Fusion Connect, which could be heading into chapter 11 bankruptcy, now faces class-action lawsuits filed on behalf of its investors.
Earlier this month, Fusion, the cloud communications provider that sells through partners, saw its stock price plummet by nearly 82 percent after it revealed it had failed to make $7 million in loan payments and had not filed its annual report on time. The company’s 8-K filing disclosed the default and annual report filing delay.
On Wednesday, Rosen Law Firm announced the filing of a class-action lawsuit on behalf of Fusion securities buyers from Aug. 14, 2018 through April 2, 2019. It seeks to recover damages for Fusion investors under federal securities laws.
Fusion said it won’t comment on litigation.
|Read our original story on Fusion Connect’s bankruptcy considerations from April 3.|
The suit alleges that Fusion made false and/or misleading statements and/or failed to disclose that its earnings for last year’s second and third quarters were “overstated” stemming from its purchase of Birch Communications’ cloud and business-services business, including its customers, operations and infrastructure. And as a result, Fusion’s public statements were “materially false and misleading at all relevant times,” it said.
“When the true details entered the market, the lawsuit claims that investors suffered damages,” the law firm said.
In addition, Block & Leviton has filed a securities fraud class action against Fusion and individual officers alleging violations of the federal securities laws. It alleges that between Aug. 14, 2018 and April 2, 2019, the defendants made false and/or misleading statements in various financial statements which were filed with the Securities and Exchange Commission.
On April 3, Block & Leviton said it was investigating Fusion when the company “announced that certain of its previously issued financial statements could no longer be relied upon due to accounting errors.”
And the Schall Law Firm also has filed a class-action suit and is seeking investors with “losses in excess of $100,000.”
In its 8-K filing, Fusion said nonpayment of the installments constitutes an “immediate event of default” under its credit agreement. It also said it has been informed by some lenders that they intend to declare all amounts borrowed to be immediately due and payable.