Southern District Of New York Dismisses Securities Act Claims Against Mobile Content Company For Lack Of Statutory Standing And For Failure To Adequately Allege Misrepresentations

On February 5, 2026, Judge Victor Marrero of the United States District Court for the Southern District of New York dismissed a putative class action asserting claims under Sections 11 and 12(a)(2) of the Securities Act of 1933 against a company that operates mobile content platforms in China, certain of its officers and directors, and the underwriters of the company's initial and secondary public offerings (the “IPO” and “SPO”). In re Qutoutiao, Inc. Sec. Litig., 2026 WL 309234 (S.D.N.Y. Feb. 5, 2026). Plaintiff alleged that the IPO and SPO offering documents contained misrepresentations with respect to the placement of illegal advertisements on the company's platform and certain alleged related party transactions. Previously, the Court had dismissed the action after concluding that plaintiff's claims—which included claims under both the Securities Act of 1933 and the Securities Exchange Act of 1934—all sounded in fraud and were therefore subject to the heightened pleading standard of Federal Rule of Civil Procedure 9(b). Plaintiff appealed the dismissal of the Securities Act claims, and the United States Court of Appeals for the Second Circuit reversed and remanded, holding that the heightened pleading standard did not apply to those claims. On remand, Judge Marrero dismissed the Section 12(a)(2) claim for lack of statutory standing and the remaining claims for failure to adequately allege misrepresentations under Rule 8(a)'s notice pleading standard.

With respect to standing, defendants challenged plaintiff's standing to pursue a Section 11 claim based on the SPO because plaintiff only purchased securities traceable to the IPO. The Court agreed in part. As to those defendants that only participated in the SPO, the Court held plaintiff lacked Article III standing to pursue claims against them because there were no allegations that they engaged in conduct that injured plaintiff. Id. at *6. But as against those defendants that participated in both the IPO and the SPO, the Court held that, while plaintiff would not have individual standing to pursue claims regarding the SPO because his purchases were not “traceable” to the SPO as required by Section 11, he nevertheless could pursue SPO claims against those defendants as a class representative because the evidence related to the IPO and SPO claims were sufficiently similar. Id. at *7–8.

With respect to the Section 12(a)(2) claim, however, the Court held that plaintiff lacked statutory standing because he purchased securities only in the secondary market, rather than directly from defendants as required by Section 12(a)(2). Id. at *8–9. The Court also rejected plaintiff's attempt to pursue the Section 12(a)(2) claim based on the “class standing” theory. The Court explained that, while this principle allowed a plaintiff with standing under one statute (here, Section 11) to pursue similar statutory claims across other offerings, it did not allow plaintiff to pursue claims under a different statute (Section 12(a)(2)). Id. at *9.

Judge Marrero then reviewed four categories of alleged misstatements and omissions, concluding that with respect to each of plaintiff's allegations [they] were insufficient to state a claim.

Plaintiff first contended the company misrepresented the processes it employed to screen for improper advertisements. Judge Marrero agreed with defendants that the statements plaintiff challenged referred not to how the company reviewed its advertisements, but rather to the content that the company provided to its customers. Id. at *10.

Plaintiff next contended that the offering documents omitted that the company knew at the time of the offerings that illegal advertisements were being uploaded to its platform. Id. at *10. Judge Marrero first assessed whether the offering documents contained a material misstatement to this effect and then assessed whether it was plausible that the company omitted the fact of these advertising practices. Judge Marrero held that the offering documents expressly disclosed that the company could not “assure” that “all the advertisements shown on [the company's] mobile applications are true, accurate, appropriate and in full compliance with applicable laws and regulations.” Id. at *11. As for whether the company knowingly omitted that it knew illegal advertisements were in fact being posted, Judge Marrero determined that plaintiff failed to adequately allege facts in support of the assertion. Id. at *12. While plaintiff argued that two confidential witnesses supported this assertion, Judge Marrero concluded that the witnesses had no direct knowledge about illegal advertising practices but merely suggested the company's advertisements were “risky” and “toed the line.” Id. at *12–13. Although plaintiff alleged media coverage suggested the company was posting illegal advertisements, Judge Marrero explained that the company was not obligated to disclose uncharged and unadjudicated suggestions of wrongdoing. Id. at *13. As for a lawsuit against the company that made allegations about illegal advertisements, Judge Marrero emphasized that the lawsuit was dismissed without any judicial findings regarding advertisements and therefore did not support plaintiff's allegations. Id. And while plaintiff contended that the company was warned by the Chinese government about its advertising, the Court noted the warning came after the offerings and thus could not have impacted the company's disclosure obligations. Id.

Plaintiff also contended that the company failed to disclose that illegal advertisements drove its revenue. Id. But Judge Marrero held that just because the company's revenue fell after the company remediated its advertising practices, it did not suggest that the company's revenue was largely attributable to those advertisements. Id. at *14.

Finally, Judge Marrero rejected the argument that the company failed to disclose “related party transactions” with entities affiliated with certain of its officers. Id. at *15. Judge Marrero held that, for one of the transactions, plaintiff's allegations of a “close business relationship” between the parties did not suffice to demonstrate a “related party” transaction, and that other transactions were not alleged to have begun before the applicable offerings. Id. at *15–16.

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