(c)(1)) (the \u201cSafe Harbor\u201d), which protects any (a) \u201cforward-looking statement,\u201d (2) identified as\n\nsuch, (3) that is accompanied by \u201cmeaningful cautionary statements identifying important factors\n\nthat could cause actual results to differ materially from those in the forward-looking statement.\u201d\n\nThese factors are not met here.\n\n \u201cIt is well recognized that even when an allegedly false statement has both a forward\n\nlooking aspect and an aspect that encompasses a representation of present fact, the safe harbor\n\nprovision of the PSLRA does not apply.\u201d In SLM Corp. Sec. Litig., 740 F. Supp. 2d 542, 555\n\n(S.D.N.Y. 2010) (citation omitted). The statements at issue here consisted of: (i) the purported\n\nreasons for the Company\u2019s growth (which formed the basis for the increased and reaffirmed\n\nguidance), including statements about CLB\u2019s and OP\u2019s current and past performance; (ii)\n\nrepresentations about the quality of CLB borrowers; (iii) the reason why OP was developed; and\n\n(iv) representations about Qudian\u2019s compliance with regulations. As such, they are statements of\n\ncurrent and historical fact that are not protected by the Safe Harbor. See Celestica, 455 Fed. Appx\n\nat 15 (no protection where defendants \u201cdid more than just offer rosy predictions,\u201d but \u201cstated that\n\npresent inventory was under control or omitted it as a contributor to the company\u2019s costs, despite\n 22\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 29 of 42\n\n\n\n\nrecklessly disregarding that the opposite was true\u201d) (citation omitted); In re Vale S.A. Sec. Litig.,\n\n2017 U.S. Dist. LEXIS 42513, at *76 (S.D.N.Y. Mar. 23, 2017) (Woods, J.) (statements that\n\ncompany had risk management systems and followed health, safety, and environmental standards\n\n\u201cnot forward-looking in nature, but rather, representations of present or historical facts\u201d).\n\n Second, Defendants\u2019 cautionary language was insufficient. Defendants try to hide behind\n\ntheir generic \u201cSafe Harbor Statement,\u201d which cautioned that \u201c[a] number of factors could cause\n\nactual results to differ materially from those contained in any forward-looking statement, including\n\nbut not limited to . . . Qudian\u2019s future business development, financial condition and results of\n\noperations . . . [and] Qudian\u2019s expectations regarding keeping and strengthening its relationships\n\nwith borrowers, institutional funding partners . . . and other parties\u201d and other equally vague\n\nlanguage that lacks meaning. Def. Br. at 5. But \u201c[c]autionary language is not meaningful if it is\n\n\u2018boilerplate,\u2019 \u2018general,\u2019 and \u2018vague.\u2019\u201d Haw. Structural Ironworkers Pension Tr. Fund v. AMC\n\nEntm\u2019t Holdings, Inc., 422 F.Supp. 3d 821, 847 (S.D.N.Y. 2019) (citing Slayton v. Am. Exp. Co.,\n\n604 F.3d 758, 772 (2d Cir. 2010)). The above statements, which refer to only general risks, are\n\ninsufficient to give rise to Safe Harbor protection. Id. (general warnings about \u201cexecution risks\u201d\n\nand \u201cunspecified \u2018known\u2026risks [and] uncertainties\u2019\u201d insufficient).\n\n Third, the Safe Harbor does not apply where \u2013 as here \u2013 the statement was made by\n\nsomeone who had \u201cactual knowledge\u201d that the statement was false or misleading. In re SLM Corp.,\n\n740 F. Supp. 2d at 555 (citation omitted); see also In re BioScrip, Inc. Sec. Litig., 95 F. Supp. 3d\n\n711, 736 (S.D.N.Y. 2015) (\u201ccautionary words about future risk cannot insulate from liability the\n\nfailure to disclose that the risk has transpired\u2019\u201d) (citations omitted); In re Indep. Energy Holdings\n\nPLC Sec. Litig., 154 F. Supp. 2d 741, 756 (S.D.N.Y. 2001) (\u201cNo degree of cautionary language\n\nwill protect material misrepresentations or omissions where defendants knew their statements were\n\n\n\n 23\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 30 of 42\n\n\n\n\nfalse when made.\u201d) (citations omitted). Plaintiffs\u2019 allegations that Defendants knew their\n\nstatements were false (\u00b6354, 363-64, 372) are sufficient to refute Safe Harbor protection. See\n\nFresno Cnty. Emples. Ret. Ass'n v. comScore, Inc., 268 F. Supp. 3d 526, 547-48 (S.D.N.Y. 2017)\n\n(rejecting application of the safe harbor for statements regarding increased guidance where, like\n\nhere, the \u201cdefendant made the projections knowing they were based on a false premise\u201d); E*Trade,\n\n712 F.Supp. 2d at 194 (\u201cgeneral statements that loan losses and securities impairments \u2018could be\n\naffected by market risks and were subject to change\u2019\u201d insufficient to insulate defendants where\n\nthey knew loans were deficient and risky) (citation omitted); AMC Entm\u2019t Holdings, 422 F.Supp.\n\n3d at 847 (\u201cThe reasonable inference is available from Plaintiffs\u2019 allegations that by this time,\n\nAMC plausibly \u2018possessed information\u2019 that the risks\u2026had already materialized\u2026.the warnings\n\nidentified by Defendants are insufficient at this stage of the litigation to conclude that these\n\nstatements fall into the\u2026safe harbor.\u201d) (citations omitted).\n\n Finally, \u201c[c]autionary words about future risk cannot insulate from liability the failure to\n\ndisclose that the risk has transpired.\u201d Davis, 2020 U.S. Dist. LEXIS 66016, at *35-36 (statements\n\nthat company \u201cmay experience excess inventory levels or inventory shortages\u201d which could result\n\nin \u201cwrite-downs and sale of excess inventory at discounted prices\u201d not protected because defendant\n\nknew of actual or likely buildup of inventory) (citing Rombach v. Chang, 355 F.3d 164, 173 (2d\n\nCir. 2004)). This is precisely the case here. For example, Defendants warned that \u201c[a]ny significant\n\nchange to our business model not achieving expected results may have a material and adverse\n\nimpact on our financial condition and results of operation\u201d (2018 20-F at 5), but they knew they\n\nhad already made significant changes to Qudian\u2019s business model by lowering credit standards in\n\nCLB. \u00b6\u00b69, 10, 57, 108, 107-18, 128-36. Accordingly, the Safe Harbor provides no protection. See\n\nJianpu, 2020 U.S. Dist. LEXIS 177272, at *29-30 (finding disclosures insufficient where they\n\n\n\n 24\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 31 of 42\n\n\n\n\nwere \u201call framed as mere hypotheticals, however, and thereby imply that the risk of regulation is\n\na theoretical one, rather than \u2013 as Plaintiff alleges \u2013 a risk that has already materialized in the\n\nmarketplace\u201d).17\n\nV. The Statements are Neither Opinion nor Puffery\n\n Defendants claim that the following categories of misrepresentations are inactionable\n\npuffery or opinion: (i) confidence that Defendants would meet their guidance (Def. Br. at 16 n.6\n\n(citing \u00b6\u00b6200, 201, 226, 262, 284)); (ii) representations that Qudian was compliant with applicable\n\nregulations (id. at 20-21 & n.11 (citing \u00b6\u00b63, 78, 79, 122, 222, 224, 230, 271, 273)); and (iii)\n\ncharacterizations of Qudian\u2019s credit standard practices as \u201cconservative.\u201d Id. at 28 n.17 (citing\n\n\u00b6\u00b6253, 292-95, 315-17). Defendants are wrong even as to this limited subset of the misstatements\n\nalleged in the Complaint.\n\n Defendants repeatedly expressed their confidence in Qudian\u2019s raised guidance for 2019.\n\nFor example, on June 21, 2019, when Qudian raised its financial guidance for 2019, Luo stated:\n\n\u201c[G]iven our sufficient funding and strong user demand, growth of our loan book is well ahead of\n\nour previously set targets, giving us strong confidence that we will meet our revised guidance.\u201d\n\n\u00b6262. These statements are not puffery, as they are not \u201cso vague, broad, and non-specific that a\n\nreasonable investor would not rely on [them], thereby rendering [them] immaterial as a matter of\n\nlaw.\u201d In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512, 572 (S.D.N.Y. 2011).\n\n\n\n\n17\n Notably, the disclosures in Jianpu were very similar to those here: China \u201chas not adopted a clear regulatory\nframework governing the young and rapidly evolving online consumer finance market\u201d; China \u201cmay also enhance the\nimplementation of existing laws and regulations\u201d; \u201cnew government laws and regulations [or] stricter enforcement of\nexisting laws and regulations . . . may materially and adversely affect our business\u201d; \u201cif any financial product on our\nplatform or the business practice of us or any of our financial service providers is deemed to violate any new or existing\nPRC laws or regulations, our business, reputation, financial condition and results of operations could be materially\nand adversely affected.\u201d 2020 U.S. Dist. LEXIS 177272, at *29-30. Compare with, e.g., Def. Br. at 15-16 & n.5\n(Qudian had \u201ca limited operating history in a new and evolving market, which makes it difficult to evaluate our future\nprospects\u201d; \u201cregulatory regime and practice\u201d were \u201cevolving and subject to uncertainty\u201d; regulations were in \u201cnascent\nstage and subject to further change and interpretation,\u201d which could \u201cmaterially and adversely affect[]\u201d the business\u201d).\n\n 25\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 32 of 42\n\n\n\n\n Defendants also repeatedly assured investors that Qudian was compliant with online\n\nlending regulations, touting its \u201cregulatory compliant and stable operating structure.\u201d \u00b6\u00b63, 78, 122,\n\n222, 224; see also \u00b6\u00b679, 273 (\u201cRegulatory Compliant [sic] is Embedded in our DNA.\u201d). These\n\nstatements, too, are not inactionable puffery. See In re Bear Stearns Cos. Inc. Sec., Derivative, and\n\nERISA Litig., 763 F. Supp. 2d 423, 459 (S.D.N.Y. 2011) (statement that defendant was \u201cin\n\ncompliance with CSE regulatory capital requirements\u201d materially false); In re Petrobras Sec.\n\nLitig., 116 F. Supp. 3d 368, 381 (S.D.N.Y. 2015) (\u201cstatements regarding its general integrity and\n\nethical soundness,\u201d although they \u201cmay be mere puffery\u201d when \u201cviewed in isolation,\u201d were\n\nactionable because Company used the statements \u201cin an effort to reassure the investing public\n\nabout the Company\u2019s integrity\u201d) (citation omitted).\n\n Defendants\u2019 characterization of statements as opinion fares no better. Recently, the Second\n\nCircuit explained that the Supreme Court\u2019s decision in Omnicare, Inc. v. Laborers Dist. Council\n\nConstr. Indus. Pension Fund, 135 S. Ct. 1318 (2015), \u201creduced the significance of district courts\u2019\n\nclassifications of statements as those of fact or opinion\u201d by \u201cincreasing the ability of plaintiffs to\n\nplead material omissions with respect to statements of opinion\u201d by either (1) \u201calleg[ing] that a\n\nstatement of opinion contained one or more embedded factual statements that can be proven false,\u201d\n\nor (2) \u201calleg[ing] that a statement of opinion, without providing critical context, implied facts that\n\ncan be proven false.\u201d NewLink, 965 F.3d at 175-76. Here, even accepting Defendants\u2019 flimsy\n\nargument that their statements of present or historical fact regarding Qudian\u2019s compliance with\n\napplicable regulations were opinions, they would still be actionable because they embedded and\n\nimplied facts that were false and that had no reasonable basis, based on omitted information. See\n\n\u00b6\u00b678-81; see also Omnicare, 135 S. Ct. at 1327 (\u201cA fact is a thing done or existing,\u201d whereas \u201c[a]n\n\nopinion is a belief, a view, or a sentiment which the mind forms of persons or things.\u201d).\n\n\n\n 26\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 33 of 42\n\n\n\n\n Finally, Defendants\u2019 false characterizations of CLB\u2019s credit standards as \u201cconservative\u201d\n\n(\u00b6\u00b6253, 292-95, 315-17) are not puffery, because they were directed at Qudian\u2019s then-existing\n\ncondition, and because they misrepresented the fact that, in fact, Qudian\u2019s credit standard practices\n\nwere not conservative, as they had substantially lowered their credit standards in CLB, thus\n\ndrastically increasing the risk of borrower default. See E*Trade, 712 F. Supp. 2d at 176-78, 182,\n\n189 (statements that defendant utilized \u201cconservative\u201d credit standards or followed \u201cconservative\u201d\n\nloan origination and acquisition practices were not puffery).\n\nVI. The Complaint Adequately Pleads Scienter\n\n A. Applicable Pleading Standards\n\n A 10(b) plaintiff must allege facts \u201cgiving rise to a strong inference\u201d of scienter. 15 U.S.C.\n\n\u00a7 78u-4(b)(2). A \u201cstrong inference\u201d is one a reasonable person would deem \u201ccogent and at least as\n\ncompelling as any opposing inference one could draw from the facts alleged.\u201d Tellabs, 551 U.S.\n\nat 324. Further, \u201cat the motion to dismiss stage, a tie on scienter goes to the plaintiff.\u201d Davis, 2020\n\nU.S. Dist. LEXIS 66016, at *41 (citation omitted). Finally, \u201c[a]ccepting Plaintiffs\u2019 allegations as\n\ntrue and construing them in the light most favorable to Plaintiffs, the Court must consider the\n\nComplaint in its entirety to determine \u201cwhether all of the facts alleged, taken collectively, give\n\nrise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation,\n\nmeets that standard.\u201d Tellabs, 551 U.S. at 324 (emphases added). An inference of scienter can be\n\nestablished by showing either that defendants had a motive to commit fraud or \u201ccircumstantial\n\nevidence of conscious misbehavior or recklessness.\u201d Blanford, 794 F.3d at 306 (citation omitted).\n\n B. Indicia Supporting a Strong Inference of Scienter\n\n In addition to motive and opportunity, which are not required but are abundantly alleged\n\nhere (infra \u00a7VI.C), Plaintiffs\u2019 scienter allegations include Yeung and Luo\u2019s own admissions;\n\nYeung\u2019s creation of OP; Yeung\u2019s abrupt and suspiciously-timed departure from the Company;\n\n 27\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 34 of 42\n\n\n\n\ncorroborative statements of the nine CWs; Yeung\u2019s statements about the Credit Trial Program that\n\ndemonstrate his knowledge of adverse facts about the true nature of OP and CLB; Yeung and\n\nLuo\u2019s direct involvement in Qudian\u2019s day-to-day operations; and the existence of red flags of\n\nwhich Defendants were aware and/or had a duty to investigate.\n\n After Qudian performed poorly in the third quarter of 2019, Luo and Yeung made a number\n\nof crucial admissions on calls with investors regarding the true nature of OP and the Credit Trial\n\nProgram (\u00b6\u00b6167-71, 173-79, 182-85, 189-90), which support an inference of scienter because they\n\nshow that the reasons for creation of OP, and the borrower composition of CLB and OP, were\n\ncrucial business decisions that Defendants had made but did not accurately tell investors. See Acer,\n\n2020 U.S. Dist. LEXIS 105814, at *33-34 (inference of scienter bolstered by admissions in SEC\n\nfilings); see also World Wrestling 2020 U.S. Dist. LEXIS 140925, at *27-29 (crediting executive\u2019s\n\nadmission as circumstantial evidence of scienter); AMC Entm\u2019t Holdings, 422 F.Supp. 3d at 850\n\n(finding CEO\u2019s public statements supported inference of scienter) (citation omitted).\n\n Yeung revealed on the third quarter earnings release call that because the financial\n\ninstitutions with which Qudian worked took on the risk of default in OP, \u201cthe economics only\n\nmakes sense to my funding partner if the loss rate is lower,\u201d which required sending them Qudian\u2019s\n\nbest borrowers, and he stated with respect to OP: \u201cWe can do the same business, focus on the high\n\nquality borrowers, earn an interesting fee and carry on growth.\u201d \u00b6\u00b6178-79, 189; see also \u00b6183\n\n(Yueng admitting on Nov. 25, 2019 call that OP focuses on the \u201chighest-quality borrowers\u201d and\n\nthe \u201cbest-quality users\u201d). In addition, Yeung apologized to borrowers on this call when responding\n\nto a question about how the borrowers in OP compared to those in CLB: \u201cI\u2019m sorry that this may\n\nnot have been apparent to the market yet, but it will be over time.\u201d \u00b6184; see also \u00b6185 (same call:\n\n\u201cWe want to be transparent. We are already leading the industry in transparency, I think. So,\n\n\n\n 28\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 35 of 42\n\n\n\n\nwhether we can do more? Let us -- give us some time to think about how we can be better at this.\n\nThere\u2019s obviously still much work to do\u201d). Luo and Yeung also admitted that OP\u2019s purpose for\n\nboth Qudian and its funding partners was to be the \u201cultimate form of regulatory compliant fintech\n\nin China\u201d and \u201cthe most regulatory compliant structure.\u201d \u00b6\u00b6168-71, 174-75, 193-95. These\n\nadmissions show Defendants grappling with how much to disclose to investors of the basic nature\n\nand purpose of OP, which they created to address these grave concerns.\n\n Seeking to distance themselves from these damning admissions, Defendants argue that they\n\nwere \u201cnot admissions at all.\u201d Def. Br. at 33. As an example, Defendants point to Luo\u2019s statement\n\nthat CLB was \u201cin full compliance with Circular 141.\u201d Id. (citing \u00b6168). But this argument ignores\n\nthe admissions, simply pointing to another statement that was itself materially false and\n\nmisleading. Somewhat remarkably, Defendants next argue \u2013 citing \u201ccontext\u201d \u2013 that Yeung was not\n\napologizing on the November 25, 2019 conference call, but instead was expressing\n\n\u201cdisappointment that the market did not yet fully appreciate\u201d OP. Id. But Plaintiffs\u2019 inference is\n\ncertainly \u201ccogent and at least as compelling as any opposing inference of nonfraudulent intent.\u201d\n\nPetrobras, 116 F.Supp. 3d at 382 (citing Tellabs, 551 U.S. at 314).\n\n The suspicious timing of Defendant Yeung\u2019s departure further supports an inference of\n\nscienter. Yeung \u2013 who created OP, the source of the Company\u2019s misrepresentations \u2013 resigned\n\nsuddenly from the Company on March 18, 2020 for unspecified \u201cpersonal reasons,\u201d on the very\n\nsame day Qudian announced its disastrous full-year 2019 results. \u00b6\u00b625, 83, 164. See In re\n\nEletrobras Sec. Litig., 245 F. Supp. 3d 450, 469 (S.D.N.Y. 2017) (\u201ctiming and circumstances of\n\nindividual defendants\u2019 resignations may add some further weight to an overall inference of\n\nscienter\u201d) (citation omitted); In re Sadia, S.A. Sec. Litig., 643 F. Supp. 2d 521, 523-24, 534\n\n(S.D.N.Y. 2009) (crediting resignations of executives two weeks after fraud revealed); Varghese\n\n\n\n 29\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 36 of 42\n\n\n\n\nv. China Shenghou Pharm. Holdings, 672 F.Supp. 2d 596, 608 (S.D.N.Y. 2009) (director\n\nresignation and CEO removal contributed to inference) (citation omitted).18\n\n In addition, Plaintiffs\u2019 scienter allegations are bolstered by nine corroborated CW\n\nstatements of well-placed former employees, which establish that: (i) CLB was in crisis during the\n\nClass Period because of the loss of business from Ant and failure of other business projects (\u00b6\u00b640,\n\n41, 44, 75, 107, 359); (ii) regulatory pressure on CLB made financial institutions stop providing\n\nQudian with funding and challenged the viability of the business (\u00b6\u00b67, 75-77, 359); (ii) Yeung\n\ncreated OP (\u00b6\u00b683, 357); (iii) OP was essentially a rebranding of Qudian\u2019s loan facilitation business\n\n(\u00b6\u00b695, 96, 98, 101, 359); (iv) OP took business away from CLB (\u00b6100); and (v) Qudian was\n\nviolating Circular 141 (\u00b6\u00b65, 69, 359). These allegations support a strong inference that Defendants\n\nknew, or should have known, about the business and regulatory pressures on CLB; the reasons for\n\ncreation, and composition of, OP; and that Qudian was violating Circular 141. See AMC Entm\u2019t\n\nHoldings, 422 F.Supp. 3d at 851-52 (CW statements \u201cprovide some further support for an\n\ninference of scienter\u201d).\n\n Defendant Yeung\u2019s own public statements regarding the Credit Trial Program also\n\ndemonstrate his knowledge of adverse facts about the true nature of OP and CLB that undermined\n\nDefendants\u2019 false and misleading statements during the Class Period. For example, when\n\ndiscussing the Credit Trial Program after the second quarter of 2019 \u2013 before admitting to its true\n\nextent the following quarter \u2013 Yeung described the \u201cso-called user profile\u201d of borrowers in that\n\nprogram as \u201ca highly [sic] trade secret\u201d (\u00b6110), indicating that he was aware of that information\n\n\n\n\n18\n Defendants\u2019 argument that Yeung\u2019s departure cannot contribute to an inference of scienter because there are no\nfacts linking it to any misconduct (Def. Br. at 31 n.19) ignores the wealth of authority discussed above. And\nDefendants\u2019 reliance on In re BISYS Sec. Litig. is misplaced, as, unlike here, documents cited in the Bisys complaint\n\u201csuggest[ed] that [one executive] resigned to accept another opportunity and [the other executive] resigned for health\nreasons.\u201d 397 F. Supp. 2d 430, 446 (S.D.N.Y. 2005).\n\n 30\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 37 of 42\n\n\n\n\nthat he chose not to disclose at that time. This shows not only that Yeung had \u201caccess to [the]\n\ninformation\u201d that Defendants misrepresented about the nature of Qudian\u2019s borrowers \u2013 which itself\n\nwould be enough to plead a strong inference of scienter, see Blanford, 794 F.3d at 306 \u2013 but he\n\nwas actually aware of key information he chose to underplay by describing the Credit Trial\n\nProgram as a mere \u201csales and marketing expense\u201d to acquire new borrowers. \u00b6\u00b6112-16, 293. See\n\nLewy v. Skypeople Fruit Juice, Inc., 2012 U.S. Dist. LEXIS 128416, at *47-48 (S.D.N.Y. Sept. 7,\n\n2012) (defendant \u201coverlooked or ignored\u201d information \u201cshe was or should have been aware\u201d of).\n\n In addition, under the \u201ccore operations\u201d doctrine, \u201ca court may infer \u2018that a company and\n\nits senior executives have knowledge of information concerning the core operations of a business,\u2019\n\nsuch as \u2018events affecting a significant source of income.\u2019\u201d AMC Entm\u2019t Holdings, 422 F.Supp. 3d\n\nat 852 (citation omitted).19 The alleged misrepresentations and omissions at issue here concerned\n\nQudian\u2019s core operations: CLB (i.e., the Company\u2019s self-described Core Loan Book) and OP. See\n\n\u00b6364 (Qudian announcing on May 20, 2019 that it was focusing its attention on its \u201ccore business\n\nlines\u201d of CLB and OP and \u201cwill stay focused on our technology-based consumption credit services\n\nand have discontinued efforts outside of consumption credit opportunities\u201d) (emphasis added).\n\n Also, because Yeung and Luo took it upon themselves to be the two individuals that spoke\n\nso positively about Qudian\u2019s CLB and OP businesses when representing the Company on its\n\nquarterly earnings releases and conference calls during the Class Period, they had a duty to\n\ninvestigate the facts that they discussed. See In re Signet Jewelers Ltd. Sec. Litig., 2018 U.S. Dist.\n\nLEXIS 199809, at *48 (S.D.N.Y. Nov. 26, 2018) (holding that defendants\u2019 attempts to \u201cplacate\u201d\n\n\n\n19\n See also Celestica, 455 Fed. App\u2019x at 14 n.3 (\u201callegations of a company\u2019s core operations \u2026 can provide\nsupplemental support for allegations of scienter\u201d). Defendants suggest that the core operations doctrine is no longer\n\u201cviable\u201d in this Circuit. Def. Br. at 32 n.20. But the Second Circuit has held \u201cthat the doctrine can provide supplemental\nsupport for allegations of scienter, even if it cannot establish scienter independently.\u201d AMC Entm\u2019t Holdings, 422\nF.Supp. 3d at 852 (citation omitted); see also City of Omaha Police & Fire Ret. Sys. v. Evoqua Water Techs. Corp.,\n2020 U.S. Dist. LEXIS 55410, at *94-96 (S.D.N.Y. Mar. 30, 2020) (adopting this approach) (citation omitted).\n\n 31\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 38 of 42\n\n\n\n\nconcerns raised by analysts supported an inference of scienter); Plumbers & Pipefitters Local\n\nUnion No. 630 Pension-Annuity Tr. Fund v. Arbitron Inc., 741 F. Supp. 2d 474, 491 (S.D.N.Y.\n\n2010) (finding recklessness in CEO \u201cspeaking so positively\u201d). Plaintiffs further allege that the Luo\n\nand Yeung \u2013 as CEO and CFO \u2013 were directly involved in Qudian\u2019s day-to-day operations and\n\nhad access to the information that was misrepresented or omitted (\u00b6\u00b624, 25, 363), and they signed\n\nand/or certified the relevant SEC filings, such that they had a duty to inquire about these issues.\n\n\u00b6\u00b6198, 203, 228, 229, 236, 260, 264, 299, 354. \u201cPlaintiffs thus easily allege that [Yeung and Luo]\n\nwere presented with sufficient \u201cred flags,\u201d such that they had a duty to \u201cinvestigate the doubtful,\u201d\n\nand thus should have known that their statements were false or misleading. These allegations,\n\n\u201ctaken collectively, give rise to a strong inference of scienter.\u201d Tellabs, 551 U.S. at 324; see also\n\nIn re Refco, Inc. Sec. Litig., 503 F. Supp. 2d 611, 649 (S.D.N.Y. 2007) (scienter may be found\n\nwhere there are \u2018specific allegations of various reasonably available facts, or \u2018red flags,\u2019 that\n\nshould have put the officers on notice\u2019 that the public statements were false\u201d) (citation omitted).\n\nThe more compelling inference is that the Luo and Yeung knew the true nature of CLB and OP\n\nwhen they misrepresented Qudian\u2019s performance and operations during the Class Period.\n\n C. Luo and Yeong Had Motive and Opportunity to Commit Fraud\n\n Luo had a financial motive to commit fraud \u2013 namely, his decision in March 2018 to\n\n\u201crelinquish [his] salary and bonus until [Qudian\u2019s] market capitalization reaches US$100 billion.\u201d\n\n\u00b6\u00b651 n.5, 362. At that time, Qudian\u2019s market capitalization was $5.54 billion. \u00b651 n.5. This highly\n\nunusual arrangement incentivized Luo to falsely portray Qudian\u2019s business as having much more\n\nroom for growth than it actually did, in order to buy more time for the Company to find a way to\n\nachieve those goals. \u00b6362. This, too, contributes to an inference of scienter. See Shanawaz v.\n\nIntellipharmaceutics Int\u2019l Inc., 348 F.Supp. 3d 313, 326 (S.D.N.Y. 2018) (incentive packages tied\n\nto stock price evidence of scienter); Aldridge v. A.T. Cross Corp., 284 F.3d 72, 83 (1st Cir. 2002)\n 32\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 39 of 42\n\n\n\n\n(\u201cWhen financial incentives to exaggerate earnings go far beyond the usual arrangements of\n\ncompensation based on the company\u2019s earnings, they may be considered among other facts to\n\nshow scienter.\u201d) (citation omitted).\n\n Defendants also had a motive to commit fraud because of the failures of Qudian\u2019s previous\n\nbusiness projects. See generally \u00b6\u00b640-42, 44, 107, 359 (explaining how the loss of business from\n\nAnt in 2018 and failure of Qudian\u2019s projects outside of its consumer lending business negatively\n\naffected Qudian\u2019s business, with Qudian\u2019s total loan balance dropping from approximately $89\n\nbillion in 2017 to $59 billion in 2018); \u00b652 (because of Qudian\u2019s loss of business from Ant and\n\nfailure of other projects such as Dabai Auto, Qudian\u2019s share price fell over 82% from its IPO price\n\nof $24 per ADS to just $4.2 per ADS on November 5, 2018, just before the start of the Class\n\nPeriod). See Acer, 2020 U.S. Dist. LEXIS 129104, at *14 (\u201ccompany\u2019s financial position\u201d relevant\n\nto scienter analysis).\n\n Finally, Luo and Yeong were high-level corporate insiders \u2013 founder, CEO, and Chairman\n\nof the Board (Luo) and CFO (Yeung) (\u00b6\u00b624, 25) \u2013 which \u201cgives rise to the presumption of an\n\nopportunity to commit fraud.\u201d Lexmark, 367 F. Supp. 3d at 36.\n\n D. Corporate Scienter is Adequately Alleged\n\n \u201c[S]cienter by management-level employees is generally sufficient to attribute scienter to\n\ncorporate defendants.\u201d Patel v. L-3 Communs. Holdings, Inc., 2016 U.S. Dist. LEXIS 42978, at\n\n*46-47 (S.D.N.Y. Mar. 30, 2016) (citation omitted); see also Eletrobras, 245 F. Supp. 3d at 469-\n\n70 (\u201cscienter against two key officers\u2026necessarily alleges scienter against Eletrobras itself\u201d)\n\n(citations omitted). Plaintiffs have alleged ample facts to support a strong inference of corporate\n\nscienter through the Yeung and Luo\u2019s conduct. See \u00b6365; supra \u00a7\u00a7 VI.B, C. Moreover, the person\n\n\u201cwhose knowledge is imputed to the corporation [need not] also \u2018make\u2019 the material misstatement\n\nor omission at issue.\u201d Pa. Pub. Sch. Emps.\u2019 Ret. Sys. v. Bank of Am. Corp., 874 F. Supp. 2d 341,\n 33\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 40 of 42\n\n\n\n\n372 (S.D.N.Y. 2012) (citations omitted). Even in the wholly unrealistic scenario that Qudian\u2019s two\n\nmost senior leaders did not know these facts about Qudian\u2019s basic operations, it is impossible they\n\nwere not known by a senior manager or other high-level employee whose scienter is attributable\n\nto the Company. See Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 177-\n\n78 (2d Cir. 2015); In re VEON Ltd. Sec. Litig., 2017 U.S. Dist. LEXIS 152240, at *31 n.3\n\n(S.D.N.Y. Sept. 19, 2017) (citation omitted).\n\nVII. Plaintiffs Adequately Plead Liability Under Section 20(a)\n\n Plaintiffs have sufficiently alleged a primary violation of Section 10(b) by Qudian and\n\nDefendants concede control. Def. Br. at 35. Therefore, the only element in contention is culpable\n\nparticipation.20 Plaintiffs adequately allege that Yeung and Luo signed and/or certified the relevant\n\nSEC filings; the false statements contained therein were known to be false or were recklessly\n\ndisregarded as such; Yeung and Luo had direct and supervisory involvement in Qudian\u2019s day-to-\n\nday operations, knowledge of the filed statements, and controlled the Company, including the\n\ncontent and dissemination of these statements; and Yeung and Luo had motive. Supra \u00a7\u00a7 VI.B, C.\n\nNothing more is required. See BioScrip, 95 F. Supp. 3d at 741 (denying motion to dismiss where\n\neach defendant was responsible for reviewing\u2026SEC filings\u201d).\n\n CONCLUSION\n\n For the foregoing reasons, the Court should deny the Motion in its entirety.21\n\n\n\n\n20\n Section 20(a) requires a plaintiff to show: (1) a primary violation; (2) control of the primary violator; and (3) culpable\nparticipation. See Carpenters Pension Tr. Fund v. Barclays PLC, 750 F.3d 227, 236 (2d Cir. 2014) (citation omitted).\n21\n If the Court grants any part of the Motion, Plaintiffs request leave to amend. See Petedge, Inc. v. Garg, 234 F. Supp.\n3d 477, 499 (S.D.N.Y. 2017) (Woods, J.) (\u201cDismissals made pursuant to Fed. R. Civ. P. 9(b) are \u2018almost always\u2019\naccompanied by a grant of leave to amend. . . .\u201d).\n\n 34\n\fCase 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 41 of 42\n\n\n\n\nDated: October 2, 2020 Respectfully submitted,\n\n KAHN SWICK & FOTI, LLC\n\n\n\n /s/ Kim E. Miller\n Kim E. Miller (KM-6996)\n J. Ryan Lopatka\n KAHN SWICK & FOTI, LLC\n 250 Park Ave., Suite 2040\n New York, NY 10177\n Telephone: (212) 696-3730\n Facsimile: (504) 455-1498\n Email: kim.miller@ksfcounsel.com\n Email: j.lopatka@ksfcounsel.com\n\n -and-\n\n Melissa H. Harris (MH-3553)\n 1100 Poydras Street, Suite 3200\n New Orleans, LA 70163\n Telephone: (504) 455-1400\n Facsimile: (504) 455-1498\n Email: Melissa.harris@ksfcounsel.com\n\n Co-Lead Counsel for Co-Lead Plaintiff\n Pablo Greco\n\n POMERANTZ LLP\n\n\n /s/ Michael Grunfeld\n\n Jeremy A. Lieberman\n Michael Grunfeld\n 600 Third Avenue, 20th Floor\n New York, NY 10016\n Telephone: (212) 661-1100\n Facsimile: (212) 661-8665\n Email: jalieberman@pomlaw.com\n Email: mgrunfeld@pomlaw.com\n\n Co-Lead Counsel for Co-Lead Plaintiffs\n Juan Pablo di Benedetto and Galessi\n Holding Corp\n\n 35\n\f Case 1:20-cv-00577-GHW Document 57 Filed 10/02/20 Page 42 of 42\n\n\n\n\n CERTIFICATE OF SERVICE\n\n I HEREBY CERTIFY that on October 2, 2020 I electronically filed the foregoing with the\n\nClerk of the Court using the CM/ECF system, which will send a Notice of Electronic Filing to all\n\nCM/ECF participants. I further certify that I mailed the foregoing document and the notice of\n\nelectronic filing via U.S. first-class mail to any non-CM/ECF participants.\n\n /s/ Kim E. Miller\n Kim E. Miller\n\n\n\n\n 36\n\f","ocr_status":2,"date_upload":"2021-02-04T10:14:20.848764-08:00","document_number":"57","attachment_number":null,"pacer_doc_id":"127027715801","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Memorandum of Law in Opposition to Motion","acms_document_guid":""}],"date_created":"2020-10-02T17:33:22.940418-07:00","date_modified":"2023-05-30T08:47:58.863780-07:00","date_filed":"2020-10-02","time_filed":null,"entry_number":57,"recap_sequence_number":"2020-10-02.001","pacer_sequence_number":212,"description":"MEMORANDUM OF LAW in Opposition re: 54 MOTION to Dismiss Plaintiffs' Amended Class Action Complaint. . Document filed by Juan Pablo Di Benedetto, Galessi Holding Corp., Pablo Greco..(Miller, Kim) (Entered: 10/02/2020)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/140128342/","id":140128342,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/16738894/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/144766959/","id":144766959,"tags":[],"absolute_url":"/docket/16738894/56/greco-v-qudian-inc/","date_created":"2020-09-04T16:01:51.699639-07:00","date_modified":"2023-05-30T08:47:58.847189-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"56","attachment_number":null,"pacer_doc_id":"127027544885","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Declaration in Support of Motion","acms_document_guid":""}],"date_created":"2020-09-04T16:01:51.690937-07:00","date_modified":"2023-05-30T08:47:58.780549-07:00","date_filed":"2020-09-04","time_filed":null,"entry_number":56,"recap_sequence_number":"2020-09-04.003","pacer_sequence_number":209,"description":"DECLARATION of James G. Kreissman in Support re: 54 MOTION to Dismiss Plaintiffs' Amended Class Action Complaint.. Document filed by Min Luo, Qudian Inc., Carl Yeung. (Attachments: # 1 Exhibit A - Qudian Inc.s Dec. 13, 2018 Press Release, # 2 Exhibit B - Qudian Inc.s March 18, 2019 Press Release, # 3 Exhibit C - Qudian Inc.s May 20, 2019 Press Release, # 4 Exhibit D - Qudian Inc.s Aug. 16, 2019 Press Release, # 5 Exhibit E - Qudian Inc.s Nov. 18, 2019 Press Release, # 6 Exhibit F - Qudian Inc.s Nov. 18, 2019 Earnings Call Transcript, # 7 Exhibit G (Part 1) - News Articles with Index, # 8 Exhibit G (Part 2) - News Articles with Index, # 9 Exhibit G (Part 3) - News Articles with Index, # 10 Exhibit H - Qudian Inc.s March 18, 2020 Press Release, # 11 Exhibit I - Excerpts of Qudian Inc.s 2019 Annual Report, # 12 Exhibit J - Excerpts of Qudian Inc.s 2017 Annual Report, # 13 Exhibit K - Excerpts of Qudian Inc.s 2018 Annual Report, # 14 Exhibit L - Qudian Inc.s Aug. 16, 2019 Earnings Call Transcript, # 15 Exhibit M - Summary of Plaintiffs' Allegations, # 16 Exhibit N - Qudian Inc.s Q1 2019 Management Presentation, # 17 Exhibit O - Qudian Inc.s Nov. 21, 2018 Earnings Call Transcript, # 18 Exhibit P - Qudian Inc.s Nov. 25, 2019 Business Update Call Transcript, # 19 Exhibit Q - SEC Filings and Publicly Available Documents for FinVolution Group (formerly known as PPDAI Group Inc.) and 360 Finance, Inc.).(Kreissman, James) (Entered: 09/04/2020)","tags":[]}],"entries_total":"https://www.courtlistener.com/api/rest/v4/docket-entries/?count=on&docket=16738894&page_size=40"}