Yahoo and CEO Marissa Mayer hit with investors’ lawsuit over ‘false and misleading statements’ and data breaches

Yahoo CEO Marissa Mayer can expect to receive a court summons in a class-action lawsuit against the company by a man who said he and others who bought Yahoo stock were deceived by statements made by Mayer, Chief Financial Officer Kenneth Goldman and the company.

The company and the two executives “employed devices, schemes and artifices to defraud,” according to the suit, which focused on claims that the defendants hadn’t properly revealed that it had failed to sufficiently encrypt users’ data.

The suit relates to two record-setting user-data breaches Yahoo announced last year. The legal action by Mark Madrack appears to be the first breach-connected lawsuit filed on behalf of investors. Some two dozen suits have been filed by Yahoo users over their stolen data.

Madrack filed a proposed summons demanding Mayer and Goldman appear in court to face his allegations.

Yahoo declined to comment, saying it didn’t discuss litigation.

Madrack’s action seeks unspecified damages to be paid to him and other investors who bought Yahoo stock between November 12, 2013 and December 14, 2016.

Mayer, Goldman and the company made “false and/or misleading statements and/or failed to disclose that Yahoo failed to encrypt its users’ personal information and/or failed to encrypt its users’ personal data with an up-to-date and secure encryption scheme,” the suit claimed.

“A data breach resulting in the theft of personal user data would foreseeably cause a significant drop in user engagement with Yahoo’s websites and services; and as a result, Yahoo’s public statements were materially false and misleading at all relevant times.”

The lawsuit cited drops in stock prices that purportedly resulted from news that hackers had stolen data from more than a billion user accounts in one attack and at least half a billion in another. Investors saw a “precipitous decline” in the value of Yahoo shares, the suit claimed.

Historical stock records show that on the first day of the class-action period in 2013 Yahoo’s stock opened at $34, and on the last day of the class period, closed at $41. By Jan. 25, the stock was at $45.

Madrack alleged that Yahoo, Mayer and Goldman broke securities laws by misleading investors. The suit made reference to a revelation last week in the Wall Street Journal that Yahoo was under investigation by the Securities and Exchange Commission.

 

Photo: Yahoo CEO Marissa Mayer (Peter Kramer/NBC via AP)

 

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