Step 1

Draft

Step 2

Unite with Fellow Investors

Step 3

Choose the Best Attorney

Step 4

Provide Documents

Step 5

Follow Case Progress

Step 6

Get Payout

VNET.US

id: 922

VNET Group ($VNET) Investor Settlement

The settlement terms have been submitted to the court for approval.

$5,875,000

Cash Settlement

S.D. New York

Court

1:23-cv-11187

Case number

03/23/2022

Class period Start

02/17/2023

Class period End

 VNET Group has agreed to a tentative settlement to resolve investor claims that it hid the founder’s margin-loan default, the risk his pledged shares could be seized, and the resulting threat to the company’s control structure and financing.

Outline:

In August 2021, founder Josh Sheng Chen pledged his VNET stake for a $50.25 million margin loan from Bold Ally. After VNET shares fell in late 2021, the loan allegedly went into default, but investors say the company continued making incomplete disclosures while discussing financing and strategy in 2022. On February 13, 15, and 17, 2023, the market learned that Bold Ally had moved against the pledged shares and that VNET had created super-voting stock for Chen to preserve control, and $VNET fell 31.85% by February 21, 2023. The case has now moved to a tentative settlement.

Timeline:
August 19, 2021: GenTao entered into a $50.25 million facility agreement with Bold Ally, and Chen and his entities pledged VNET shares as collateral.
November 22, 2021: Bold Ally notified GenTao and Chen that collateral margin under the facility was deficient and demanded more collateral.
April 6, 2022: Chen, his holding companies, and Bold Ally entered into a standstill agreement acknowledging prior default and early-termination events.
April 26, 2022: VNET filed its annual report and disclosed the Bold Ally facility, while investors say key default-related facts remained undisclosed.
September 13, 2022: Chen made a preliminary non-binding proposal to acquire VNET for $8.20 per ADS.
February 13, 2023: Bold Ally announced it had exercised rights under the facility after default and said pledged VNET shares could be sold.
February 15, 2023: VNET approved up to 555,000 new Class D shares for Chen, carrying 500 votes per share.
February 17, 2023: Chen filed an amended Schedule 13D disclosing additional default notices and that shares had been transferred to Bold Ally.
February 21, 2023: $VNET closed at $4.57 after falling 31.85% from February 13, 2023.
February 2026: VNET agreed to settle the lawsuit.
Background:

VNET is a China-based internet and data center services company. Its founder, Josh Sheng Chen, held a large ownership stake and significant voting power, making his control an important part of the company’s governance and financing structure.

In August 2021, Chen used his VNET stake to secure a $50.25 million margin loan from Bold Ally through GenTao and related entities. The loan terms allegedly allowed Bold Ally to act if VNET’s ADS price and collateral value fell below certain levels, and investors say VNET knew about those arrangements through an acknowledgment letter and related financing documents.

After VNET’s ADS price dropped sharply in late 2021, Bold Ally allegedly issued margin and default notices. Investors say those problems were not fully disclosed in 2022, even as VNET discussed financing resilience, corporate strategy, and possible take-private proposals.

The situation came to a head in February 2023, when Bold Ally announced it had exercised its rights after default and could sell pledged VNET shares. Two days later, VNET authorized a new class of super-voting shares for Chen, saying the move was meant to protect the company’s interests and continued stability.

Investors say those events exposed the true scale of the risk tied to Chen’s pledged shares and the company’s broader financing arrangements. From February 13 through February 21, 2023, $VNET fell 31.85%. The matter has now moved to a tentative settlement.

What Can Investors Expect Now?

 VNET Group has agreed to a tentative settlement to resolve investor claims that it hid the founder’s margin-loan default, the risk his pledged shares could be seized, and the resulting threat to the company’s control structure and financing.

If you were damaged due to this situation, you can file for a payout and get your share of the settlement. You can check if you are eligible and other details in the FAQ section.

Case Type

US Securities Class Action

Case Status

Stipulative Settlement

Alleged Offence

Mismanagement,

Misleading Statements,

Omissions

Suspected Party

Directors,

Management

Security Type

Depository Securities (ADS, ADR, GDR)

Trade Direction

Long

Payout per Share

0.075

Filing date

12/26/2023

Lead Plaintiff Deadline

02/26/2024

Plaintiffs

Semerak

Attorneys

Glancy Prongay & Murray LLP

Defendants

Josh Sheng Chen

Administrator

Strategic Claims Services

Attorney fee

$2,058,333

Trades matching type

FIFO

Frequently Asked Questions

Trusted by industry leaders

Endorsed by top professionals who trust our innovative solutions to drive impactful results.