Simple answer, investors were mislead, which caused massive financial losses!
"Fiduciary Duty of Loyalty.
Officers and directors owe a duty of loyalty to a corporation and its shareholders. They are expected to put the welfare and best interests of the corporation above their own personal or other business interests."
A securities class action (SCA), or securities fraud class action, is a lawsuit filed by investors who bought or sold a company’s publicly traded securities within a specific period of time (known as a “class period”) and suffered economic injury as a result of violations of the securities laws.
In cases involving misleading statements or omissions, a class period generally starts when a company makes an untrue statement of material fact about the company or fails to disclose a material fact necessary to render other statements not misleading.
The class period generally ends when the truth is fully disclosed to the investing public. The statement or action that reveals the truth related to a specific alleged misstatement or omission is known as a "corrective disclosure". During the class period there is usually one final corrective disclosure and in some complex cases, several partial corrective disclosures that reveal partial truths related to the alleged misstatements or omissions.
"Cases are brought pursuant to Federal Rule of Civil Procedure 23[1] on behalf of a group of persons who purchased the securities of a particular company during a specified period of time (the class period)."
