Can a company act as lead plaintiff on behalf of its own investors in a securities class action? The PSLRA is silent on that question and it appears to be a novel one for the courts.
In Genius Group Ltd. v. Citadel Securities LLC, 2026 WL 1760342 (S.D.N.Y. June 18, 2026), Genius alleged that the defendants artificially depressed the price of the company’s shares via spoofing (i.e., manipulative trading that changes the appearance of the supply and demand of the shares). The company sought to act as lead plaintiff in a putative securities class action seeking recovery on behalf of all sellers of its shares, including the company itself, over a three-year period.
The court recognized that under the PSLRA’s lead plaintiff provisions, Genius was the presumptive lead plaintiff because it appeared to have the largest financial interest in the relief sought by the class (and it also was the only lead plaintiff applicant). However, the PSLRA also requires a court to assess whether the applicant is typical and adequate under FRCP 23. As to typicality, the court noted that Genius “‘disposed of’ approximately 80% of its shares during the Class Period through atypical transactions, including conversions, warrant exercises, option exercises, and merger consideration.” As to adequacy, the court found that Genius (a) faced unique statute of limitations and reliance defenses, and (b) had proposed, without adequate explanation as to necessity or the fee structure, that the class be represented by three separate law firms (including a lawyer who had been sanctioned in another alleged market manipulation case).
The court declined to appoint Genius as the lead plaintiff. Perhaps even more interestingly, however, it also declined to reopen the lead plaintiff application process. The court noted that Genius would not be prejudiced if it was forced to bring its claims as a single plaintiff. Moreover, the court concluded that it seemed “self-evident that a lawsuit filed by two law firms, with a Motion to appoint three law firms as Lead Counsel and no appropriate Lead Plaintiff, smacks of the sort of lawyer-driven litigation that the PSLRA aims to avoid.”
Holding: Motion to be appointed lead plaintiff denied and action directed to proceed on an individual basis.
The 10b-5 Daily 