InfoSoncis Corporation (NASDAQ: IFON) Investor Securities Class Action Lawsuit 06/13/2006

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Company Name(s): 
InfoSonics Corp.
Case Name: 
InfoSoncis Corp. Shareholder Class Action Lawsuit 06/13/2006
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Approved
Affected Securities
NASDAQ: IFON
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
06/13/2006
Class Period Begin: 
02/06/2006
Class Period End: 
08/09/2006
Court of Filing: 
U.S. District Court for the Southern District of California
Date Settled: 
05/05/2009
Settlement Amount: 
$3,800,000
Deadline to Participate in Settlement: 
06/04/2009
Summary: 

October 15, 2010 - The court ordered the authorization of the distribution of the net settlement fund.

May 5, 2009 - The court approved the settlement, entered the orders approving the plan of allocation, the motion for attorneys’ fees and expenses, and dismissed the action with prejudice.

January 20, 2009 - The court preliminarily approved the settlement.

October 16, 2008 - Parties filed a stipulation of settlement.

May 23, 2008 - The lead plaintiff filed a third amended complaint.

April 28, 2008 - The court granted in part and denied in part the defendants' motion to dismiss.

October 1, 2007 - The defendants' filed a motion to dismiss.

September 10, 2007 - The lead plaintiff filed a second amended complaint.

August 7, 2007 - The court granted in part and denied in part the defendants' motion to dismiss.

April 16, 2007 - The defendants' filed a motion to dismiss.

February 14, 2007 - The lead plaintiff filed an amended consolidated complaint.

January 23, 2007 - The court granted the lead plaintiff leave to file an amended complaint.

October 23, 2006 - The lead plaintiff and lead counsel were appointed and all cases were consolidated.

July 13, 2006- An investor in shares of InfoSonics Corporation (NASDAQ: IFON), filed a lawsuit in the U.S. District Court for the Southern District of California in connection with certain allegedly false and misleading statements made between May 9, 2006, and June 9 , 2006,

The securities class action lawsuit relates to InfoSonics Corporation’s restatement of first quarter 2006 financial statements and claims relating to the InfoSonics Corporation’s distribution of a former manufacturer’s cellular phone in the U.S. The derivative lawsuit relates to InfoSonics Corporation’s restatement of its first quarter 2006 financial statements and a grant of stock options in December 2005.

The original complaint alleged that InfoSonics Corporation and its top officers engaged in a scheme to defraud InfoSonics Corporation investors in violation of the federal securities laws by reporting false financial results on May 8, 2006 for its first quarter ended March 31, 2006. Specifically, the Complaint alleged that defendants knew, or with deliberate recklessness disregarded, that the Company had improperly accounted for warrants issued in connection with a January 2006 private placement which enabled it to report net income of $1.738 million for that quarter. Before the market opened on Monday, June 12, 2006, InfoSonics Corporation a decrease of 32.5%, due to the improper accounting treatment of the warrants. Corporation stock immediately plunged more than 28% that day on extraordinarily high volume.

The Complaint further alleged that, while in possession of material nonpublic information concerning InfoSonics Corporation accounting for the warrants, defendants sold massive amounts of their personal holdings between May 11, 2006 and June 7, 2006 for proceeds exceeding $3 million. Indeed, as Corporation admitted in a Form 8-K filed on June 12, 2006 with the SEC, InfoSonics Corporation had determined by Monday, June 5, 2006 that it would need to restate its previously reported financial results because it had improperly accounted for the warrants. Nevertheless, its Chief Financial Officer and the President of the Company’s Latin American operations continued to sell their personal InfoSonics Corporation stock even after that determination.