Walker v. Chidambaran. — Entry #107: MEMORANDUM OPINION

Case 8:24-cv-02900-DKC    Document 107   Filed 03/20/26   Page 1 of 70


                IN THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF MARYLAND

LOUIS LEVEQUE, individually and :
on behalf of all others
similarly situated              :

     v.                              :   Civil Action No. DKC 24-2900

                                     :
ILEARNINGENGINES, INC., et al.
                                     :

                             MEMORANDUM OPINION

     Presently pending and ready for resolution in this putative

securities class action are five motions to dismiss for failure to

state a claim filed by Defendants Marcum LLP, (ECF No. 80); Thomas

Olivier, (ECF No. 82); Harish Chidambaran, (ECF No. 83); Sayyed

Farhan Naqvi, (ECF No. 84); and Matthew Barger, Ian Davis, Bruce

Mehlman, and Michael Moe, (ECF No. 85); as well as the motion to

partially lift the discovery stay filed by Louis Leveque and Iqbal

Al Hamid (collectively, “Plaintiffs”), (ECF No. 93).              The issues

have been briefed, and the court now rules, no hearing being deemed

necessary.   Local Rule 105.6.     For the following reasons, the five

motions to dismiss will be granted and the motion to partially

lift the discovery stay will be denied.


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I.    Background

      A.     Factual Background 1

      1.     iLearningEngines’ Origin

      Mr. Chidambaran founded a company named iHealthEngines in

2010, before changing its name to iLearningEngines (“iLE”) in 2018.

(ECF No. 41 ¶¶ 54–55).         Through at least 2018, iLE described itself

as a “Learning as a Service platform” for the healthcare industry.

(Id. ¶¶ 56–59).        In August 2020, iLE began describing itself as an

“[Artificial      Intelligence        (“AI”)]      Powered     Learning     Platform.”

(Id. ¶ 60).          It explained that its platform has three main

components:      (1)    “Knowledge       Clouds,”      which    consist       of   “data

retrieved     from     both   internal     institutional        data    and    external

sources” such as Salesforce and Microsoft Teams; (2) its “Out-of-

the-Box     AI   Engine”      and    associated     proprietary        AI   algorithms

trained on the data sets; and (3) its “no-Code Work Flow and AI

Canvas,” which “integrate[s] an organization[’s] systems using AI

. . . to optimize the organization’s workflows, including by

creating chat bots with subject matter expertise and ‘providing

smart      decision     making’       that      will    ‘unlock’        a     company’s

institutional knowledge.”             (Id. ¶ 63).        More specifically, iLE


      1The facts herein are as alleged in the overly long, at times
redundant, amended complaint or drawn from documents integral to
the complaint.    Counsel did not seek leave to file a pleading
exceeding the permitted length of 40 pages (by an extra 200 pages),
in violation of Local Rule 103.1.d.
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“offers two solutions to enterprises: Learning Automation and

Information Intelligence.”          (Id. ¶ 65).     Its Learning Automation

solution uses AI “to create real time learning solutions to assist

in   developing      an   organization’s      personnel     through”      learning

modules, whereas its Information Intelligence solution “use[s] its

AI Assistant to integrate enterprise systems” to assist with

company decision-making and cost savings.               (Id.).

        Mr.    Chidambaran   served   as    President    and     Chief   Executive

Officer (“CEO”) of iLE during the time it was private.                      (Id. ¶

31).     Balakrishnan Arackal joined the company in 2014 as Chief

Business Officer (“CBO”), (Id. ¶ 34), and Mr. Naqvi joined as Chief

Financial Officer (“CFO”) in 2019, (Id. ¶ 32).

        2.     iLE Goes Public

        Arrowroot Acquisitions, Inc. (“Arrowroot”) was formed in 2020

as a special purpose acquisition company (“SPAC”), meaning it was

a shell company with the express purpose of merging with another

company or effecting some other form of business combination. (Id.

¶ 68).       Arrowroot held an initial public offering (“IPO”) in March

2021, which raised $287.5 million.           (Id. ¶ 69).    In 2022, Arrowroot

identified iLE as its target.               (Id. ¶ 71).        In January 2023,

Arrowroot’s Board discussed a proposed valuation of iLE of $1.28

billion.       (Id. ¶ 73).       In May 2023, Arrowroot and iLE jointly

announced the execution of a reverse merger agreement, upon the

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closing of which the combined entity would retain the iLE name and

continue to be headed by Mr. Chidambaran.          (Id. ¶¶ 67, 77).            The

merger would take iLE public on the NASDAQ stock exchange.                    (Id.

¶ 76).   According to its later public filings, iLE tallied revenue

of “$217.9 million, $309.2 million, and $420.6 million, for fiscal

years 2021, 2022 and 2023, respectively.”          (Id. ¶ 66).       In March

2024, though, just prior to the closing of the merger, iLE “was in

a dire financial state, reporting just $800,000 in cash, $22

million in debt, and an accumulated deficit of $47.1 million.”

(Id. ¶ 67).

     On April 17, 2024, the merger closed and iLE went public.

(Id. ¶ 79).   Mr. Chidambaran remained CEO, Mr. Naqvi remained CFO,

Mr. Arackal remained CBO and took on the role of President, and

the following individuals were appointed to the Board: Mr. Barger,

Mr. Davis, Mr. Mehlman, Mr. Moe, and Mr. Olivier.             (Id. ¶¶ 31–39).

At the time of closing, Arrowroot’s funds had declined from $287.5

million to $5.9 million, because “most [Arrowroot] stockholders

elect[ed] to redeem their shares for cash instead of becoming

investors in [iLE].”         (Id. ¶ 79).     Upon closing, iLE received

around $52.7 million in gross proceeds.         (Id. ¶ 80).       After going

public, iLE had 134,313,494 shares of common stock outstanding,

(Id. ¶ 46), of which roughly 76.9% were subject to a one-year lock-

up provision, (Id. ¶¶ 417, 419).

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     3.     iLE’s Registration Statements

     Once it went public, iLE decided to register several tranches

of shares with the Securities & Exchange Commission (“SEC”).                          (Id.

¶¶ 9–10). Effective June 21, 2024, iLE registered up to 16,208,318

shares    pursuant    to    a   Form   S-8    Registration       Statement       (“S-8

Registration Statement”).           (Id. ¶¶ 137, 139, 142).             Those shares

were issued or issuable to employees pursuant to various employee

equity incentive and stock purchase plans.                  (Id. ¶¶ 137, 139).

Effective August 9, 2024, iLE registered up to an additional

100,774,669 shares of iLE common stock pursuant to a Form S-1

Registration Statement (“S-1 Registration Statement”).                        (Id. ¶¶

247, 250).      These shares were either issued or issuable to a

variety of parties.         (Id. ¶ 248).      The S-1 Registration Statement

additionally    registered      over   22     million    shares     issuable          upon

exercise   of   iLE    warrants.       (Id.    ¶   247).        Both    Registration

Statements were signed by Mr. Chidambaran, Mr. Naqvi, Mr. Arackal,

Mr. Olivier, Mr. Barger, Mr. Davis, Mr. Mehlman, and Mr. Moe.                         (Id.

¶¶ 138, 250).    Incorporated into both Registration Statements were

iLE’s financial statements for 2021, 2022, and 2023, (see id. ¶¶

134, 140, 145), as well as iLE’s independent accounting firm

Marcum’s    April     22,   2024,    audit    report     that    these      financial

statements presented the financial position of iLE “fairly, in all


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material respects, . . . in conformity with” generally accepted

accounting principles (“GAAP”), (id. ¶¶ 141, 146, 246).

      The content of those financial statements is central to this

case.    As previously mentioned, iLE reported therein that it had

earned “revenue of $217.9 million, $309.2 million, and $420.6

million, for fiscal years 2021, 2022 and 2023, respectively.” (Id.

¶ 66).    It further reported that “most of the revenue and sales

comes from [iLE’s] partner relationships . . . with a ‘Technology

Partner’ and value added resellers.”          (Id. ¶ 82).       iLE never stated

the identity of the Technology Partner in its public filings. (Id.

¶ 96).

      Plaintiffs focus on the Technology Partner, by far the largest

partner relationship iLE manages.         iLE management explained that

iLE “enter[s] contracts with the Technology Partner through which

the Technology Partner purchases and integrates [iLE’s] platform

into the Technology Partner’s own software solution provided to

one of the Technology Partner’s customers.”             (Id. ¶ 90 (emphasis

omitted)).      Furthermore,    iLE   “has    outsourced    [implementation]

services to its . . . Technology Partner . . . who has been trained

to   provide    the   implementation      services.”            (Id.   (emphasis

omitted)).     Accordingly, iLE treats the Technology Partner as “a

customer in some arrangements and a vendor in other arrangements.”

(Id. ¶ 92).      iLE had entered into a Master Agreement with the

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Technology Partner in 2019 and renewed that contract for another

ten years in 2024.       (Id. ¶¶ 97, 157).        That agreement “provide[d]

for the quarterly netting of amounts collected by the Technology

Partner    from   end-users[]     against   the    cost    of     the    Technology

Partner’s services rendered and billable to [iLE].”                     (Id. ¶¶ 97,

157).     iLE clarified in the S-1 Registration Statement that it

“determined the services it received from the Technology Partner

were distinct and the consideration paid to the Technology Partner

was equivalent to an arms-length transaction.                   As a result, no

costs   incurred   by    [iLE]    related   to    services      provided    by    the

Technology Partner have been netted against revenues earned from

the Technology Partner.”         (Id. ¶ 92).

     iLE did not describe the Technology Partner as a related party

in its SEC filings.        (Id. ¶ 12).          Prior to the closing of the

merger, the SEC inquired as to “whether the Technology Partner is

a related party.”       (Id. ¶ 402).    In response, iLE represented that

“the Technology Partner is not a related party and they do not

hold any financial interest in [iLE].”             (Id. ¶ 403).

     4.     Mr. Leveque and Mr. Al Hamid Purchase Shares

     On July 25, 2024, just over a month after the S-8 Registration

Statement and several weeks before the S-1 Registration Statement,

Mr. Leveque purchased 5,000 shares of iLE common stock.                     (Id. ¶

423).     Starting eleven days after the August 9 S-1 Registration

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Statement, Mr. Al Hamid made a series of purchases of iLE common

stock: 500 shares on August 20, 500 shares on August 23, 1,000

shares on August 27, 1,000 shares on August 30, and 1,500 shares

on September 16.    (ECF Nos. 41-1, at 3; 41 ¶ 424).             The final two

purchases    occurred   after    an    August     29    short-seller      report

described below and were followed nearly immediately by sales of

the same number of shares.       (ECF No. 41-1, at 3).

     5.     The Hindenburg Report

     On August 29, 2024, the short-seller firm Hindenburg Research

published an investigative research report about iLE titled “An

Artificial    Intelligence      SPAC   With     Artificial       Partners       And

Artificial Revenue” (the “Hindenburg Report” or “Report”). 2                    (ECF

No. 41 ¶ 159).     The Report identified the Technology Partner as

Experion Technologies, FZ LLC (“Experion”).               (Id. ¶ 167).          Its

authors made two principal claims: Experion was an undisclosed

related party, and “the vast majority of [iLE’s] revenue is fake.”

(Id. ¶ 159).     The Report stated that “all information contained

[t]herein . . . ha[d] been obtained from public sources” and it

“ma[de] no representation, express or implied, as to the accuracy,


     2 Mr. Barger notified iLE of his intention to resign as iLE
director on August 28, the day before the release of the Hindenburg
Report. (ECF No. 41 ¶ 184). His resignation was effective August
29, the day of the Report’s release. (Id.).
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timeliness, or completeness of any such information.”              (ECF No.

83-2, at 24). 3

     Regarding its contention that Experion was an undisclosed

related   party,   the   Hindenburg   Report   provided      the   following

evidence:

            (i) [Mr.] Chidambaran was listed as the
            American    contact   for    [the]   “Technology
            Partner” on Experion’s website and listed his
            personal    residence   as    the  location   of
            “Experion Americas”; (ii) per Indian corporate
            records    and   LinkedIn,     iLearningEngines’
            Senior Project Manager, Tom Thomas and AVP of
            Sales & Business Development Director, Ratish
            Nair, were directors and shareholders of
            Experion’s     India     affiliate,     Experion
            Technologies, FZ LLC [sic, should be Experion
            Infosystems];    (iii)    Experion   India   and
            Experion [Middle East & Africa (“MEA”)] are
            partially owned by Jojo Philip, the brother of
            iLearningEngines’ Senior Director Channel
            Partnerships, Cherian K. Philip; and (iv)
            Experion MEA was headed and partially owned by
            iLearningEngines’     President     and    Chief
            Business       Officer,        Arackal,      and
            iLearningEngines’ AVP of Sales & Business
            Development, Ratish Nair.

(ECF No. 41 ¶ 169).      More specifically, Mr. Chidambaran’s listing

as the contact person for Experion Americas is from February 2020.

(Id. ¶¶ 113–14).      The listing of Tom Thomas and Ratish Nair as


     3 The court may consider the Hindenburg Report on a motion to
dismiss because Plaintiffs do not dispute its authenticity, and it
is integral to the complaint. See Faulkenberry v. U.S. Dep’t of
Def., 670 F.Supp.3d 234, 249 (D.Md. 2023) (quoting Reamer v. State
Auto. Mut. Ins. Co., 556 F.Supp.3d 544, 549 (D.Md. 2021), aff’d,
No. 21-2432, 2022 WL 17985700 (4th Cir. Dec. 29, 2022)).
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directors of an Experion India affiliate is from March 2023.                (Id.

¶ 119). Mr. Nair was also listed as the contact person for Experion

MEA and a shareholder of Experion MEA.            (Id. ¶¶ 123, 125, 126).

Both Mr. Thomas and Mr. Nair were senior employees at iLE while

they held their positions at Experion.          (Id. ¶ 121).       2024 Indian

corporate records reflect that Jojo Philip at that time owned a

35%    stake   in   Experion   India,   and   records     from    a    corporate

intelligence firm around the same time show that he had a 45% stake

in Experion MEA.       (Id. ¶¶ 131–32).       Cherian Philip was a senior

employee of iLE at the time.         (Id. ¶ 129).       Indian court orders

show that Jojo Philip is the brother of Cherian Philip.                   (Id. ¶

130).     As for Mr. Arackal, public records reveal that he is a

shareholder of Experion MEA and was a director of Experion India

from 2017–2022, an Experion MEA Advisory Board member in 2019, and

CEO of Experion MEA in 2015.         (Id. ¶¶ 126–28).          He was a senior

employee of iLE during that period.             (Id. ¶ 34).           The Report

authors and Plaintiffs point to this web of connections as proof

that Experion was a related party of iLE.          (Id. ¶ 168).        They also

note a “peculiar aspect of the Master Agreement” with Experion:

iLE did not need to repay the nearly $50 million outstanding

balance it owed to Experion until “10 years after the Master

Agreement was terminated.”       (Id. ¶¶ 165–66).      Such an arrangement,

they contend, makes “no rational business sense” and “rais[es]

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questions of whether [there] is an arms-length relationship.” (Id.

¶ 166).

       Regarding its claim that iLE’s revenues were largely fake,

the    Hindenburg     Report   emphasized     the    considerable     revenues,

minimal net income, and the netting arrangement.                 In 2023, iLE

earned $389.4 million of its $420.6 million total revenue from

and/or through the Technology Partner, and incurred $388.2 million

in costs to the Technology Partner, for a net income from the

Technology Partner of $1.2 million, which the Report authors

believed would be paid toward the large outstanding balance iLE

owed to Experion.      (Id. ¶¶ 164–65).       For the quarter ending March

31, 2024, the Technology Partner collected 90% of iLE’s revenue

and invoiced 94.62% of iLE’s costs associated with that revenue.

(Id. ¶ 94).       Likewise, through the second quarter of 2024, iLE

reported $238,961,000 in revenue and $237,553,000 in costs from

the Technology Partner, for a net income of roughly $1.4 million.

(Id. ¶ 157).     The Report authors described the hypothesized scheme

as follows: By “claiming that virtually all business takes place

through Experion, [iLE] can put a layer between it and the suspect

transactions     in    an   offshore,    opaque     jurisdiction,”     and      the

“unusual circular structure makes it easy to inflate both revenue

and cost figures while only netting out a minimal difference.”

(Id. ¶ 177).

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     The Report authors buttressed their fake-revenue theory with

several additional allegations.             They asserted that iLE’s revenue

in India was 99.4% lower than claimed based on a review of its

Indian subsidiary’s records, (Id. ¶ 170), and that when they

visited iLE’s Indian location, they “found no signage to indicate

[iLE] had any presence in the building,” (Id. ¶ 171).                    They noted

another “circular” deal generating $50 million in annual revenue

and $30 million in annual costs, which was “highly suspicious” and

purportedly indicative of the revenue and expenses being “largely

fake.”     (Id.    ¶    172).      Next,    they    questioned      iLE’s   $722,000

acquisition   of       In2vate,    which    had    only    $60,000    in    accounts

receivable, and its supposed contribution of more than two million

of iLE’s 4.9 million total users.               (Id. ¶ 173).    Running their own

math, the Report authors argued that those two million users did

“not add up to [a] significant portion of [iLE’s] revenue.”                     (Id.

¶ 174).   Finally, they investigated iLE’s “Key Customer in India,”

Vedhik Schools, which reported only $649,000 in revenue in 2023

and thus was “unlikely to be a major source of revenue.”                     (Id. ¶

176).     Plaintiffs included Mr. Chidambaran’s rebuttal of these

allegations in the amended complaint, (Id. ¶ 515), and they neither

discuss nor rely on these allegations in their motion papers.

     They contended that the fake-revenue scheme could persist

because iLE’s accountant, Marcum, failed “to uphold basic auditing

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standards,” as evidenced by the $13 million in total fines it

received     from       the    Public    Company    Accounting        Oversight    Board

(“PCAOB”) and the SEC in 2023 for “widespread audit deficiencies

in connection with SPAC audits.”                 (Id. ¶ 178).

       The market reaction to the Hindenburg Report was swift.                          The

day it was released, iLE’s stock price fell 53.3%.                        (Id. ¶ 179).

The media outlets Fortune, Bloomberg, and Reuters all published

articles about the Report and the stock price decline.                          (Id. ¶¶

180–82, 185).

       6.    iLE’s Response

       iLE   issued       an    immediate     response     on    August      29,   2024,

denouncing the report as a scheme to profit at the expense of iLE’s

investors, declaring that it “contain[ed] misleading statements,

speculations and innuendos,” and announcing that it would respond

further in the days ahead.                (Id. ¶ 183).      On September 5, 2024,

iLE issued a press release and Form 8-K announcing that the Board

had     formed      a    special        committee    (“Special        Committee”)        to

investigate the Hindenburg Report’s allegations.                         (Id. ¶ 186).

They explained that an investigation was “in the best interest of

shareholders” even though iLE’s “independent auditors conduct[ed]

periodic audits in accordance with PCAOB standards and ha[d] issued

clean    audit   opinions.”             (Id.).      In   the    press    release,       Mr.

Chidambaran asserted that iLE “has real products, contracts, and

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revenue”   and    reaffirmed     that   the    Hindenburg      Report    contained

“misleading statements, speculations and innuendoes.”                       (Id. ¶

187).

     On September 10, 2024, iLE issued another press release titled

“iLearningEngines CEO Sets the Record Straight,” in which Mr.

Chidambaran       stated   the     need      to    “correct        the   egregious

misstatements” in the Hindenburg Report and directed readers to a

longer rebuttal posted to the iLE website.                     (Id. ¶¶ 188–89).

Plaintiffs allege that Mr. Chidambaran did not address all of the

Hindenburg Report’s claims.         (Id. ¶ 189).       Instead, he appeared to

acknowledge that Experion was the Technology Partner, (Id. ¶ 190),

although he simultaneously announced that as of September 10, 2024,

“a majority of iLE revenue comes from partnerships outside of

Experion,” (Id. ¶ 191).          As for the Hindenburg Report’s related-

party allegations, Mr. Chidambaran responded that “[t]here is no

mutual ownership between [iLE] and Experion.”                 (Id. ¶ 192 (first

alteration       in   original)).            Plaintiffs      allege      that      Mr.

Chidambaran’s lack of response to the “claims that [iLE] senior

employees and/or their family were directors, shareholders, or

owners in Experion is a tacit admission that they were true.”

(Id.).     Lastly, Mr. Chidambaran responded to the fake-revenue

claims by pointing to the fact that iLE’s financials had withstood

scrutiny from independent auditors and lenders. (Id. ¶ 193). That

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same day, an analyst from the Benchmark Company published a report

deeming Mr. Chidambaran’s rebuttal to be credible and dismissing

the Hindenburg Report’s allegations.          (Id. ¶¶ 194–95).         Plaintiffs

allege that the Benchmark report is not credible on the ground

that the analyst could not have had enough time to verify the

accuracy of the rebuttal.        (Id. ¶ 195).

       A series of further press releases followed.               On November 18,

2024, iLE announced that its financial statements since 2020 should

“no    longer   be   relied    upon,”   Marcum     had   withdrawn     its   prior

opinions, iLE had received a subpoena from the SEC, and Mr. Naqvi

had been placed on administrative leave from his role as CFO and

given the new title of Senior Vice President.              (Id. ¶ 196).      iLE’s

share price fell 27%.          (Id. ¶ 202).       On December 10, 2024, iLE

informed the market that Mr. Chidambaran, Mr. Naqvi, Mr. Arackal,

and two iLE Vice Presidents, Ramakrishnan Parameswaran Arackal 4

and Vivek Chary, had been placed on administrative leave and Mr.

Olivier had been appointed interim CEO.             (Id. ¶ 205).     iLE’s share

price fell 14.2%.      (Id. ¶ 207).     On December 23, 2024, iLE reported

that it had filed for Chapter 11 bankruptcy. 5               (Id. ¶ 208).         Its


       4
       Ramakrishnan Arackal is not a defendant in this action.                    All
references to “Mr. Arackal” are to Balakrishnan Arackal.

       5    iLE’s     affiliates—iLearningEngines    Holdings,
iLearningEngines FZ-LLC, and In2vate—all filed for bankruptcy,
too. (ECF No. 41 ¶ 210, 212, 213).
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share price tumbled 78.5%.          (Id. ¶ 209).       That same day, NASDAQ

notified iLE that it would be delisted from the stock exchange.

(Id. ¶ 211).        Finally, iLE announced on December 27, 2024, that

Mr. Chidambaran, Mr. Naqvi, Balakrishnan Arackal, Ramakrishnan

Arackal, and Mr. Chary had resigned.             (Id. ¶ 214).         In the same

press release, iLE conveyed that it had “self-reported potential

violations of law to the Department of Justice [(‘DOJ’)]” and “was

cooperating with both the SEC’s and DOJ’s investigations.”                     (Id.

¶ 215).

     Marcum resigned as iLE’s auditor on February 13, 2025.                    (Id.

¶ 217).      The 8-K reporting Marcum’s resignation revealed that

Marcum had notified iLE on January 5, 2024, in connection with its

audit of iLE’s 2023 financial statements, that iLE “had material

weaknesses in internal control over financial reporting relating

to corporate governance policies, statutory compliance policies,

and information technology controls.”            (Id.).

     On March 6, 2025, iLE converted its bankruptcy from Chapter

11 reorganization to Chapter 7 liquidation.            (Id. ¶ 220).       In iLE’s

bankruptcy     proceedings,       the   iLE    affiliate         iLearningEngines

Holdings    (“iLE    Holdings”)    submitted    a    Statement      of   Financial

Affairs on April 11, 2025, identifying Experion MEA as an “insider”

and a “related party.”            (Id. ¶¶ 226–27).          The Statement of

Financial    Affairs    also   indicated      that   in   the     year   prior     to

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bankruptcy, iLE Holdings had sent fifty wire transfers totaling

over $87 million to Experion MEA.           (Id. ¶ 230).       Of that $87

million, iLE Holdings sent a series of transfers totaling $2

million in December 2023, $1.75 million in the first quarter of

2024, and $12.225 million in the first two quarters of 2024.              (Id.

¶ 231).     Plaintiffs allege that those numbers do not match the

“‘[n]et cash transfers between [iLE] and Technology Partner’ of

$2.213 million, $330,000, and $2.14 million” that iLE reported for

those    periods,   respectively.      (Id.).    iLE   Holdings    sent      the

remaining $73.2 million in the third and fourth quarters of 2024,

$55.7 million of which it sent after the publication of the

Hindenburg Report.     (Id. ¶¶ 230–31).     Plaintiffs contend that all

“[t]hese payments [we]re in addition to the funds Experion kept

due to netting.”     (Id. ¶ 232). 6

     B.     Procedural Background

     On October 7, 2024, Danny Walker filed a securities class

action complaint against Harish Chidambaran, Sayyed Farhan Naqvi,

and iLE.     (ECF No. 1).    On December 24, 2024, iLE informed the

court that it had filed for bankruptcy, and an automatic stay had


     6 iLE affiliates also identified Experion Infosystems Private
Limited, Vedic Network Experion, Synergy Markets Experion, and
Experion MEA each as an “insider” and “related party.” (ECF No.
41 ¶¶ 234–35, 238). The wire transfers to those entities from iLE
affiliates were much smaller, in the range of $6,200 to
$216,343.55. (Id. ¶¶ 234, 238).

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issued.     (ECF No. 18).      iLE was terminated as a party on December

27.    (ECF No. 19).    Various individuals moved to be appointed Lead

Plaintiff, and the court appointed Louis Leveque as Lead Plaintiff

on February 27, 2025.          (ECF No. 36).

        Mr. Leveque and Mr. Al Hamid filed the 240-page, operative

amended complaint on April 28, 2025.              (ECF No. 41).           In Count I,

they allege that all defendants are strictly liable under Section

11    of   the   Securities    Act   of   1933,   15   U.S.C.      §     77a   et   seq.

(“Securities Act”).      (ECF No. 41 ¶¶ 437–50).           They assert that the

following defendants are liable because they were signatories of

the S-1 and S-8 Registration Statements: Mr. Chidambaran, (Id. ¶

31); Mr. Naqvi, (Id. ¶ 32); Mr. Arackal, 7 (Id. ¶ 34); and Matthew

Barger, Ian Davis, Bruce Mehlman, Michael Moe, and Thomas Olivier,

(Id. ¶¶ 35–39) (collectively, “Individual Defendants”).                         (Id. ¶

444).      Plaintiffs further seek to hold Marcum strictly liable

because it certified the financial statements incorporated into

the S-1 and S-8 Registration Statements.               (Id. ¶ 445).            Count II


       7
       Mr. Arackal has not yet been served with the amended
complaint. He lives in India and would likely need to be served
pursuant to the Hague Service Convention, which Plaintiffs
estimate would take six to twelve months.     (ECF No. 88, at 3).
Because “the factual elements and the claims against Mr. Arackal
materially overlap with the facts and claims asserted against the
other defendants,” (Id.), the court approved Plaintiffs’ request
to defer service on Mr. Arackal until the court decides the pending
motions to dismiss, (ECF No. 89). Given the rulings announced in
this opinion, there is no reason to proceed to serve Mr. Arackal,
and the amended complaint will be dismissed in its entirety.
                                 18


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alleges that Individual Defendants violated Section 15 of the

Securities     Act    because     they     are    “controlling        persons”     of

individuals liable under Section 11.              (Id. ¶¶ 451–57).       Count III

asserts violations by Mr. Chidambaran, Mr. Naqvi, and Mr. Arackal

of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.

§   78a   et   seq.   (“Exchange       Act”),    and   Rule   10b-5    promulgated

thereunder,      17    C.F.R.      §     240.10b-5,      by    making     material

misrepresentations      and     omissions       that   deceived    the   investing

public, artificially inflated and maintained the market price of

iLE’s common stock, and caused iLE common stock purchasers to pay

artificially inflated prices.           (ECF No. 41 ¶¶ 549–60; see also id.

¶¶ 33, 42).     Finally, Count IV alleges violations of Section 20(a)

of the Exchange Act by Mr. Chidambaran and Mr. Naqvi because they

are “controlling persons” of individuals liable under Section

10(b).    (Id. ¶¶ 561–64; see also id. ¶ 33).

      On July 31, 2025, Individual Defendants and Marcum filed

motions to dismiss all counts asserted against them for failure to

state a claim. (ECF Nos. 80; 82; 83; 84; 85). Plaintiffs responded

on September 18.       (ECF Nos. 90; 91; 92).            Individual Defendants

and Marcum replied on October 22.               (ECF Nos. 101; 102; 103; 104;

105). 8


      8Plaintiffs and Marcum also filed notices of supplemental
authority on October 17, (ECF No. 97), and November 17, (ECF No.
106), respectively.
                               19


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       Finally, Plaintiffs moved on September 19, 2025, for a partial

lift of the discovery stay to conduct discovery regarding the

traceability of their shares to the S-1 and S-8 Registration

Statements.       (ECF No. 93).          Marcum responded on October 2, (ECF

No. 94), and all other served defendants joined Marcum’s response

the same day, (ECF No. 95).               Plaintiffs replied on October 17.

(ECF No. 98).

II.    Standard of Review

       A motion to dismiss under Fed.R.Civ.P. 12(b)(6) tests the

sufficiency of the complaint.             Presley v. City of Charlottesville,

464 F.3d 480, 483 (4th Cir. 2006).                 The court “must accept the

complaint’s factual allegations as true and construe the facts in

the light most favorable to the plaintiff.”                       Barnett v. Inova

Health Care Servs., 125 F.4th 465, 469 (4th Cir. 2025) (citing

Barbour     v.    Garland,     105   F.4th       579,    589    (4th    Cir.   2024)).

Ordinarily, a plaintiff’s complaint must only satisfy the standard

of Rule 8(a)(2), which requires a “short and plain statement of

the    claim     showing   that    the    pleader       is   entitled    to    relief.”

“[W]here the well-pleaded facts do not permit the court to infer

more than the mere possibility of misconduct, the complaint has

alleged—but it has not ‘show[n]’—that the pleader is entitled to

relief.’”        Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (quoting

Fed.R.Civ.P.       8(a)(2)).         A    Rule    8(a)(2)      “showing”       requires

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“stat[ing] a claim to relief that is plausible on its face.”            Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).             “A claim has

facial plausibility when the plaintiff pleads factual content that

allows the court to draw the reasonable inference that defendant

is liable for the misconduct alleged.”      Mays v. Sprinkle, 992 F.3d

295, 299–300 (4th Cir. 2021) (quoting Iqbal, 556 U.S. at 678).

     Because Plaintiffs’ Securities Act and Exchange Act claims

sound in fraud, they are subject to a heightened pleading standard

under Fed.R.Civ.P. 9(b).     Cozzarelli v. Inspire Pharms. Inc., 549

F.3d 618, 629 (4th Cir. 2008) (holding that Rule 9(b)’s heightened

pleading requirements apply to Securities Act claims when “a

plaintiff makes an allegation that has the substance of fraud,”

even when the plaintiff disclaims allegations of fraud). 9              Rule

9(b) requires that “[i]n alleging fraud or mistake, a party must

state with particularity the circumstances constituting fraud or

mistake.”     A plaintiff must plead with particularity “the time,

place, speaker and contents of the allegedly false statements, as

well as the manner in which [the] statements are supposedly false

and the specific facts which raise an inference of fraud.”             In re

Medimmune, Inc. Sec. Litig., 873 F.Supp. 953, 960 (D.Md. 1995)


     9 When“[t]he complaint treats the allegedly false statements”
in the company’s Registration Statements “as part of a single,
coordinated scheme to defraud investors,” the Securities Act
allegations are subject to Rule 9(b).     Cozzarelli, 549 F.3d at
629. Here, the amended complaint does just that.
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(citing Gollomp v. MNC Fin. Inc., 756 F.Supp. 228, 232 (D.Md.

1991); Borow v. nView Corp., 829 F.Supp. 828, 833 (E.D.Va. 1993)).

       The Private Securities Litigation Reform Act of 1995, 15

U.S.C. § 78u-4 et seq. (“PSLRA”), imposes additional pleading

requirements on plaintiffs in securities fraud actions.                       When a

plaintiff alleges a misleading statement or omission, he must

“specify each statement alleged to have been misleading” and “the

reason or reasons why the statement is misleading.”                   15 U.S.C. §

78u-4(b)(1).      With    respect     to    causes    of   action    requiring     a

particular     state     of   mind,    a       plaintiff    must     “state     with

particularity facts giving rise to a strong inference that the

defendant acted with the required state of mind” when committing

each   alleged   violation.      Id.       §   78u-4(b)(2)(A).         Finally,    a

plaintiff must “plead . . . with sufficient specificity” that “the

defendant’s misrepresentations proximately caused the plaintiff’s

economic loss.”    Tchrs.’ Ret. Sys. of La. v. Hunter, 477 F.3d 162,

185–86 (4th Cir. 2007) (citing Hillson Partners Ltd. P’ship v.

Adage, Inc., 42 F.3d 204, 208 (4th Cir. 1994); Lentell v. Merrill

Lynch & Co., 396 F.3d 161, 172 (2d Cir. 2005)); see also 15 U.S.C.

§ 78u-4(b)(4) (“[T]he plaintiff shall have the burden of proving

that the act or omission of the defendant alleged to violate this

chapter caused the loss for which the plaintiff seeks to recover

damages.”); Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 346 (2005)

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(“Our holding about plaintiffs’ need to prove proximate causation

and economic loss leads us also to conclude that plaintiffs’

complaint here failed adequately to allege these requirements.”).

III. Analysis

     A.     Exchange Act

     Plaintiffs bring a claim for violation of Section 10(b) of

the Exchange Act and Rule 10b-5 promulgated thereunder against Mr.

Chidambaran, Mr. Naqvi, and Mr. Arackal, and a derivative claim

for violation of Section 20(a) of the Exchange Act against Mr.

Chidambaran and Mr. Naqvi.         Both Mr. Chidambaran and Mr. Naqvi

move to dismiss these claims.      Their arguments prevail, and Counts

III and IV will be dismissed.

     1.     Section 10(b) and Rule 10b-5 (Count III)

     A claim under Section 10(b) and Rule 10b-5 must allege: “(1)

a material misrepresentation or omission by the defendant; (2)

scienter;   (3)   a   connection   between    the   misrepresentation         or

omission and the purchase or sale of a security; (4) reliance upon

the misrepresentation or omission; (5) economic loss; and (6) loss

causation.”   Maguire Fin., LP v. PowerSecure Int’l, Inc., 876 F.3d

541, 546 (4th Cir. 2017) (quoting Stoneridge Inv. Partners v. Sci.-

Atlanta, Inc., 552 U.S. 148, 157 (2008)).           Materiality hinges on

whether there is “a substantial likelihood that the disclosure of

the . . . fact would have been viewed by the reasonable investor


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as having significantly altered the total mix of information made

available.”         Greenhouse v. MCG Cap. Corp., 392 F.3d 650, 656 (4th

Cir. 2004) (quoting Basic, Inc. v. Levinson, 485 U.S. 224, 231–32

(1988)).        Defendants         challenge       Plaintiffs’     allegations          as    to

material       misrepresentations           or    omissions,      scienter,      and     loss

causation.       Plaintiffs’ allegations regarding each of these three

elements are indeed inadequate.

     a.        Material Misrepresentations or Omissions

     To plead a material misrepresentation in a Section 10(b)

claim, a plaintiff must plead the falsity of each statement with

specificity.          Cozzarelli, 549 F.3d at 625.                      As for material

omissions,      a    plaintiff       must    identify      an    affirmative       duty       to

disclose and a failure to make the requisite disclosure.                                     See

Singer    v.    Reali,       883   F.3d     425,    440   (4th    Cir.    2018).        Here,

Plaintiffs          allege     fifteen       material         misrepresentations              or

omissions, all of which hinge on Plaintiffs’ belief that Experion

is an undisclosed related party and/or iLE revenues are “largely

fake.”     (See ECF No. 41 ¶¶ 459-517).                   Analysis can, therefore,

focus    on    these    cross-cutting            assertions      rather   than     on    each

individual          misrepresentation.               Because       the     related-party

allegations rest on a failure to disclose, those allegations are

treated as raising a material omission, whereas the fake-revenue

assertions are treated as raising a material misrepresentation.

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Defendants do not appear to contest Plaintiffs’ assertion that

there is a duty to disclose material related-party relationships.

(See id. ¶ 287 (“GAAP requires financial statements to include .

. . disclosures of material related party transactions[.]”)).

Accordingly, the issue that the related-party allegations raise is

solely whether Defendants failed to meet that duty.                  The issue

that   the    fake-revenue   allegations     raise    is      the   falsity     of

Defendants’ statements regarding iLE’s revenues.              Plaintiffs have

not adequately pleaded either one.

       First, Plaintiffs’ related-party allegations, which mirror

those in the Hindenburg Report, do not appear to square with GAAP

standards.        The     relevant     standard,     Accounting       Standards

Codification    (“ASC”)    850-10-20    (“Related    Party     Disclosures”),

defines a related party as follows:

             a. Affiliates of the entity

             b. Entities for which investments in their
             equity securities would be required

             c. Trusts for the benefit of employees

             d. Principal owners of the entity and members
             of their immediate families

             e. Management of the entity and members of
             their immediate families

             f. Other parties with which the entity may
             deal   if   one   party  controls   or   can
             significantly influence the management or
             operating policies of the other to an extent
             that one of the transacting parties might be
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             prevented from fully pursuing its own separate
             interests

             g. Other parties that can significantly
             influence the management or operating policies
             of the transacting parties or that have an
             ownership interest in one of the transacting
             parties and can significantly influence the
             other to an extent that one or more of the
             transacting parties might be prevented from
             fully pursuing its own separate interests.

(Id. ¶ 283 (emphasis omitted)).             Plaintiffs focus on the final

three categories.     First, they allege that Experion was a related

party “due to the existence of [a] familial relationship between

the owner of Experion India/Experion MEA and a member of [iLE’s]

senior management.”      (Id. ¶ 301).         They are referring to Cherian

and Jojo Philip; Jojo Philip evidently owned a 35% stake in

Experion India and a 45% stake in Experion MEA while his brother,

Cherian Philip, was iLE’s “Senior Director Channel Partnerships

for Asia, Middle East & Africa.”              (Id. ¶¶ 129-32).        But as Mr.

Chidambaran explains, this fact, at most, only makes Jojo Philip

a related party, as a member of the immediate family of a member

of iLE management.      (ECF No. 83-1, at 18 & n.2).              Plaintiffs do

not explain how Jojo Philip’s immediate family status is imputed

first   to   the   Experion    affiliates     in   which   he    is   a   minority

shareholder    and   then     to   Experion    itself.      Plaintiffs’     other

allegations regarding members of iLE who have held shares or roles


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in Experion affiliates fail to make Experion a related party for

the same reason.

     Second, Plaintiffs contend that “members of [iLE’s] senior

management team” had the ability “to significantly influence the

operations of Experion India and Experion MEA.”               (ECF No. 41 ¶

301).   Plaintiffs incorporate the following allegations from the

Hindenburg Report:

           (i) [Mr.] Chidambaran was listed as the
           American   contact   for  [the]   “Technology
           Partner” on Experion’s website and listed his
           personal   residence   as  the  location   of
           “Experion Americas”;

           (ii)   per  Indian   corporate   records   and
           LinkedIn, iLearningEngines’ Senior Project
           Manager, Tom Thomas and AVP of Sales &
           Business Development Director, Ratish Nair,
           were directors and shareholders of Experion’s
           India affiliate, Experion Technologies, FZ LLC
           [sic, should be Experion Infosystems];

           (iii) Experion India and Experion [Middle East
           & Africa (“MEA”)] are partially owned by Jojo
           Philip, the brother of iLearningEngines’
           Senior Director Channel Partnerships, Cherian
           K. Philip; and

           (iv) Experion MEA was headed and partially
           owned by iLearningEngines’ President and Chief
           Business      Officer,       Arackal,      and
           iLearningEngines’ AVP of Sales & Business
           Development, Ratish Nair.

(Id. ¶ 169 (citation modified)).           Mr. Chidambaran’s listing as

Experion   Americas’   contact   person     and   the    inclusion    of      his

residence as Experion Americas’ business location are inapposite

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because that was verifiably true only as recently as February 2020

and January 2022, respectively, (Id. ¶¶ 113–14), long before the

issuance of any of the alleged omissions.         As for Mr. Thomas and

Mr. Nair, records do reflect that as of March 31, 2023, they held

two of the three director positions at Experion India while serving

as senior employees at iLE. (Id. ¶¶ 119-22). While it is possible,

then, that they controlled Experion India while working for iLE,

Plaintiffs do not explain how iLE exerted sufficient influence and

control over Mr. Thomas and Mr. Nair to achieve influence and

control over Experion India. And even if Experion India was indeed

a related party, it is not remotely clear that that renders

Experion itself a related party, or that iLE had a material

relationship with Experion India such that its duty to disclose

would be triggered.    On the latter point, bankruptcy proceedings

disclosed $216,343.55 in wire transfers from an iLE affiliate to

Experion India in the year preceding bankruptcy, (Id. ¶ 234), which

pales in comparison to the $87 million sent to Experion MEA, (Id.

¶ 231).   The Philip brothers’ relationship also does not render

Experion a related party because Plaintiffs do not explain why the

sibling relationship is sufficient to satisfy the significant

influence or control test. Lastly, Mr. Arackal was CEO of Experion

MEA in 2015, (Id. ¶ 128), long before the alleged omissions.                He

was an Experion MEA board member until 2022 and held an undisclosed

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share of Experion MEA, (Id. ¶¶ 126-27), but neither fact clarifies

the extent of his influence or control over Experion MEA.                         The

allegations   regarding       Mr.   Nair’s     stake    in   Experion      MEA    are

insufficient for the same reason.            In short, Plaintiffs succeed in

demonstrating considerable overlap in personnel between iLE and

Experion    entities    but    fail    to    spell     out   beyond      conclusory

allegations that this overlap constitutes significant influence or

control over Experion.        See In re Qutoutiao, Inc. Sec. Litig., No.

20-cv-6707,   2023     WL   4977499,    at   *10     (S.D.N.Y.    Aug.    3,    2023)

(explaining that a “close business relationship” alone does not

trigger a duty to disclose absent allegations revealing how that

closeness manifests in influence and control), vacated on other

grounds sub nom., Pappas v. Qutoutiao Inc., No. 23-1233, 2024 WL

4588491 (2d Cir. Oct. 28, 2024).

       In one last attempt to do so, Plaintiffs point to bankruptcy

filings in which iLE affiliates refer to Experion MEA, Experion

India, and a few other Experion affiliates as “insiders” under the

Bankruptcy Code, as well as “related parties.”                   (ECF No. 41 ¶¶

227,    234–35).        Although       these       observations       might      seem

superficially   probative,      their    weight      dissipates    under       proper

analysis.    Plaintiffs do not counter Mr. Chidambaran’s contention

that the definition of “insider” under the Bankruptcy Code differs

meaningfully from that of “related party” under GAAP, and that

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“related party” is not a defined term under the Bankruptcy Code.

(ECF No. 83-1, at 20).         Moreover, Mr. Chidambaran points to the

“Global Notes” included with the “insider” disclosures that state:

“Persons listed as ‘insiders’ have been included for informational

purposes only and the inclusion of them in the Schedules and

Statements[] shall not constitute an admission that those persons

are insiders for purposes of . . . the Bankruptcy Code.”                (ECF No.

103, at 9).       Whatever motive iLE affiliates had for making such

disclosures (perhaps an abundance of caution), they are not so

substantiated and unequivocal that they undercut iLE’s previous

position regarding the nature of its relationship with those

Experion entities.

     Plaintiffs fail to allege that iLE had a duty to disclose

Experion as a related party, so none of the alleged omissions is

actionable on this basis.

     The other category of allegations Plaintiffs assert pertains

to iLE’s misrepresentation of its revenues; to wit, that its

reported    and    discussed   revenues    were   “largely     fake.”     These

allegations fail, however, for the simple reason that they assume

their conclusion.       The Hindenburg Report “suspect[ed]” that the

revenue    and    expenses   associated    with   the   Technology      Partner,

Experion, were “largely fake” because “[t]he unusual circular

structure makes it easy to inflate both revenue and cost figures

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while only netting out a minimal difference.”               (ECF No. 41 ¶¶ 172,

177 (alterations      in    original)).         But   the   suspicion      that    the

relationship structure could facilitate revenue inflation does not

mean that iLE in fact inflated its revenues.                 (ECF No. 84-1, at

20).    By failing to bridge that gap, Plaintiffs “do not permit the

court to infer more than the mere possibility of misconduct,”

Iqbal, 556 U.S. at 679, much less the specificity of misconduct

required under Rule 9(b) and the PSLRA.

       Plaintiffs argue, in essence, that the relationship with

Experion lacked economic substance and instead consisted of round-

tripping     funds.    “A      typical   ‘round-tripping’         scheme   involves

parties entering into reciprocal contracts to exchange similar

amounts of money for similar services.”                Tchrs.’ Ret. Sys., 477

F.3d at 178 (citation modified).          As the Fourth Circuit explained:

             Such transactions can be improper because the
             parties   book  revenues   even  though   the
             transactions “wash out” without any economic
             substance. But the basis for alleging “round-
             tripping” does not exist when either of the
             transactions have economic substance because
             those transactions would not wash out.    The
             mere existence of reciprocal dealing does not
             suggest “round-tripping.”

Id.     Here, Plaintiffs assume without adequate explanation that

neither leg of the transaction contained economic substance. Based

on iLE’s financial statements, it does not appear that iLE and the

Technology      Partner     provided      similar      services.           In     some

                                         31


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circumstances, the Technology Partner purchased the right to use

iLE’s platform, to which iLE retained the intellectual property

rights, and the Technology Partner would integrate the platform

into its own software and provide it to its own customers.                          (ECF

No. 41 ¶¶ 291, 515).              In other circumstances, iLE paid the

Technology Partner to serve as its agent, and in exchange the

Technology Partner would facilitate sales to iLE customers.                         (Id.

¶ 291).        iLE would also pay the Technology Partner to perform

research and development, sales and marketing, and implementation

and support services.            (Id.).        Although iLE and the Technology

Partner each facilitated the sales of the other in some way, they

appear to have done so in different ways and with different

customers.       Given the apparent substance to both legs of these

transactions, the happenstance that the values of these services

roughly coincided does not mean that they washed each other out.

Plaintiffs      allege   nothing     more       than    “the    mere    existence       of

reciprocal dealing.”       Tchrs.’ Ret. Sys., 477 F.3d at 178.                 That is

not enough.

     Finally, Plaintiffs’ allege that the $87 million in wire

transfers revealed in the bankruptcy proceedings are not properly

accounted for in iLE’s financial statements.                   These wire transfers

do not match the “net cash transfers” to the Technology Partner as

stated    in    SEC   filings,    are     in    large   round    amounts,     and      are

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described minimally as “outgoing wire transfer[s].”               (ECF No. 41

¶¶ 310, 331). Thus, Plaintiffs argue, iLE “revenue and net revenue

is overstated by the amount of these payments.”             (ECF No. 92, at

19).   How amounts being round and minimally described as outgoing

wire transfers lead to a conclusion that they lacked a legitimate

business purpose is not explained.           It is doubtful that such

attributes constitute indicia of wrongdoing.           And the fact that

the outgoing wires do not match net cash transfers is perhaps

unsurprising given that net cash transfers would also account for

incoming transfers from the Technology Partner.             Admittedly, the

netting arrangement between iLE and the Technology Partner is

somewhat confusing.    It is not clear if, and to what extent, iLE

and the Technology Partner did net costs and revenues; the amended

complaint   is   somewhat   contradictory.     On   the     one    hand,     the

statement in the S-1 Registration Statement seems to consider the

netting arrangement to be optional: “[iLE] determined the services

it received from the Technology Partner were distinct and the

consideration paid to the Technology Partner was equivalent to an

arms-length transaction.     As a result, no costs incurred by [iLE]

related to services provided by the Technology Partner have been

netted against revenues earned from the Technology Partner.”               (ECF

No. 41 ¶ 92).     On the other hand, the “Fees” provision of the

Master Agreement does not clearly contemplate that netting is

                                   33


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optional, as opposed to mandatory.                  For example, it provides that

“[o]n or before the fifth (5th) day of each calendar month,” the

Technology Partner “will promptly report and pay to [iLE] all

amounts due and payable for [iLE] Products . . . less any fees due

for    .    .    .   [s]ervices    previously       provided”       by    the   Technology

Partner.         (Id. ¶ 108).       Plaintiffs do not explain how to square

iLE’s characterization of the netting arrangement in the S-1

Registration           Statement        with   their     theory      of     the       netting

arrangement.          To the extent iLE and the Technology Partner did not

always net, it is hard to see how iLE Holdings’ outgoing wire

transfers give rise to an inference that iLE misstated revenue.

       Plaintiffs           fail   to     allege    that      iLE    made       any     false

representation about its revenue, so none of the alleged statements

is actionable on this basis, either.

       b.        Scienter

       The      next    pleading    requirement        that    Defendants         raise   is

scienter, which is “a mental state embracing intent to deceive,

manipulate, or defraud.”                 Tellabs, Inc. v. Makor Issues & Rts.,

Ltd.,      551       U.S.   308,   319    (2007)    (quoting        Ernst   &     Ernst    v.

Hochfelder, 425 U.S. 185, 193 n.12 (1976)). In addition to intent,

scienter also “encompasses ‘severe recklessness,’” meaning “an act

so highly unreasonable and such an extreme departure from the

standard of ordinary care as to present a danger of misleading the

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plaintiff to the extent that the danger was either known to the

defendant or so obvious that the defendant must have been aware of

it.”    In re Triangle Cap. Corp. Sec. Litig., 988 F.3d 743, 751 (4th

Cir. 2021) (quoting Ottmann v. Hanger Orthopedic Grp., Inc., 353

F.3d 338, 343 (4th Cir. 2003)) (citing Tchrs.’ Ret. Sys., 477 F.3d

at 184).

       The   PSLRA    “imposes     a    heightened      pleading      standard       for

scienter, requiring plaintiffs to ‘state with particularity facts

giving rise to a strong inference of scienter.’”                    Id. (quoting 15

U.S.C. § 78u-4(b)(2)).            “To qualify as ‘strong[,]’ . . . an

inference     of   scienter    must    be   more    than   merely     plausible       or

reasonable—it must be cogent and at least as compelling as any

opposing inference of nonfraudulent intent.”                Tellabs, 551 U.S. at

314.         The   scienter      inquiry      “assess[es]       the     allegations

holistically,” rather than “each allegation in isolation.”                     Id. at

326    (citation     modified).        “[O]missions     and    ambiguities       count

against inferring scienter,” as does absence of motive, though the

latter is not “fatal.”         Id. at 325, 326 (citation modified).

       In    the     amended    complaint,         Plaintiffs       offer    various

allegations of scienter, all of which Defendants contend are

insufficient. Defendants are correct. To begin, Plaintiffs allege

that “as the CEO and CFO,” Mr. Chidambaran and Mr. Naqvi “would

have personal knowledge” of the structure of the relationship with

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Experion “and would have known or recklessly disregarded the

falsity and misleadingness of the alleged misstatements.”                  (ECF

No. 41 ¶ 522).     Mr. Chidambaran and Mr. Naqvi’s “knowledge of

[iLE’s]   core   business,”      along      with     “its      employees       and

executive[s’] relationships with Experion,” is allegedly “strong

evidence” of scienter.      (Id. ¶ 525).     But “‘bare allegations’ that

officers have ‘knowledge of key facts’ because of their positions

or because such knowledge relates to the business’s core operations

are not enough, standing alone, ‘to support a strong inference of

scienter.’”   KBC Asset Mgmt. NV v. DXC Tech. Co., 19 F.4th 601,

612 (4th Cir. 2021) (quoting Yates v. Mun. Mortg. & Equity, LLC,

744 F.3d 874, 890 (4th Cir. 2014)).         Defendants’ positions at most

indicate their involvement in any alleged misstatement, but not

their knowledge thereof.

     On that point, Defendants also argue that the mere fact of a

GAAP violation, whether in recording revenue or identifying a

related party, is generally insufficient on its own to raise a

strong inference of scienter.       As another court in this district

has explained, “allegations of a violation of GAAP provisions or

SEC regulations, without corresponding fraudulent intent, are not

sufficient to state a securities fraud claim.”              Keeney v. Larkin,

306 F.Supp.2d 522, 541 (D.Md. 2003) (quoting Chill v. Gen. Elec.

Co., 101 F.3d 263, 270 (2d Cir. 1996)), aff’d, 102 F.App’x 787 (4th

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Cir. 2004).     Plaintiffs do not respond on this front in relation

to recording revenue, but do contend that as to related parties,

the GAAP test is so simple that a violation should give rise to an

inference of scienter.       (ECF No. 92, at 26).          They cite ASC 850-

10-20(e), which defines as a related party “[m]anagement of the

entity and members of their immediate families,” and assert that

several   iLE   executives     clearly     meet    this    definition.     (Id.

(alteration in original)).        Fair enough.        But that says nothing

about whether Experion meets that definition, and it is difficult

to see how it does.      If Plaintiffs themselves struggle to apply

the test they frame as simple, then they cannot rely on potential

misapplication of the test by Mr. Chidambaran and Mr. Naqvi as

strong evidence of scienter.          See Harris v. AmTrust Fin. Servs.,

Inc., 135 F.Supp.3d 155, 161 n.9 (S.D.N.Y. Sep. 29, 2015) (“GAAP

is not the lucid or encyclopedic set of pre-existing rules that

[it might be perceived] to be.” (alteration in original) (quoting

In re Worldcom, Inc. Sec. Litig., 352 F.Supp.2d 472, 478 (S.D.N.Y.

2005)).

     Plaintiffs next point to the Board placing Mr. Chidambaran

and Mr. Naqvi on administrative leave during the Special Committee

investigation,    (ECF   No.     41    ¶   527),     and    their   subsequent

resignations while the investigation remained ongoing, (Id. ¶

528), as evidence of scienter.         Again, these allegations on their

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own are insufficient.       The Fourth Circuit has repeatedly declined

to rely on executive departures as strong evidence of scienter.

S.A. Fire & Police Pension Fund v. Syneos Health Inc., 75 F.4th

232, 244 (4th Cir. 2023) (“[E]xecutive departures are, at best,

weak evidence of scienter.” (citation modified)); Triangle Cap.,

988 F.3d at 754 (“[W]ithout allegations demonstrating Defendants’

contemporaneous    knowledge    [of   their    misfeasance],       we    find    it

difficult to give this regime change any weight toward a scienter

inference.”).      Plaintiffs     respond      that   the      timing    of     Mr.

Chidambaran’s and Mr. Naqvi’s resignations pending the Special

Committee   investigation     indicate     that   they    resigned      to    avoid

termination for cause.      (ECF No. 92, at 27).         Perhaps, but that in

itself is an inference.        And the “strong inference of scienter

[must] be supported by facts, not other inferences.” Maguire Fin.,

876 F.3d at 548.

     iLE’s self-reporting of potential violations of the law to

the Department of Justice is even further evidence of scienter,

Plaintiffs contend.   (Id. ¶ 530).         Those were potential violations

of law, however, and Plaintiffs provide no indication that the

government has concluded any violations actually occurred, or that

the potential violations reported entailed intentional or severely

reckless behavior by Mr. Chidambaran and Mr. Naqvi.                     Again, a


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strong    inference      of   scienter      cannot     be    supported    by       “other

inferences.”        Maguire Fin., 876 F.3d at 548.

     Plaintiffs also allege that as CEO and CFO, Mr. Chidambaran

and Mr. Naqvi “would have been aware” of the $87 million in wire

transfers to Experion MEA in the year preceding bankruptcy.                         (Id.

¶ 532).        This, however, is just another allegation that senior

employees       had    “‘knowledge     of    key     facts’    because       of    their

positions.”         KBC Asset Mgmt., 19 F.4th at 612 (quoting Yates, 744

F.3d at 890). And as discussed in the previous section, Plaintiffs

fail to explain fully why the court should read anything into these

wire transfers given the unclear extent of the netting arrangement.

The fact that over $55 million of the wire transfers occurred after

publication of the Hindenburg Report does not necessarily mean

they “rushed to move money out of [iLE].”                    (ECF No. 92, at 27).

Plaintiffs cite this figure from iLE’s bankruptcy proceedings but

do not indicate that any party to those proceedings has suggested

these payments constituted fraudulent conveyances.                       Without any

indication of what iLE’s obligations to Experion actually were

during this time period, the timing of these payments cannot raise

a strong inference of scienter.

     Finally, Plaintiffs contend that Mr. Chidambaran and Mr.

Naqvi    had    a    motive   to   defraud       because    “there   [wa]s     a    clear

incentive to maximize the company’s perceived value.”                        (ECF No.

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92, at 27).    But the Fourth Circuit has concluded that “these types

of generalized motives—which are shared by all companies—a[re]

insufficient to plead scienter under the PSLRA.”               Ottmann, 353

F.3d at 352 (citing, inter alia, City of Philadelphia v. Fleming

Cos., 264 F.3d 1245, 1269 (10th Cir. 2001)).                A motivation to

maximize the company’s perceived value and “keep share prices . .

. high” is precisely this type of generalized motive.               Triangle

Cap., 988 F.3d at 754.

     Considering these allegations together, they do not raise an

inference of scienter at least as compelling as the innocent

alternative.    It remains more likely that Mr. Chidambaran and Mr.

Naqvi faced tricky GAAP issues and relied on their independent

accountant’s opinion of their resolution of those issues.            “Marcum

had continual access to internal, confidential, current corporate

information concerning [iLE’s] most up-to-date operational and

financial results and prospects.”          (ECF No. 41 ¶ 400).               It

certified iLE’s financial statements for 2023, 2022, and 2021, and

consented to the inclusion of its opinion in the Registration

Statements. (Id. ¶¶ 245-46, 253). iLE stated that it incorporated

those financial statements “in reliance” on Marcum’s opinion. (Id.

¶ 145).   Even though Marcum apparently notified iLE in January

2024 while auditing iLE’s 2023 financial statement that iLE had

certain “material weaknesses,” (Id. ¶ 217), its April 2024 opinion

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stated that iLE’s 2023 financial statement “present[ed] fairly, in

all material respects, the financial position” of iLE, (Id. ¶ 246).

It    appears,   then,    that    Mr.   Chidambaran     and    Mr.   Naqvi    could

reasonably believe that they were consistently and accurately

representing iLE’s financials to investors.

       c.    Loss Causation

       Finally, a plaintiff must adequately plead loss causation to

state a Section 10(b) claim.            15 U.S.C. § 78u-4(b)(4); Defeo v.

IonQ, Inc., 134 F.4th 153, 161 (4th Cir. 2025).               Loss causation is

“a causal connection between the material misrepresentations and

the loss.”       Dura Pharms., 544 U.S. at 342 (citation modified).

Loss     causation    allegations       are     reviewed      “for    ‘sufficient

specificity,’     a   standard     ‘largely     consonant     with   Fed.R.Civ.P.

9(b)’s’ particularity requirement.”               Defeo, 134 F.4th at 161

(quoting Katyle v. Penn Nat’l Gaming, Inc., 637 F.3d 462, 471 (4th

Cir. 2011)).     “To plead loss causation, a plaintiff must plausibly

and with sufficient specificity allege . . . ‘(1) the exposure of

the     defendant’s      misrepresentation       or    omission,      i.e.,       the

revelation of new facts suggesting the defendant perpetrated a

fraud on the market, and [that] (2) such exposure resulted in the

decline of the defendant’s share price.”              Id. at 161–62 (emphasis

added) (citation modified) (quoting Singer, 883 F.3d at 445).

There are three ways to plead such exposure: (1) the corrective

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disclosure theory, meaning “the defendant company itself made a

disclosure that publicly revealed for the first time that the

company perpetrated a fraud on the market by way of a material

misrepresentation   or   omission”;     (2)   the    materialization      of   a

concealed risk theory, meaning exposure by a third party of the

defendant company’s fraud; and (3) an “amalgam” of the previous

two, “allowing for the reality that the truth of a company’s fraud

can leak out slowly from a variety of different sources.”                Id. at

162 (quoting Singer, 883 F.3d at 445–47).           “[I]t is not enough to

plead that some allegation of fraud hit the market if it is

implausible to believe that said allegation revealed any new truth

to the market.”   Id.

     Here, Plaintiffs allege loss causation through an amalgam of

exposures.   They point to four disclosures.           (ECF No. 41 ¶ 535).

First, and most importantly, they highlight the release of the

Hindenburg Report on August 29, 2024, which posited that iLE had

fabricated its revenues and failed to disclose its Technology

Partner as a related party.     (Id. ¶ 159).        iLE’s share price fell

from a closing price of $3.19 on August 28 to a closing price of

$1.49 on August 29, a 53.3% decline.          (Id. ¶ 179).       Second, they

cite the Form 8-K filing on November 18, 2024 (“Cautionary 8-K”),

in which iLE announced that its financial statements since 2020

should “no longer be relied upon,” Marcum had withdrawn its prior

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opinions, iLE had received a subpoena from the SEC, and Mr. Naqvi

had been placed on administrative leave from his role as CFO and

given the new title of Senior Vice President.          (Id. ¶ 196).      iLE’s

share price fell again, this time from a closing price of $1.50

the previous trading day to a closing price of $1.095 on November

18, a 27% decline.    (Id. ¶ 202).        Third, they raise the Form 8-K

filing on December 10, 2024 (“Executive Leave 8-K”), in which iLE

announced that Mr. Chidambaran, Mr. Naqvi, Mr. Arackal, and two

iLE Vice Presidents had been placed on administrative leave and

Mr. Olivier had been appointed interim CEO.           (Id. ¶ 205).       iLE’s

share price fell further, from a closing price of $1.20 on December

9 to a closing price of $1.03 on December 10, a 14.2% decline.

(Id. ¶ 207).   Fourth, they point to iLE’s press release on December

23, 2024 (“Bankruptcy Press Release”), that it had filed for

bankruptcy.    (Id. ¶ 208).    iLE’s share price tumbled from a closing

price of $0.885 the previous trading day to a closing price of

$0.19 on December 23, a 78.5% decline.         (Id. ¶ 209).

     Defendants argue that Plaintiffs have failed to plead loss

causation because the Hindenburg Report disclaims its own accuracy

and exposed no new facts, and none of the other three alleged

disclosures exposed to the market any new facts, either.                  (ECF

Nos. 83-1, at 31–34; 84-1, at 34–37).        Plaintiffs respond that the

Hindenburg Report did indeed expose new facts to the market, and

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that all the alleged “partial” disclosures considered together

constituted the requisite exposure.              (ECF No. 92, at 28–35). 10

          Defendants are correct that the Hindenburg Report is not a

qualifying disclosure.           It is a “‘high bar that plaintiffs must

meet in relying on self-interested and anonymous short-sellers’

when attempting to plead loss causation.”                Defeo, 134 F.4th at 163

(quoting In re Nektar Therapeutics Sec. Litig., 34 F.4th 828, 839

(9th Cir. 2022)). Two circumstances are generally fatal to reliance

on    a        short-seller   report.      First,    when    self-interested         and

anonymous short-sellers disclaim the accuracy of their report,

their report is “rendered . . . inadequate” for pleading loss

causation.          Id. (quoting Nektar Therapeutics, 34 F.4th at 840)).

In Defeo, the Fourth Circuit held that a short-seller report did

not       constitute     a    qualifying    disclosure       because     its    self-

interested,          anonymous   authors    included     a   disclaimer     that     it

“cannot and does not provide any representations or warranties

with respect to the accuracy of th[e] [cited] materials.”                      Id. at

158–59, 165.         Likewise, the Hindenburg Report’s authors were self-

interested, possibly anonymous, 11 and included a disclaimer that


          10
       Plaintiffs disclaim reliance on the Hindenburg Report as a
“complete corrective disclosure.” (ECF No. 92, at 35 n.1).

          11
       Defendants contend that the Hindenburg Report’s authors are
anonymous, (ECF No. 83-1, at 11), and Plaintiffs do not contest
that assertion.     The Ninth Circuit, however, has described
Hindenburg reports as not anonymous because Hindenburg is a “well-
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they “make[] no representation, express or implied, as to the

accuracy, timeliness, or completeness of any . . . information” in

the Report.      (ECF No. 83-2, at 24).     The disclaimer is strikingly

similar to the one in Defeo. Accordingly, any “reasonable investor

reading the[] [report] would likely have taken [its] contents with

a healthy grain of salt,” causing “its potential evidentiary value

[to] evaporate[].”      Defeo, 134 F.4th at 163, 164 (quoting In re

Bofl Holding, Inc. Sec. Litig., 977 F.3d 781, 794–95 (9th Cir.

2020)). Therefore, it is “implausible” that the Hindenburg Report,

“accompanied by those kinds of disclosures[]” and “published by an

activist short seller, would reveal some new truth to the market.”

Id. at 164. 12


known short-seller firm[].” Espy v. J2 Glob., Inc., 99 F.4th 527,
541 (9th Cir. 2024).     It is not clear whether anonymity is
eliminated when an institutional author is named, such as
Hindenburg, or whether the Report is still considered anonymous
unless individual authors are named. The court need not resolve
the question because the issue is not dispositive. Id. (holding
that a Hindenburg Report, despite not being anonymous, did not
qualify as a corrective disclosure).    Also, the authors of the
Report announced that they “stand[] to realize significant gains
in the event that the price of the securities move[s].” (ECF No.
83-2, at 24).     Accordingly, the Hindenburg Report is self-
interested, if not also anonymous.

     12 Plaintiffs appear to try to distinguish Defoe on the basis
that the short-seller report there also relied on anonymous sources
that were readily manipulable by the short-seller, whereas the
Hindenburg Report did not rely on anonymous sources. (ECF No. 92,
at 30, 33). A better reading of Defoe, however, is that the short-
seller’s reliance on anonymous sources was an additional, but not
necessary, deficiency in the loss causation inquiry.      The rule
Defoe announces makes no mention of anonymous sources: “[W]hen
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     Second, when the short-seller report relies exclusively on

public information, it generally does not qualify as a corrective

disclosure.    Espy v. J2 Glob., Inc., 99 F.4th 527, 540–42 (9th Cir.

2024).   In efficient markets, the stock price is presumed to

incorporate    all    publicly   available   information,      so   a   report

relying exclusively on publicly available information often cannot

“reveal new information to the market that has not yet been

incorporated into the price.”          Bofl Holding, 977 F.3d at 794

(emphasis added); see also Nektar Therapeutics, 34 F.4th at 839

(explaining that it “is normally difficult” to infer that a short-

seller’s report exposed new information to the market if the report

“uses publicly available information”).         That being said, a short-

seller’s report that relies exclusively on publicly available

information can still qualify as a corrective disclosure if the

underlying data is complex and/or required considerable effort to

locate and analyze.      Espy, 99 F.4th at 541.         In other words, if

synthesizing    the    public    information    required      “expertise       or

specialized skills beyond what a typical market participant would

possess,” then it might qualify as a corrective disclosure.                   Id.


authors of a report are ‘anonymous and self-interested short-
sellers who disavowed any accuracy,’ their reports are ‘rendered
. . . inadequate’ for purposes of loss causation.” 134 F.4th at
163 (quoting Nektar Therapeutics, 34 F.4th at 840). Nor do the
Ninth Circuit cases the Defoe court relied on as “persuasive” make
any mention of anonymous sources.     See Nektar Therapeutics, 34
F.4th at 838–40; Bofl Holding, 977 F.3d at 791–97.
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at 542 (quoting Grigsby v. Bofl Holding, Inc., 979 F.3d 1198, 1208

(9th Cir. 2020)).

       Such reliance on publicly available information is fatal to

the    Hindenburg     Report’s     status     as    a   corrective       disclosure.

Hindenburg explicitly represented that “[t]o the best of [its]

ability and belief, all information contained herein . . . has

been obtained from public sources.” (ECF No. 83-2, at 24 (emphasis

added)).     Plaintiffs argue that the Report also relied on private

information       obtained       from    “corporate          intelligence         firm

Diligencia.”      (ECF No. 92, at 34).             Putting aside the fact that

this     contention     contradicts          Hindenburg’s           representations,

Defendants note that the only information sourced from Diligencia

is that “Jojo Philip, the brother of an iLE employee, held a

minority interest in Experion MEA.”                (ECF No. 103, at 18 (citing

ECF No. 41 ¶ 132)).            That factual allegation was one small

component of Plaintiffs’ sweeping related-party argument and thus

does not change the overall character of the Report’s sourcing.

Plaintiffs also argue that preparing the Report required expertise

and specialized skills, so synthesizing the publicly available

information effectively provided the market with new information.

(ECF No. 92, at 33–34).             That argument fares no better.                    No

expertise or specialized skills are required for “a careful reading

of public documents, including . . . investor presentations, press

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releases, employees’ LinkedIn profiles, board members’ resumes,

public corporate records, and SEC filings.”                Espy, 99 F.4th at

542.   The Hindenburg Report largely relied on a careful reading of

precisely the same materials: investor presentations, (ECF No. 83-

2, at 3, 9, 17); press releases (id. at 11, 18, 19); employees’

LinkedIn profiles, (id. at 7, 9, 11, 12); public corporate records,

(id. at 3, 9–14); and SEC filings (id. at 3–27).                    Contrary to

Plaintiffs’ assertions, such materials do not take “great effort

. . . to locate and analyze,” Espy, 99 F.4th at 541 (quoting Bofl

Holding, 977 F.3d at 795), nor do they consist of “complex economic

data understandable only through expert analysis,” Pub. Emps. Ret.

Sys. v. Amedisys, Inc., 769 F.3d 313, 323 (5th Cir. 2014).               Because

Plaintiffs   “allege[]      no    facts   plausibly     explaining     why   this

[publicly available] information . . . was not yet reflected in

[iLE’s] stock price,” they have “failed to plausibly allege that

the Hindenburg [R]eport qualifies as a corrective disclosure.”

Espy, 99 F.4th at 542.

       Although the Hindenburg Report itself does not qualify as a

corrective disclosure, it is still possible for Plaintiffs to plead

a corrective disclosure through “a series of partial disclosures.”

Singer, 883 F.3d at 446 (quoting Katyle, 637 F.3d at 472).                   When

partial disclosures tend to corroborate a short-seller report

based on public information, those disclosures can lend greater

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credence to the notion that the short-seller report did reveal

something new to the market.            Defeo, 134 F.4th at 164.

       Plaintiffs cite the Cautionary 8-K, Executive Leave 8-K, and

Bankruptcy Press Release as additional partial disclosures tending

to corroborate the Hindenburg Report. 13              (ECF No. 41 ¶ 535).          But

none of these alleged disclosures acknowledged fake revenues or

admitted that the Technology Partner should have been disclosed as

a related party.       The Cautionary 8-K provisionally communicated to

the    market   that   investors    should      not   rely   on    iLE’s   previous

financial       statements     during     the    pendency     of     the   Special

Committee’s investigation.          It explicitly stated that iLE “is

unable to determine whether it must correct financial statements”

and “no conclusions have been reached at this time.”                 (Id. ¶ 200).

Such statements do not “reveal[] any truth about [iLE’s] purported

fraud.”     Defeo, 134 F.4th at 164.            Likewise, it is implausible


       13
        In their opposition, Plaintiffs also point to a few other
alleged disclosures, namely various news reports and iLE’s
December 27, 2024, 8-K filing. (ECF No. 92, at 31–32, 34–35). To
begin, neither were included in Plaintiffs’ list of potential
qualifying disclosures in the amended complaint. (ECF No. 41 ¶
535). As excerpted, the news articles do no more than report that
iLE’s stock price fell following the release of the Hindenburg
Report.    (Id. ¶¶ 180-82, 185).     The December 27 8-K filing
announced that Mr. Chidambaran and Mr. Naqvi had resigned and iLE
had self-reported potential violations of law to the Department of
Justice. (Id. ¶¶ 214-15). But iLE did not link the resignations
or self-reported violations to the allegations in the Hindenburg
Report.   While they suggest something in the company is amiss,
they do not “relate back” to the specific misrepresentations of
which Plaintiffs complain. Singer, 883 F.3d at 446.
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that Marcum’s withdrawal of its opinions, the receipt of an SEC

subpoena, and the placement of Mr. Naqvi on administrative leave

(but simultaneously appointing him Senior Vice President) revealed

any truth to the purported fraud.            Instead, such actions are

consistent   with    reasonable,   ongoing     investigation      into      the

Hindenburg Report’s allegations, even if they turned out to be

entirely false.      Similarly, the Executive Leave 8-K noted that

“[t]he [i]nvestigation remains ongoing,” (ECF No. 41 ¶ 206), and

any inference regarding the reason for placing the iLE executives

on administrative leave rests on speculation, nothing more, see

Twombly, 550 U.S. at 555.      Lastly, the Bankruptcy Press Release

reveals little.     Plaintiffs explain in the amended complaint that

just prior to the April 2024 merger, iLE “was in a dire financial

state, reporting just $800,000 in cash, $22 million in debt, and

an accumulated deficit of $47.1 million.”       (ECF No. 41 ¶ 67).          The

fact that iLE had to file for bankruptcy before the end of the

year is perhaps unsurprising, especially considering the effect of

a short-seller attack, even if entirely unsubstantiated.

     In the end, Plaintiffs fall back on perhaps the most logical

argument of all, “[t]he immediate and severe stock price reaction

to the Hindenburg Report.”     (ECF No. 92, at 33).         Certainly, the

stock price fell severely after the release of the Hindenburg

Report and each subsequent alleged disclosure.               But “[t]aken

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together or separately,” the Hindenburg Report and subsequent

alleged disclosures do not reflect a “revelation of [iLE’s] fraud

as contributing to the decline in share price so much as they

credit the allegation of fraud as a contributing factor.”               Defeo,

134 F.4th at 164.   There are various other explanations for a stock

price decline in the immediate wake of a short-seller report

besides the report’s allegations being meritorious. 14            Absent any

corroborating facts of the fraud alleged in the Hindenburg Report,

Plaintiffs’   favored   explanation    is    “merely     consistent      with”

Defendants’   liability.      Twombly,      550   U.S.   at     557.      Such

“correlation does not equal causation.”           Defeo, 134 F.4th at 164

(citation modified).    The PSLRA requires more.


     14Other observers have noted that allegations in short-seller
reports can induce panic selling, detached from the underlying
merits of the allegations. Katherine McGavin, Short Selling in a
Financial Crisis: The Regulation of Short Sales in the United
Kingdom and the United States, 30 Nw. J. Int’l L. & Bus. 201, 223
(2010). Or the short-seller report might alert formerly disengaged
or uninformed investors that they had neglected their due diligence
on the company, even if the short-seller’s specific allegations
are unpersuasive. See Lei Chen, The Informational Role of Short
Sellers: The Evidence from Short Sellers’ Reports on US-Listed
Chinese Firms, 43 J. Bus. Fin. & Acct. 1444 (2016) (noting that
due diligence can be poorer when companies go public via reverse
merger, especially when the bulk of their operations is overseas).
Here, upon closer look, investors may well have disbelieved the
Hindenburg   Report’s   fraud  allegations   but   disliked   iLE’s
significant reliance on a single customer/vendor relationship and
sold their shares. Finally, execution of a short sale itself can
flood the market with shares and depress the share price. Merritt
B. Fox, Lawrence R. Glosten & Paul C. Tetlock, Short Selling and
the News: A Preliminary Report on an Empirical Study, 54 N.Y. L.
Sch. L. Rev. 645, 652-53 (2009).
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     2.     Section 20(a) (Count IV)

     Section 20(a) of the Exchange Act imposes liability on anyone

who “controls any person liable under” Section 10(b).               15 U.S.C.

§ 78t(a).    Plaintiffs allege that Mr. Chidambaran and Mr. Naqvi

are liable under Section 20(a).          (ECF No. 41 ¶¶ 33, 564).             Mr.

Chidambaran and Mr. Naqvi move to dismiss Plaintiffs’ Section 20(a)

claims against them because Section 20(a) liability is derivative

of Section 10(b) liability, and Plaintiffs fail to allege Section

10(b) liability adequately.       (ECF Nos. 83-1, at 16; 84-1, at 28

n.4).     Plaintiffs do not respond to this argument.                 Because

Plaintiffs fail to state a claim under Section 10(b) against any

defendant,    their   Section   20(a)     claims   will      necessarily      be

dismissed, too. Yates, 744 F.3d at 894 n.8 (“Because the complaint

is legally insufficient with respect to the § 10(b) claim, the §

20(a) claim must also fail. (citing Matrix Cap. Mgmt. Fund, LP v.

BearingPoint, Inc., 576 F.3d 172, 192 (4th Cir. 2009))).

     B.     Securities Act

     Plaintiffs also bring a claim for violation of Section 11 of

the Securities Act against Individual Defendants and Marcum, and

a derivative claim for violation of Section 15 of the Securities

Act against Individual Defendants.       Individual Defendants all move

to dismiss these claims, and Marcum moves to dismiss the Section


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11 claim asserted against it.         Their arguments succeed, and Counts

I and II will be dismissed.

       1.     Section 11 (Count I)

       Section 11 provides a civil cause of action to “any person

acquiring      [a]   security”     from    a    registration       statement    that

“contained an untrue statement of a material fact or omitted to

state a material fact required to be stated therein or necessary

to make the statements therein not misleading.”                       15 U.S.C. §

77k(a).       The standard for assessing materiality is the same as

Section 10(b) and Rule 10b-5.             In re Constellation Energy Grp.,

Inc. Sec. Litig., 738 F.Supp.2d 614, 633 (D.Md. 2010) (citing

Garber v. Legg Mason, 537 F.Supp.2d 597, 615 (S.D.N.Y. 2008)).

Section 11, however, imposes strict liability and does not require

a plaintiff to establish scienter.              See Yates, 744 F.3d at 894.

       Plaintiffs allege that Individual Defendants and Marcum are

liable under Section 11 for the misrepresentations and omissions

in the financial statements incorporated into the S-1 and S-8

Registration Statements.          (ECF No. 41 ¶¶ 314–416, 438, 443, 445).

Individual Defendants and Marcum contend that Plaintiffs lack

statutory standing because the shares they purchased are not

traceable to the Registration Statements.               (ECF Nos. 80-1, at 26–

30; 82-1, at 9–13; 83-1, at 34–37; 84-1, at 28–34; 85-1, at 12–

16).        Alternatively,   Mr.    Chidambaran      argues    that    Plaintiffs’

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Section 11 claim is inadequate because it fails to allege any

material misstatement, (ECF No. 83-1, at 37), and Marcum argues

that Plaintiffs fail to allege its liability under the Section 11

standard for statements of opinion set forth in Omnicare, Inc. v.

Laborers Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175

(2015), (ECF No. 80-1, at 15–26).       Plaintiffs argue that they do

have statutory standing.     (ECF Nos. 90, at 16–29; 91, at 34–37).

They also vigorously contest, in their discussion of the Exchange

Act claims, Mr. Chidambaran’s argument that there were no material

misstatements, (ECF No. 92, at 16–24), as well as Marcum’s position

that the Omnicare standard governs audit opinions, (ECF No. 91, at

20–33).

     a.   Statutory Standing

     Plaintiffs allege that their Section 11 claim is asserted “on

behalf of Plaintiffs and other members of the Securities Act

Classes who, during the Class Period, purchased or acquired [iLE]

common stock pursuant and/or traceable to the Form S-8 Registration

Form and Form S-1 Registration Form.”       (ECF No. 41 ¶ 438).        After

the S-8 Registration Statement became effective on June 21, 2024,

Mr. Leveque purchased 5,000 shares of iLE common stock on the open

market on July 25, just over a month later.           (Id. ¶¶ 420, 423).

After the S-1 Registration took effect on August 9, Mr. Al Hamid

purchased 500 shares of iLE common stock on the open market on

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August 20, 2024, 500 shares on August 23, 1,000 shares on August

27, 1,000 shares on August 30, and 1,500 shares on September 16.

(ECF No. 41-1, at 3; see also ECF No. 41 ¶ 424).           Plaintiffs allege

that “[g]iven the substantial increase in the volume of shares

being traded” immediately after the Registration Statements took

effect, “there is a high probability that the shares Plaintiffs

purchased   after   these    dates   were    traceable     to    the   Offering

Documents.”   (ECF No. 41 ¶ 422).           Accordingly, Plaintiffs state

that through discovery they “will prove that some or all of the

shares [they] purchased on the open market are traceable to the”

Registration Statements.      (Id. ¶¶ 423, 424).       They then detail how

they plan to trace the chain of title of their shares in discovery.

(Id. ¶¶ 426–36).

     Plaintiffs’    allegations      are    insufficient        for    statutory

standing.   A plaintiff bringing a Section 11 claim must “plead and

prove that he purchased shares traceable to the allegedly defective

registration statement.”       Slack Techs., LLC v. Pirani, 598 U.S.

759, 770 (2023).      Standing allegations are assessed under the

pleading requirements of Fed.R.Civ.P. 8(a).             Yates, 744 F.3d at

899 (citing In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104,

1107 (9th Cir. 2013)).      Plaintiffs cite several cases holding that

a plaintiff need only provide the general allegation that the

plaintiff purchased stock pursuant to or traceable to the offering

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documents.   (ECF No. 90, at 18–19, 23 n.10, 26).           Courts in this

circuit have rejected that proposition and instead held that, in

light of Twombly and Iqbal, “the complaint must set forth facts

plausibly suggesting that plaintiffs’ shares were issued as part

of the relevant offering.” TransEnterix Inv. Grp. v. TransEnterix,

Inc., 272 F.Supp.3d 740, 760 (E.D.N.C. 2017); accord Fanucchi v.

Enviva Inc., No. 22-cv-2844-DKC, 2024 WL 3302564, at *18 (D.Md.

July 3, 2024). 15   Although the Fourth Circuit has not weighed in

on this question in the Section 11 context, the TransEnterix court

understood the Fourth Circuit’s opinion in an analogous case to

reject the viability of such general allegations:

          In analyzing standing under Section 12(a)(2),
          the Fourth Circuit in Yates . . . h[eld] that
          “using the ‘pursuant and/or traceable to’
          language—coupled with sufficient supporting
          facts—can give rise to a plausible inference
          of standing in certain circumstances.” Yates,
          744 F.3d at 900. The Fourth Circuit held that
          the plaintiffs had not plausibly alleged
          standing   because    the   complaint   lacked
          “supporting facts sufficient to push the claim
          into the realm of plausibility.”    Id.   This
          court concludes that the Fourth Circuit would

     15 Plaintiffs rely on a case from this district, In re Mun.
Mortg. & Equity, LLC, Sec. & Derivative Litig., 876 F.Supp.2d 616
(D.Md. 2012), which concluded that “[t]he pleading requirement for
Section 11 standing is satisfied by general allegations that
plaintiff purchased pursuant to or traceable to [a] false
registration statement,” id. at 658 (second alteration in
original) (quoting In re Wachovia Equity Sec. Litig., 753 F.Supp.2d
326, 373 (S.D.N.Y. 2011)). (ECF No. 90, at 26). That case is
“outdated” and therefore unpersuasive. Fanucchi, 2024 WL 3302564,
at *19.

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          subject allegations of standing under Section
          11 to the same plausibility analysis.[16]

TransEnterix, 272 F.Supp.3d at 760–61. The only two circuit courts

to address this question directly since Twombly and Iqbal have

agreed that something more than a barebones allegation is required.

In re Ariad Pharms., Inc. Sec. Litig., 842 F.3d 744, 755–56 (1st

Cir. 2016); Century Aluminum, 729 F.3d at 1107; see also Cupat v.

Palantir Techs., Inc., No. 22-cv-2384, 2025 WL 1141534, at *14

(D.Colo. Apr. 4, 2025) (observing that the United States Courts of

Appeals for the First and Ninth Circuits are “the only two circuit

courts that appear to have addressed the issue”). 17             Otherwise,


     16Plaintiffs contend that Yates is inapposite because Section
12 requires a “heightened showing for standing” compared to Section
11. (ECF No. 90, at 25 n.12). While it is true that Section 12’s
pleading requirement is indeed more rigorous because aftermarket
purchasers may not sue, Yates, 744 F.3d at 899–900 (describing
Section 11 standing requirements as “more relaxed”), that does not
render the reasoning of Yates inapplicable.         Yates properly
imported the more general teachings of Twombly and Iqbal that
statutory standing allegations require “factual enhancement” and
must be more than “merely consistent with” standing. Id. at 899,
901 (quoting and citing Iqbal, 556 U.S. at 678). The Yates court
cited Century Aluminum’s conclusion that supporting facts are not
always sufficient, even in the less restrictive Section 11 context.
Id. at 900 (citing Century Aluminum, 729 F.3d at 1107–08).
Plaintiffs’ efforts to distinguish Yates are unavailing.

     17 Plaintiffs point to In re Suprema Specialties, Inc. Sec.
Litig., 438 F.3d 256 (3d Cir. 2006), as a circuit court upholding
general allegations as sufficient at the motion-to-dismiss stage.
(ECF No. 90, at 18–19). Indeed, the Third Circuit held that the
“plaintiffs’ assertions of purchases ‘in’ and ‘traceable to’ the
Suprema stock offerings were sufficient at the pleading stage,”
and the question of traceability would be resolved in discovery.
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plaintiffs offer “nothing more than a ‘formulaic recitation’ of

[the traceability] element” of a Section 11 claim.              Ariad Pharms.,

842 F.3d at 756 (quoting Twombly, 550 U.S. at 555).

     Where, as here, “[a] company has issued shares in multiple

offerings under more than one registration statement, ‘a greater

level of factual specificity will be needed before a court can

reasonably infer that shares purchased in the aftermarket are

traceable to a particular offering.’”          TransEnterix, 272 F.Supp.3d

at 761 (quoting Century Aluminum, 729 F.3d at 1107).                   “In that

case, ‘the plaintiff must prove that his or her shares were issued

under the allegedly false or misleading registration statement,

rather than some other registration statement.’”                  Id. (quoting

Ariad Pharms., 842 F.3d at 755) (citing Century Aluminum, 729 F.3d

at 1106).    “To do so, a plaintiff may either prove that the shares

at issue were purchased directly in the secondary offering or, if

the shares were purchases in the aftermarket, prove that the chain-

of-title for the shares can be traced back to the secondary

offering, starting with the plaintiff’s purchase and ending with

someone     who   purchased   directly    in    the   secondary      offering.”

Fanucchi,    2024   WL   3302564,   at   *18   (citing     TransEnterix,        272

F.Supp.3d at 761).       In many instances, the “obvious alternative


Suprema Specialties, 438 F.3d at 274 n.7. That case, however, was
decided before Twombly and Iqbal and is therefore unpersuasive.
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explanation” to traceability is that the purchased shares “could

instead have come from the pool of previously issued shares.”

Century Aluminum, 729 F.3d at 1108 (quoting Twombly, 550 U.S. at

567).    When that is the case, “plaintiffs cannot offer allegations

that are ‘merely consistent with’ their favored explanation but

are    also   consistent   with   the    alternative       explanation.”        Id.

(quoting Iqbal, 556 U.S. at 678).              Rather, they must provide

something more, “such as facts tending to exclude the possibility

that the alternative explanation is true.”             Id. (citing Twombly,

550 U.S. at 554).

       Here, Plaintiffs admit in the amended complaint that they

purchased their shares on the open market.                 So, they must plead

facts that the shares they purchased are traceable to either the

S-1 or S-8 Registration Statement and that tend to exclude the

alternative explanation that their shares instead trace back to

the pool of shares that existed prior to and was unaffected by the

Registration Statements.       Beyond the general allegation that their

shares are traceable, Plaintiffs allege that there is a “high

probability” their shares are traceable based on certain figures

related to the number of total shares outstanding and the number

of shares registered in the Registration Statements, and that they

will    prove   that   their   shares    are   in   fact    traceable   through

discovery.      (ECF No. 41 ¶¶ 422, 425).

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       Defendants argue that Plaintiffs impermissibly rely on the

probability      that     they    purchased      shares    traceable      to      the

Registration Statements, rather than the fact that their purchased

shares are so traceable.          They echo the conclusion of a district

court that recently considered the statistical tracing theory:

“[A] plaintiff must plead facts supporting a plausible inference

that its shares are traceable, not simply facts supporting a

plausible inference that its shares are probably traceable to the

challenged registration statement.”              Cupat, 2025 WL 1141534, at

*16.    The only circuit courts to have considered the statistical

tracing theory at the pleading stage both rejected it.                    Century

Aluminum, 729 F.3d at 1108 (allegations regarding purchase dates

and    prices   and     the   trading   volume    around     those   dates     were

insufficient); Pirani v. Slack Techs., Inc., 127 F.4th 1183, 1190

(9th Cir. 2025) (explaining that Century Aluminum rejected the

statistical tracing theory and finding no standing where the

plaintiff raised a “statistical inference” based on “the number of

shares he purchased and the fraction of shares on the exchange

that were registered”); Ariad Pharms., 842 F.3d at 756 (finding

statutory standing implausible where 15 million registered shares

were issued when 166 million were already outstanding). 18


       18
       The Fifth Circuit addressed the statistical tracing theory
on a Rule 12(b)(1) motion to dismiss for lack of subject matter
jurisdiction and therefore could consider evidence outside the
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       Plaintiffs attempt to distinguish these cases on the ground

that in all of them, either the plaintiffs did not allege, or the

courts did not believe, that it was possible to prove traceability.

(See     ECF   No.    90,    at     17   (distinguishing           Pirani),    24–25

(distinguishing Cupat), 27 (distinguishing Century Aluminum), 28

(distinguishing      Ariad   Pharms.)).          In   other   words,     Plaintiffs

believe their complaint is different because they do not allege

that the best they will ever be able to do is give the court a

high probability of traceability; rather, they allege they can

provide certainty.          To begin, that distinction of Defendants’

authorities is questionable.             See, e.g., Second Amended Class

Action Complaint ¶ 237, Cupat, No. 22-cv-2384 (D.Colo. Apr. 4,

2025), ECF No. 92 (“With discovery, a reliable chain of title can

be constructed that will allow Plaintiffs to prove they purchased

shares    traceable    to    the    Registration      Statement[.]”       (emphasis

added)).       And    even    assuming        traceability     for     aftermarket


pleadings. Krim v. pcOrder.com, Inc., 402 F.3d 489, 494–97 (5th
Cir. 2005). Accordingly, its discussion did not focus on how the
statistical tracing theory relates to pleading requirements.
Assuming that chain-of-title tracing was impossible, the court
rejected the proposition that a plaintiff could have standing
simply because there was a greater than 90% chance that his shares
are traceable to the offering. Id. at 496. The court concluded
that this theory would confer standing on all aftermarket
purchasers, despite Section 11’s restriction of standing to those
purchasers who actually acquired the registered stock.      Id. at
496–97.

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purchasers is possible in the modern marketplace, 19 Plaintiffs do

not explain why their belief that future proof is certain rests on

anything other than their probabilistic assessment at this time.

Indeed, if they had other reasons for such a belief, they would

have included them in their amended complaint. Plaintiffs’ attempt

to mask the central role of probabilities in their theory through

unsubstantiated promises of certainty is nothing more than artful

pleading.

     Plaintiffs next argue that even if the court construes their

theory as one of probabilities, their allegations are sufficient

because registered shares constituted 87.1% of outstanding shares

and 100% of the “public float.” 20    (See, e.g., ECF No. 90, at 21).


     19 Elsewhere, Plaintiffs include the following quotation from
a recent paper by two securities law scholars: “Many judges,
academics, plaintiffs’ and defense attorneys still subscribe to
the myth that it is impossible to trace chain of title for
commingled securities in order to establish standing under Section
11.   Unfortunately, this is a misguided, out-of-date assumption
because enhanced data-reporting requirements and modern computing
power can realistically solve this problem.” (ECF No. 98, at 17–
18 (quoting John C. Coffee, Jr. & Joshua Mitts, Slack v. Pirani
and the Future of Section 11 Claims, at 1 (Dec. 1, 2023),
https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID4650838_code180
6223.pdf?abstractid=4644888&mirid=1&type=2      [https://perma.cc/
ZU84-G4QP])).

     20 Plaintiffs (and iLE in the S-1 Registration Statement) do
not explain their understanding of the term “public float.” The
SEC defines “public float” as the product of a company’s total
shares in the “float” and the market price of a share of said
company. 17 C.F.R. § 229.10(f)(2). Plaintiffs do their math based
on iLE’s representation in the S-1 Registration Statement that the
100,774,669 shares registered constituted 90.9% of iLE’s public
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They point to various courts that have held that relatively high

probabilities are sufficient at the motion-to-dismiss stage.              (Id.

at 21–22); In re Ubiquiti Networks, Inc. Sec. Litig., 33 F.Supp.3d

1107, 1119 (N.D.Cal. 2014) (finding traceability plausible where

only   26,000   of   87   million    unregistered    shares     were    freely

tradable), aff’d in part, rev’d in part on other grounds, 669

F.App’x 878 (9th Cir. 2016); In re EveryWare Glob., Inc. Sec.

Litig.,   175   F.Supp.3d     837,    866   (S.D.Ohio        2016)   (finding

traceability where 46.4% of outstanding shares were registered and

plaintiff purchased 15% of the shares traded on the day of the

offering), aff’d sub nom., IBEW Loc. No. 58 Annuity Fund v.

EveryWare Glob., Inc., 849 F.3d 325 (6th Cir. 2017); In re Coinbase

Glob., Inc. Sec. Litig., No. 22-cv-04915, 2024 WL 4053009, at *19

(D.N.J. Sep. 5, 2024) (finding traceability plausible where 74% of


float.   (ECF Nos. 90-2, at 74; 91, at 34).        Because the S-1
Registration Statement speaks in terms of the number of shares
rather than their aggregate value, (ECF No. 90-2, at 74), iLE and
Plaintiffs do not appear to be using the SEC’s definition of public
float. Other courts have defined “float” as “the percentage of
shares held by the public, rather than insiders.”        Krogman v.
Sterritt, 202 F.R.D. 467, 478 (N.D.Tex. 2001); see also, e.g., In
re NII Holdings, Inc. Sec. Litig., 311 F.R.D. 401, 410 (E.D.Va.
2015) (citing Krogman, 202 F.R.D. at 478). In that sense, then,
the word “public” is redundant. Regarding iLE’s float, for the S-
1 and S-8 Registration Statements to have registered 100% of the
float, Plaintiffs must allege facts that the two Registration
Statements registered every share not owned by an insider at the
time of Plaintiffs’ purchases.      They do not put together the
numbers, or even account for insider ownership, in a way that
permits such a conclusion.      Therefore, the float argument is
unintelligible.
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outstanding shares were registered).                 Furthermore, they contend

that those courts that have held otherwise dealt with far lower

probabilities than are present here.                (ECF No. 90, at 24, 27–28);

see Cupat, 2025 WL 1141534, at *17 (52.6% of outstanding shares

registered);     Century       Aluminum,      729    F.3d     at     1106   (33.3%     of

outstanding shares registered); Ariad Pharms., 842 F.3d at 756

(8.4%     of   outstanding      shares      registered);       TransEnterix,           272

F.Supp.3d at 761 (8% of outstanding shares registered).

       Off the bat, Plaintiffs’ numbers appear incomplete, if not

incorrect.       Plaintiffs      do   not     assess    Mr.    Leveque’s      standing

separately from that of Mr. Al Hamid, but it is essential to do

so.     Cf. Town of Chester v. Laroe Ests., Inc., 581 U.S. 433, 439

(2017) (holding, in the Article III standing context, that “when

there are multiple plaintiffs[,] [a]t least one plaintiff must

have standing”). Mr. Leveque purchased before the S-1 Registration

Statement took effect, so his shares can be traceable, if at all,

only to the S-8 Registration Statement.                     As of May 14, 2024,

Plaintiffs allege that “[iLE] had 134,313,494 shares of common

stock outstanding.” (ECF No. 41 ¶ 46). Defendants argue the proper

number is at least 157,595,089 shares, which includes 22,624,975

shares issuable upon private and public warrants but not yet issued

as of July 22.      (ECF No. 105, at 11; see also ECF No. 90-2, at 2,


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19). 21    The lock-up provisions related to the merger restricted

roughly 103,770,120 shares, or “over 76.9% of [iLE] outstanding

shares,” 22 using Plaintiffs’ preferred total figure.            (ECF No. 41

¶ 419).    Those restrictions were likely to last until April 2025.

(See id. ¶ 417).        Reading between the lines, then, at least

30,543,374 shares were unrestricted and thus freely tradable.                 On

June 21, 2024, the S-8 Registration Statement “registered up to

16,208,318 shares of iLearningEngines common stock.”            (Id. ¶ 139).

Mr. Leveque purchased shares on July 25, 2024.          (Id. ¶ 423).      From

here, at least four assumptions need to be made: (1) whether

Plaintiffs’    total   outstanding    shares   figure    is    correct;       (2)

whether all the registered shares were issued; (3) whether all the

registered shares had been issued by May 14 to be included in the

outstanding shares figure; and (4) whether all the registered

shares were freely tradable.         Drawing all these assumptions in

Plaintiffs’ favor, there were still roughly 30,543,374 shares


      21
       The court may consider the Form S-1 Registration Statement
filed at ECF No. 90-2 on a motion to dismiss because it is a public
record. Moreover, it was filed on June 3 (ECF No. 90, at 12), and
amended for the second time on July 22, (ECF No. 90-2, at 2), so
the figures therein are relevant to Mr. Leveque’s July 25
purchases.

      22The S-1 Registration Statement sets forth a slightly
different figure of 134,970,114 outstanding shares as of April 16,
2024, roughly one month earlier.        (ECF No. 90-2, at 19).
Plaintiffs appear to use this total to calculate the 76.9% figure.

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freely tradable on July 25 when Mr. Leveque purchased his 5,000

shares, of which 16,208,318 shares were registered. 23               The highest

possible   percentage       of     freely      tradable    shares     that    were

registered, then, was 53.1%, nearly identical to the percentage in

Cupat that Plaintiffs seek to distinguish.                 Although the 46.4%

figure in EveryWare was lower, the plaintiff there purchased 15%

of the total shares traded the day the registered shares came

available, whereas Mr. Leveque purchased an unspecified portion of

the total shares traded on a day over a month after the S-8

Registration Statement took effect.             In other words, Mr. Leveque’s

traceability odds appear remarkably lower than Plaintiffs suggest

and lack any factual enhancements.

     Plaintiffs’ numbers remain unsettled when it comes to Mr. Al

Hamid.     On   August   9,      2024,   the    S-1   Registration      Statement


     23 These assumptions matter. First, Plaintiffs’ outstanding
shares figure is several months out of date. If it is too low,
then the denominator should be larger.         Second, iLE’s S-8
Registration Statement identifies the registered shares as “issued
or issuable” pursuant to various equity incentive plans. (ECF No.
41 ¶ 137).    If not all the registered shares were issued, then
fewer than 16,208,318 registered shares were available for
purchase by Mr. Leveque, and therefore the numerator should be
smaller. Third, if some or all the registered shares were issued
after June 21 but before July 25, then they were not accounted for
in the total outstanding shares figure of 134,313,494 shares, and
therefore the denominator should be larger. On this point, it is
notable that there was a large jump in trading volume on June 21
after the registration, suggestive of new shares being issued and
then sold. (Id. ¶ 420). Fourth, if some of the registered shares
were subject to the merger lock-up provisions, then they were not
freely tradable, and the numerator should be smaller.
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registered “up to 100,774,669 shares of [iLE] common [stock].”

(Id. ¶ 247).    On top of the (up to) 16,208,318 S-8 shares, there

was a maximum total of 116,982,987 registered shares at the time

Mr. Al Hamid began purchasing iLE common stock on August 20.

Dividing this figure by the May 14 total outstanding shares figure

of 134,313,494 shares yields the percentage Plaintiffs rely on:

87.1%.    (ECF No. 90, at 14).     While the court can draw the first

three    assumptions   listed   above,      it     cannot     draw   the    fourth

assumption because it is not possible that all 100,774,669 shares

were freely tradable given the alleged lock-up provisions.                   It is

possible that a favorable percentage exists for Mr. Al Hamid,

whether it is below or above 87.1%, but the court will not do the

math for him.

     Even if a favorable percentage exists, however, “[s]imply

alleging that stock is traceable because of a favorable percentage

does ‘not give rise to a reasonable inference that plaintiffs’

shares are traceable.’      Plaintiff[s’] shares could have come from

the offering[s], or alternatively, could not have.”                   Doherty v.

Pivotal Software, Inc., No. 19-cv-3589, 2019 WL 5864581, at *10

(N.D.Cal. Nov. 8, 2019) (quoting and citing Century Aluminum, 729

F.3d at 1108).     Plaintiffs’ allegations are “‘merely consistent

with’ their favored explanation.”        Century Aluminum, 729 F.3d at

1108 (quoting Iqbal, 556 U.S. at 678).             Rather, “[s]omething more

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is needed,” id., such as purchase of the shares within a day of

offering,    Coinbase,        2024   WL    4053009,       at   *19;    EveryWare,         175

F.Supp.3d    at   864;    Mun.       Mortg.,       876   F.Supp.2d     at     657,    658.

Plaintiffs    purchased        their      shares    weeks      to   months    after       the

Registration Statements.             They allege no additional facts that

would nudge traceability into the realm of plausibility.

     b.     Material Misrepresentations or Omissions

     Mr. Chidambaran also moves to dismiss Plaintiffs’ Section 11

claims because they fail to allege any material misrepresentation.

(ECF No. 83-1, at 37).           Because the court has already concluded

above that Plaintiffs have not adequately alleged any material

misrepresentation        or    omission,       this      deficiency     serves       as   an

additional basis of dismissal of the Section 11 claims against all

defendants. 24

     2.     Section 15 (Count II)

     Section 15 of the Securities Act imposes liability on anyone

who “controls any person liable under” Section 11.                           15 U.S.C. §

77o(a).     Plaintiffs allege that Individual Defendants are liable

under Section 15.    (ECF No. 41 ¶¶ 40, 457).                  Individual Defendants

all move to dismiss Plaintiffs’ Section 15 claims against them


     24  Given   that   lack    of   traceability   and   material
misrepresentation serve as two separate grounds for dismissal, the
court need not reach Marcum’s additional argument that Plaintiffs
have not stated a claim against it under Omnicare.
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because Section 15 liability is derivative of Section 11 liability,

and Plaintiffs fail to allege Section 11 liability adequately.

(ECF Nos. 82-1, at 13; 83-1, at 35; 84-1, at 34; 85-1, at 17).

Plaintiffs do not contest that Section 15 liability attaches only

if there is an underlying violation of Section 11.                 (ECF No. 90,

at 29).    Because Plaintiffs fail to state a claim under Section 11

against any defendant, their Section 15 claims will necessarily be

dismissed, too.      Emps.’ Ret. Sys. v. Macrogenics, Inc., 61 F.4th

369, 393–94 (4th Cir. 2023); Cozzarelli, 549 F.3d at 630.

     C.      Motion to Lift the Stay on Discovery

     While the motions to dismiss were still in the briefing stage,

Plaintiffs moved for a partial lift of the discovery stay that the

PSLRA     imposes,   perhaps    anticipating     that    their     traceability

allegations were insufficient.        (ECF No. 93).       The PSLRA mandates

that “all discovery and other proceedings shall be stayed during

the pendency of any motion to dismiss, unless the court finds upon

the motion of any party that particularized discovery is necessary

to preserve evidence or to prevent undue prejudice to that party.”

15 U.S.C. § 78u-4(b)(3)(B).          Through particularized discovery,

Plaintiffs planned to try to reconstruct the chain of title of

their shares by issuing subpoenas to the Depository Trust Company,

Continental Stock Transfer & Trust Company (iLE’s transfer agent),

and, if necessary, a limited number of broker-dealers and the

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company that ultimately purchased iLE out of bankruptcy. 25                  (ECF

No. 93-1, at 9–10).          Defendants characterize Plaintiffs’ proposed

discovery as an impermissible “fishing expedition.”               (ECF Nos. 94,

at    6;    95,   at   1).    Although   Defendants’     characterization        of

Plaintiffs’ proposed discovery is dubious, Plaintiffs’ motion is

futile because they fail to allege a material misrepresentation

adequately.       The motion is moot and will be denied.

IV.    Conclusion

       For the foregoing reasons, all five motions to dismiss will

be granted and the motion to lift the stay on discovery will be

denied.      A separate order will follow.


                                                      /s/
                                            DEBORAH K. CHASANOW
                                            United States District Judge


       25
        Discovery would not necessarily involve so many parties.
A recent paper, mentioned previously, notes that the Financial
Industry Regulatory Authority (FINRA) maintains a Consolidated
Audit Trail of all stock trades. Coffee & Mitts, supra note 19,
at 21. The paper asserts that plaintiffs thus need only subpoena
FINRA, “remov[ing] the need for [p]laintiffs to subpoena every
individual broker-dealer whose accounts at one time held the
securities in question.” Id.
                               70