China-based company’s victory in securities fraud case reversed on appeal

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On 1 August 2012, the Court of Appeals for the Second Circuit revived a putative securities fraud class action lawsuit against China North East Petroleum Holdings Ltd. (NEP), a China-based crude oil production company whose stock was traded on the New York Stock Exchange. Reversing the trial court, which had dismissed the case, the Court of Appeals held that the recovery of NEP’s stock price to a level above the price paid by the plaintiff did not necessarily preclude the plaintiff from proving that it had suffered an economic loss as a result of the alleged fraud.

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