# In re Galena Biopharma, Inc. Securities Litigation

> District Court, D. Oregon · August 5, 2015 · 117 F. Supp. 3d 1145

URL: https://www.frixlaw.com/law-library/cases/7232535

## Case

- **Full name:** In re GALENA BIOPHARMA, INC. SECURITIES LITIGATION
- **Court:** District Court, D. Oregon
- **Decided:** August 5, 2015
- **Citations:** 117 F. Supp. 3d 1145; 2015 U.S. Dist. LEXIS 102250; 2015 WL 4643474
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Simon
- **Judges:** Simon
- **Cited by:** 15 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/7232535

## How later opinions describe it (automated extraction)

- noting that another executive “corresponded extensively with [the third party]; reviewed, edited, and approved the articles; knew that the articles were part of the paid promotional scheme; admitted to the Special Committee that she knew the articles were part of the paid prom…
- concluding that the defendants had “ultimate authority” over the content
- noting that defendant’s alleged attempts to hide and cover up the specifics of 17 the alleged fraudulent scheme supported an inference of scienter

## Opinion text

*1156 OPINION AND ORDER
MICHAEL H. SIMON, District Judge.
This putative class action securities fraud case is brought by shareholders (“Plaintiffs”) of Defendant Galena Biophar-ma, Inc. (“Galena” or “Company”). Plaintiffs allege that Galena, certain members of Galena’s Board of Directors (“Board”), and executive officers of Galena engaged in a fraudulent scheme to promote Galena and increase its stock price so that many of Galena’s officers and directors could (and did) sell their personally-owned Galena stock at artificially high prices, in a “pump and dump” insider trading scheme. Plaintiffs further allege that The Dream-Team Group LLC (“DreamTeam”), its Managing Member Michael McCarthy, its employee or agent Thomas Michael Meyer, 1 Lidingo Holdings, LLC (“Lidingo”), and Lidingo’s Managing Member Kamilla Bjorlin, 2 participated in the scheme by publishing bullish articles, comments, blogs, posts, and email blasts, including having authors publish articles using false aliases, without including the required disclosure that they were being paid by Galena to try to inflate its stock price. 3
Before the Court are five motions to dismiss: (1) a motion to dismiss filed by Defendants Rudolph Nisi, Sanford Hills-berg, Steven Kriegsman, Stephen Galliker, and Richard Chin (collectively “Outside Directors”) (Dkt. 80); (2) a motion to dismiss filed by Defendant Mark J. Ahn (Dkt. 81); (3) a motion to dismiss filed by Defendants Mark Schwartz, Ryan Dunlap, and Remy Bernarda (collectively “Management Defendants”) and Galena 4 (Dkt. 82); (4) a motion to dismiss filed by Defendants Li-dingo and Bjorlin (collectively “Lidingo Defendants”) (Dkt. 136); and (5) a motion to dismiss filed by Defendants Dream-Team and McCarthy (collectively “Dream-Team Defendants”) (Dkt. 138). For the following reasons, the pending motions to dismiss are granted in part and denied in part.
STANDARDS
A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially *1157 plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir.2010). In evaluating the sufficiency of a complaint’s factual allegations, the court must accept as true all well-pleaded material facts alleged in the complaint and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir.2012); Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir.2010). To be entitled to a presumption of truth, allegations in a complaint “may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.2011). All reasonable inferences from the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office Solution, 513 F.3d 1038 , 1043 n. 2 (9th Cir.2008). The court need not, however, credit the plaintiffs legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 , 129 S.Ct. 1937 , 173 L.Ed.2d 868 (2009).
A complaint must contain sufficient factual allegations to “plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr, 652 F.3d at 1216 . “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 663 , 129 S.Ct. 1937 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 , 127 S.Ct. 1955 , 167 L.Ed.2d 929 (2007)).
BACKGROUND 5
A. Company Background
As alleged in the Consolidated Class Action Complaint for Violations of the Federal Securities Laws (“Consolidated Complaint” or “CAC”), Galena is a biotechnology company based in Lake Oswego, Oregon. In 2007 the Company was spun off from its parent, CytRx Corporation (“CytRx”). CytRx remained Galena's majority owner until 2008. In connection with the spin-off, Ahn was appointed a director of Galena. Ahn became Galena’s President and Chief Executive Officer (“CEO”) in March 2011.
Galena focuses on the development and commercialization of targeted oncology treatments. Galena’s only commercial-stage product is Abstral®, a propriety form of fentanyl, an opiate analgesic. Fentanyl can be abused and has been resold as a street drug. At least four other companies already offer generic fentanyl in the United States. As alleged by Plaintiffs, Galena is “far from obtaining financial success from selling Abstral.” Galena also is pursuing the development of cancer therapeutics, including its main product candidate, NeuVaxTM, for the treatment of breast cancer.
B. Galena’s Relationship with Dream-Team and Lidingo
Galena’s relationship with DreamTeam dates back to 2008, and its relationship with Lidingo dates back to 2012. Galena previously had hired these investor relations firms to tout Galena’s stock in advance of stock offerings. In early summer 2013, Galena did not have any open contracts with either company.
In July 2013, Ahn asked Galena’s Vice President of Marketing & Communica *1158 tions, Reray Bernarda, to interview three investor relations firms that could potentially increase Galena’s stock price. Two of these companies were Tiberend Strategic Advisors (“Tiberend”) and Dream-Team. Bernarda recommended that Galena hire Tiberend, a traditional, full service investor relations firm spécializing in the healthcare and life sciences industry! Ber-narda recomménded that Galena not hire DreamTeam. Bernarda noted that Tiber-end treated writers as “journalists,” unlike DreamTeam. Bernarda further noted that if Galena hired DreamTeam, she believed it would cause “issues.” Galena hired Ti-berend at $3,500 per month for an initial three-month trial.'
Despite Bernarda’s recommendation to the contrary, Ahn also hired DreamTeam. DreamTeam began its work under a 90-day, $25,000 contract for “Platinum Services” dated July 23, 2013 and a 240-day, $50,000 contract also dated in July 2013. The total monthly payment to DreamTeam was approximately $14,583.
In addition, Ahn signed a contract with Lidingo oh August ’1, 20Í3, which obliged Galena to pay Lidingo a cash fee of $20,000 per month plus expenses. The contract also gave Lidingo an option to buy 250,000 shares of Galena common stock at an exercise price based on the day the agreement closed, 100,000 shares of which vested immediately. Plaintiffs allege that Ahn did not have the corporate authority to award stock options.
C. Alleged Scheme
Plaintiffs allege that Galena and its management and directors entered into an unlawful promotional scheme with Dream-Team and Lidingo artificially to inflate the stock price of Galena using a variety of different channels. Galena intended that DreamTeam and Lidingo would place misleading articles on investor websites touting Galena. DreamTeam and Lidingo did so, often using third parties and aliases that falsely claimed to be established, credible investment professionals. The articles did not disclose the paid relationship with Galena and often included false disclaimers that they were not paid promotions. Galena required that it approve every article before that article could be published, and either Ahn or Bernarda approved each article.
By way of example, on or about August 6, 2013, DreamTeam submitted to the online investment advice website Seeking Alpha 6 an article entitled “Galena Biop-harma Presents an. Attractive Investment Opportunity.” This article recommended investment in Galena stock, but failed to disclose any financial relationship between the author, who was identified only as “Wonderful Wizard,” and either Galena or DreamTeam. The article affirmatively misrepresented that it was not a paid promotion.
Another article placed by DreamTeam touting Galena in Seeking Alpha appeared *1159 on November 22, 2013, this time by an author identified only as “Kingmaker,” who also failed to disclose any relationship with either Galena or DreamTeam. These two articles about Galena in Seeking Alpha were presented as being written by two different people, each recommending investment in Galena, but were allegedly actually written by the same author. 7 As of November 26, 2013, DreamTeam had caused to be published 18 articles about Galena on Seeking Alpha.
DreamTeam and Lidingo would' also monitor social media, post oh electronic message boards and blogs, and send email blasts relating to Galena. They used numerous aliases on Facebook, twitter, and other social networking sites to call attention to the positive (and allegedly misleading) articles and to respond to any negative articles or comments about Galena. By way of example, Plaintiffs allege that hours after Galena and DreamTeam caused to be published a pro-Galena article on August'6, 2013, two aliases posted on a Yahoo! Finance Galena page that the article was “worth checking out.” One of these posts . indicated that the person posting would buy more Galena stock the next day. Similarly, on November 27, 2013, Galena and DreamTeam caused another article to be published on the website Seeking Alpha using the alias “Stock Whisper” and then posted on DreamTeam’s blog,, stating that “Stock Whisper” had published a bullish article about Galena. The post on Dream-Team’s blog summarized and analyzed the Seeking Alpha article without disclosing that DreamTeam or its agents had, in fact, authored both. Some of the articles published resulted in Galena’s stock price gaining fifteen percent in a single day. 8
Many different fraudulent aliases and third parties were used by DreamTeam and Lidingo to convince investors that there was a broad base of independent and professional investors supporting Galena. The fact that many different “voices”, appeared to be touting Galena persuaded investors that the conclusions must be accurate and that there was heavy demand for Galena’s stock.
Shortly after retaining Lidingo and DreamTeam in July 2013, Galena initiated a secondary offering. 9 It filed an amended *1160 registration statement with the Securities Exchange Commission (“SEC”) on August 9, 2013. On September 18, 2013, Galena conducted a public offering, selling 17,500,-000 units, each consisting of one share of common stock and a warrant to purchase 0.35 of a share of common stock at an exercise price of $2.50 per share, for net proceeds to Galena of $32.6 million. Galena raised additional net proceeds of $5.2 million through the underwriters’ exercise of their over-allotment option.
Plaintiffs further allege that Galena, DreamTeam, Lidingo, and their respective management personnel entered into this scheme with the plan to manipulate Galena’s stock price. Galena’s officers and directors intended to wait until the share price of Galena was artificially inflated as a result of DreamTeam and Lidingo’s misleading promotional campaign and then, in possession of material, adverse, non-public information, sell their personally-held stock.
On November 22, 2013, the same day that the Seeking Alpha bullish article was published, Galena’s Compensation Committee 10 granted a total of 2.55 million shares of stock options to Galena’s officers and directors. These options issued in November carried an exercise price of $3.88 per share. This was the only time that options had been awarded by the Compensation Committee at that time of year. 11 The usual practice by the Compensation Committee had been to grant stock options to Galena’s officers and directors in January of any given year.
By early January 2014, Galena’s stock price had risen significantly. In July 2013, it traded at approximately $2 per share. By January 16, 2014, it had more than tripled and was trading at $7.48 per share. Beginning January 17, 2014, and within a period of eighteen trading days, through February 12, 2014, six of Galena’s officers and directors sold all or nearly all of their personally-held Galena stock; a seventh sold approximately 20 percent of his shares. Collectively, these sales totaled more than $16 million. 12 The Consolidated Complaint alleges that these were all direct sales and not made pursuant to any pre-arranged Rule 10b5-l trading plan. Plaintiffs further allege that none of these defendants had engaged in open market sales of Galena stock during the four years before January 2014.
D. Exposing the Alleged Scheme
The scheme allegedly began to unravel as news of the insider trades entered the market. Plaintiffs allege that from January 17, 2014 through January 31, 2014, based on news of the insider trades, Galena’s stock price fell approximately 29.5 percent, from $7.48 to $5.27. On February I, 2014, analyst Matt Gravitt published an article on Seeking Alpha, titled “Galena Biopharma: Numerous Red Flags Suggest a Significant Overvaluation.” This article revealed that Galena had been paying Mis-sionlR, a DreamTeam brand, to promote Galena. Galena’s stock price fell an additional 20 percent, from $5.27 to $4.22.
*1161 On February 12, 2014, journalist Adam Feuerstein published an online article on TheStreet.com, titled “Galena Biopharma Pays for Stock-Touting Campaign While Insiders Cash Out Millions.”- In his article, Mr. Feuerstein alleged that Galena was engaging in a misleading brand-awareness campaign aimed at boosting its stock price. The article also reported that Galena had paid DreamTeam to publish articles promoting the Company’s stock without disclosing who paid for those articles. On this news, Galena’s stock dropped from $5.22 to $4.26, a one-day decline of approximately 16 percent. None of the Selling Defendants 13 sold any personally-held stock after February 12, 2014. Plaintiffs allege that within hours of this article’s publication, Galena fired DreamTeam. Plaintiffs further allege that DreamTeam then attempted to remove evidence of its relationship with Galena by deleting a disclaimer DreamTeam had posted on its website noting that Galena had paid MissionIR for promotional services and removing almost all articles related to either Galena or CytRx from DreamTeam’s websites.
Two days later, on February 14, 2014, an analyst published an article on Seeking Alpha, attributing Galena’s stock price performance since November 2013 to DreamTeam’s promotional, efforts. That same day, Galena published an open letter to its investors. The letter admitted that the Company had paid DreamTeam to promote Galena’s stock and that Company insiders had sold, or.“divested” personally-owned shares in mid-January 2014, but denied all other allegations. On that same day, February 14, 2014, Galena’s stock price dropped $0.63 per share to close at $3.73 per share, a one-day decline of 14 percent.
On March 13, 2014, financial analyst and author Richard Pearson published the results of his investigation of the relationship between Galena, CytRx, and DreamTeam on Seeking Alpha. The article detailed Mr. Pearson’s findings after going “undercover” as a writer for DreamTeam assigned to promote Galena. Mr. Pearson also released his emails with Meyer, who claimed to be an employee of DreamTeam working, closely with McCarthy. Mr. Pearson’s investigative article stated that he was told that DreamTeam’s clients would have to approve and edit all articles and that Mr. Pearson was not allowed to disclose that he was being paid to write the pro-Galena articles.
On March 17, 2014, two trading-days after the publication of the Pearson ex-posé, Galena, announced that it was under investigation by the SEC, stating in its Form 10-K annual report: “In February 2014, we learned that the SEC is investigating certain matters relating to our company and an outside investor-relations firm that we retained in 2013. We have been in contact with the SEC staff through our counsel and are cooperating with the investigation.” Upon, disclosure of the SEC investigation, Galena’s common stock share price dropped to $2.82, representing a 12 percent single day loss.
On August 18, 2014, Galena’s Board held a special meeting. On August 20, 2014, Mr. Feuerstein announced that a source close to Galena had. informed him that Ahn had been fired for cause at that special meeting. As alleged by'Plaintiffs, at the time of Mr. Feuerstein’s report, neither Galena nor anyone else had announced that Ahn had left the company.
On August 21, 2014, Galena issued a press release claiming that Ahn had “resigned” as President and CEO. On August *1162 22, Galena filed a report with the SEC. This report stated that Ahn had'“resigned” effective August 20,-2014. This report also stated that “[i]n accordance with the terras his employment agreement ... no severance or other compensation is payable to Dr. Ahn.”
On August 21,2014, Galena also issued a press release that stated Ahn had resigned “to pursue other long held personal and professional goals.” Plaintiffs’ allege, however, that Ahn’s employment agreement; dated March 31, 2011, provides that Ahn will receive severance unless he was fired for cause or resigned without good reason;
E. Galena’s Additional Alleged Misrepresentations
In addition to the alleged scheme and the alleged misrepresentations made through the promotional campaign, Plaintiffs allege that Galena made false or misleading statements in its own name. To conduct its September 2013 public offering, on September 13, 2013, Galena entered into an Underwriting Agreement, signed by Ahn. This Underwriting Agreement was filed as an exhibit to Galena’s 8-K filing with the SEC made that same day. Plaintiffs allege this Underwriting Agreement was false or misleading because it claimed that Galena was not engaging in any conduct that would “manipulate” its stock price.
The same day, also as part of its secondary offering, Galena published a Prospectus. Plaintiffs allege that this Prospectus is misleading and contains material omissions because it lists several possible reár sons why Galena’s stock price might fluctuate, but does not disclose the alleged promotional scheme as one of those reasons.
On November 6, 2013, Galena filed a Form 10-Q with the SEC, signed by Ahn and Vice President and Chief Financial Officer Ryan Dunlap. Plaintiffs allege this form is false or misleading because it asserts that no material facts are omitted from the report and that the signatories have disclosed to Galena’s auditors any fraud that involves Galena’s management or other employees. ' Plaintiffs also allege that Galena’s Code of Ethics is false or misleading because it is publicly available and states that Galena will not tolerate conduct that risks a violation - of federal law. ■
DISCUSSION
A. Jurisdiction over DreamTeam Defendants
The DreamTeam Defendants originally argued that, the Court does not have personal jurisdiction over either DreamTeam or McCarthy. Plaintiffs responded that, pursuant to the Ninth Circuit’s holding in Sec. Investor Prot. Corp. v. Vigman, 764 F.2d 1309 , 1316 (9th Cir.1985), the Securities Exchange Act of 1934 (the “Exchange Act”) authorizes nationwide service and the only requirements for personal jurisdiction are that the defendant have minimum contact's with the United States. In their reply brief, the DreamTeam Defendants concede that the Court has personal jurisdiction over DreamTeam and'McCarthy. Accordingly, DreamTeam’s motion under Federal Rule of Civil Procedure 12(b)(2) is denied. 14
*1163 B. Securities Fraud Pleading Standards
To state a claim for securities fraud a plaintiff must prove:
(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.
Halliburton Co. v. Erica P. John Fund, Inc., — U.S. -, 134 S.Ct. 2398, 2407 , 189 L.Ed.2d 339 (2014) (quotation marks omitted). A complaint alleging securities fraud in a private action for damages is also subject to heightened pleading standards.
First, the complaint must satisfy Federal Rule of Civil Procedure 9(b), which requires that “a party must state with particularity the circumstances constituting fraud or mistake.' Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” “To satisfy Rule 9(b), a pleading must identify ‘the who, what, when, where, and how of the misconduct charged,’ as well as ‘what is false or misleading about [the purportedly fraudulent] statement, and why it is false.’” Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1056 (9th Cir.2011) (quoting Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir.2010)).
Second, because Plaintiffs allege misrepresentations in violation of Section 10(b) of the Exchange Act, codified at 15 U.S.C. § 78j (“Section 10(b)”), and Rule 10b-5(b), that claim must satisfy the requirements of the Private Securities Litigation Reform Act (“PSLRA”), codified at 15 U.S.C. § 78u-4(b). The PSLRA requires a plaintiff plead with particularity each statement or omission that is alleged to be misleading and the reasons why it is misleading. 15 U,S.C. § 78u-4(b)(l). The PSLRA also requires that a plaintiff “state with particularity facts giving rise to a strong inference” that the defendant acted with scienter. Id. § 78u-4(b)(2). “The inference that the defendant acted 'with scienter need not be irrefutable, i.e., of the ‘smoking-gun’ genre, or even the ‘most plausible of competing inferences,’ but it “must be more than merely plausible or reasonable” — it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314, 324 , 127 S.Ct. 2499 , 168 L.Ed.2d 179 (2007).
“Scienter may be established ... by showing that the defendants knew their statements were false, .or by showing that defendants were reckless as to the truth or falsity of their statements.” Gebhart v. S.E.C., 595 F.3d 1034, 1041 (9th Cir.2010). Recklessness in this context is “ ‘deliberate recklessness’ or ‘conscious, recklessness,’ and ... it includes ‘a subjective inquiry turning on ‘the defendant’s actual state of mind.’ ” S.E.C. v. Platforms Wireless Int’l Corp., 617 F.3d 1072 , 1093 (9th Cir.2010) (quoting Gebhart, 595 F.3d at 1042 ). The Ninth Circuit has defined the required deliberate or conscious recklessness in the context of a securities fraud case as:
a highly unreasonable omission, involving ... an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either .known to the defendant or is so obvious that the actor must have been aware of it. [Additionally)] the danger of misleading' buyers must be actually known or so obvious *1164 that any reasonable man would be legally bound as knowing.
In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1053 (9th Cir.2014) (quotation marks and citation omitted) (first alteration in original).
C. Scienter
Defendants argue that Plaintiffs do not plead sufficient facts showing that any of them knew or were sufficiently reckless to the truth about the alleged fraud or scheme. Scienter is a necessary element for Plaintiffs’ claim under Section 10(b) and Rule 10b-5 (alleged against Galena, Ahn, Dunlap, Bernarda, the DreamTeam Defendants, and the Lidingo Defendants) and claims of insider trading (alleged against Defendants Ahn, Kriegsman, Chin, Nisi, Hillsberg, Galliker, and Schwartz). In evaluating scienter, courts must look at the complaint in its totality and not just the individual allegations of scienter. See Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 (9th Cir.2009) (“Thus, a court now reviewing a complaint’s scienter allegations under the PSLRA must ‘consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.’ The court must determine whether ‘all of the facts alleged, taken collectively, give rise to a strong inference of scien-ter, not whether any individual allegation, scrutinized in isolation, meets that standard.’ ” (emphasis in original) (quoting Tellabs, 551 U.S. at 322-23 , 127 S.Ct. 2499 ) (citation omitted)); South Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir.2008) (“[A] court should look to the complaint as a whole, not to each individual scienter allegation as Silicon Graphics suggests. Thus, Tellabs counsels us to consider the totality of circumstances, rather than to develop separately rules of thumb for each type of scienter allegation.”). 15
a. Ahn
Defendants argue that Plaintiffs do not sufficiently allege Ahn’s scienter because there are no facts alleged showing that Ahn knew that writers were being paid to tout Galena, knew the writers were using multiple aliases, or knew the articles were not disclosing the paid relationship. Defendants also argue that a more reasonable inference is that Ahn was merely reviewing draft articles to “fact-check” for inaccuracies concerning Galena’s business.
Viewing the Consolidated Complaint as a whole, the Court finds that it sufficiently alleges facts giving rise to a strong inference of Ahn’s scienter. Plaintiffs assert numerous allegations relevant to Ahn’s scienter. 16
*1165 With respect to the alleged promotional scheme, Plaintiffs allege that Ahn: (1) corresponded extensively with Dream-Team and Lidingo; (2) overruled Bernar-da’s objection and hired DreamTeam in July 2013; (3) signed the contract between Lidingo and Galena, committing to pay Lidingo $20,000 per month when the “legitimate” public relations firm hired by Galena (Tiberend) was paid only $3,500 per month; (4) lied to certain Galena managers and claimed he had not renewed Li-dingo’s contract; (5) awarded Lidingo Galena stock options, despite the fact that Ahn did not have the authority to grant such options; (6) actively concealed from Galena’s Board and Compensation Committee the fact that Ahn had improperly granted Galena stock options to Lidingo; (7) knew that the Lidingo contract required Galena to cover Lidingo’s expenses, which included payments to writers; (8) signed a check to Lidingo in April 2012 to pay writers; (9) signed the contract between DreamTeam and Galena, committing to pay DreamTeam $25,000 per month for three months and then $50,000 total for approximately eight months; (10) reviewed draft articles from Lidingo and DreamTeam; (11) approved the articles before they could be published; (12) requested and received copies of published articles after publication; (13) knew the articles were part of the paid promotion; (14) knew that the.articles did not contain the required disclosure that the authors were paid, having received copies of the completed articles; and (15) lied about why Galena terminated DreamTeam and the quantity and quality of the relationship between Galena and DreamTeam.
Plaintiffs also allege that Ahn knew and allowed- insiders to sell stock during the height of .the promotion scheme in violation of Galena’s insider trading policy and conspired with Dunlap to “confuse” the market and hide the. insiders’ sell-off. To do so, Dunlap and Ahn encouraged the inside sellers to also make numerous “small buys” so that the insider selling SEC Form 4’s would be mixed with insider buying forms.
Plaintiffs further allege that Ahn sold a significant amount of personally-held Galena stock in a manner inconsistent with his historical trading practices and after the stock had increased in price. He then publicly asserted a false reason for his insider sales, falsely stating that he was precluded from selling Galena stock for nine months that ended in January 2014, when in fact the “blackout” continued until March 2014.
On January 16, 2014, Galena’s stock hit its highest price since 2010. Plaintiffs allege that Galena held a Board meeting that same day. At that time, Galena was in a trading “blackout” for insiders. This insider • trading “blackout” was in place because Galena insiders had received Galena’s preliminary earnings report and thus could not trade until the final earnings report was publicly disclosed. The minutes from the January 16, 2014 Board meeting reflect that after discussion, the Board lifted the trading blackout. The testimony of the Board members to Galena’s Special Committee investigating the alleged wrongdoing, however, was “inconsistent” with there being such a discussion and vote that day during the Board meeting. The Special Committee concluded in its report 17 that if the vote had occurred, *1166 it appeared solely designed to allow insiders to immediately sell their Galena stock.
Plaintiffs also allege that Galena’s Special Committee determined that Ahn had violated company policy, may have breached his fiduciary duties, likely violated securities laws, and lied to the Special Committee. Ahn was then terminated for cause after his misconduct came to light, although he falsely claimed that he resigned.
Plaintiffs also incorporate by reference emails to DreamTeam in which Ahn requests that he be sent copies of published articles. Plaintiffs further allege that either Ahn or Bernarda, both of whom were copied on the emails attaching draft articles, approved all. of the articles drafted by DreamTeam before those articles could be published, Plaintiffs also allege that DreamTeam stated in an email to. Mr. Pearson that Galena was slow to approve articles and that DreamTeam “can’t make [Galena] approve when I say, it’s up to them unfortunately.” CAC ¶ 148.
. These numerpus particularized factual allegations relating to Ahn’s knowledge and conduct support -a strong inference that Ahn knew or was, at a .minimum, deliberately or. consciously reckless as to the truth, or falsity of the fact, that Lidingo and DreamTeam were using illegitimate means to boost Galena’s stock price and that the promotional campaign violated the securities laws. Although the Consolidated Complaint does not identify specifically which articles were approved by Ahn and specifically which were approved by. Ber-narda, the email exhibits to the Special Committee Report, incorporated by reference, show that the articles were sent to both Ahn and.Bernarda at the same time and knowledge of their contents can be imputed to both of them, regardless of who made the specific approval on any given article. Ahn approved drafts that did not contain the required paid promotion disclaimer and was later- provided copies of final, published versions that also did not contain the required paid promotion disclaimer.
Additionally, Ahn’s alleged attempts to hide that he renewed Lidingo’s contract and awarded stock options to Lidingo and his responses and attempts to cover up the specifics of the paid promotional campaign and his personal sale of stock also support a strong inference of scienter. See, e.g., Nathanson v. Polycom, Inc., 87 F.Supp.3d 966, 979-80 , 2015 WL 1517777, at *9 (N.D.Cal.2015) (noting that the defendant CEO’s attempts to hide his conduct was evidence of scienter); In re Nature’s Sunshine Prods. Sec. Litig., 486 F.Supp.2d 1301, 1310 (D.Utah 2007) (“Evidence that a defendant has taken steps to cover-up [sic] a misdeed is strong proof of scienter.”). Plaintiffs’ allegations also show that Ahn was involved in the attempted cover-up of Galena’s relationship with DreamTeam and Lidingo, further supporting Ahn’s scienter. Immediately after the alleged promotional scheme came to light, Ahn terminated DreamTeam and then publicly stated he terminated DreamTeam for “performance reasons.” Ahn als'o terminated Lidingo. DreamTeam then attempted to remove all evidence of its connection with Galena, and Ahn was one of Galena’s *1167 primary contact persons- for DreamTeam and was Galena’s CEO. Thus, it is a reasonable inference that Ahn was aware of this alleged cover-up. Ahn also allegedly lied to a reporter, stating that Galena did not approve any of the articles drafted by DreamTeam writers and that Ahn was not aware that the Seeking Alpha articles were the result of the DreamTeam campaign, even though emails sent to Ahn show otherwise.
Further, the fact that Ahn was terminated for cause, or even if he resigned (as stated by Ahn), after the conduct came to light is evidence supporting an inference of scienter. See Cement & Concrete Workers Dist. Council Pension Fund v. Hewlett Packard Co., 964 F.Supp.2d 1128, 1138 (N.D.Cal.2013) (noting that the fact that a defendant resigns after alleged misconduct is revealed “provides minimal, non-disposi-tive supporting evidence of scienter” (quotation marks omitted)).
Finally, Ahn’s insider stock sales support a strong inference of scienter. See Tellabs, 651 U.S. at 325, 127 S.Ct. 2499 (noting-that “personal financial gain may weigh heavily in favor of a scienter inference”). “[I]nsider trading is suspicious only when it is dramatically out of line with prior trading practices at times calculated to maximize the personal benefit from undisclosed inside information.” Zucco Partners, 552 F.3d at 1005 . (quotation marks omitted). Three factors that courts should consider “to determine whether stock sales raise a strong inference of deliberate recklessness are: ‘(1) the .amount and percentage of shares sold by insiders; (2) the timing.of the sales; and (3) whether the sales were consistent with the insider’s prior trading history.’ ” Id. (quoting In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir.1999)).
Here, Plaintiffs have alleged facts sufficient to show that Ahn’s stock sales support a strong inference of scienter. On January 27, 2014, Ahn sold approximately 87 percent 18 of his personal holdings of Galena stock and received proceeds of approximately $3.8 million. These sales were not made pursuant to a pre-arranged Rule 10b5-l trading plan, and Ahn had not sold any Galena stock on the open market in the previous four years. Ahn thus received millions of dollars selling the large majority of his personal Galena shares in a sale that was dramatically out of line with his prior trading practices. Further, the sales were timed to maximize the price increase that had resulted from the paid promotional campaign, which was material, nonpublic information. Galena’s stock price had been increasing for months, but had just started to decrease after other insiders began selling large amounts of their personal stock. Although Ahn, unlike some of the other Defendants, missed selling at what turned out to be the highest price (approximately $7), he still sold while the promotional campaign was ongoing and undisclosed and the price was allegedly still inflated (approximately $5).
Ahn argues that the more compelling inference to be drawn from the facts alleged in the Consolidated Complaint is that he hired multiple investor and public relations firms, he had no reason to believe those firms were paying authors and not disclosing that fact, he reviewed articles to ensure their factual accuracy regarding Galena’s business, and he sold his stock to diversify his investment portfolio. The *1168 Court finds that the inference of scienter alleged by Plaintiffs are “as cogent or compelling as a plausible alternative inference” and, thus, that Ahn’s scienter has been adequately alleged. See Zucco Partners, 552 F.3d at 1007.
b. Bernarda
Similar to the allegations made against Ahn, Plaintiffs allege that Bernar-da corresponded extensively with Dream-Team and Lidingo; reviewed, edited, and approved the articles; knew that the articles were part of the paid promotional scheme; admitted to the Special Committee that she knew the articles were part of the paid promotional campaign; received copies of the published articles; and knew the articles did not disclose their paid connection to Galena. 19
Plaintiffs also allege that either Ahn or Bernarda, both of whom were copied on the emails attaching draft articles, approved certain articles drafted by Dream-Team before those articles could be published. As with the allegations against Ahn, the fact that the Consolidated Complaint does not identify which articles were approved by Ahn and which were approved by Bernarda is not fatal because the email exhibits show that articles were sent to both Ahn and Bernarda at the same time and knowledge of the articles can be imputed to both of them.
Unique to Bernarda, Plaintiffs allege that on December 12, 2013, Tiberend, the “legitimate” public relations firm retained by Galena, warned Bernarda that hiring an investment relations firm that engages in “pay-for-play” often “border[s] on fraud.” CAC ¶ 177. Tiberend cautioned that these firms “are asking for fees but not disclosing that the resulting article was paid for by the company. They generally hide this connection (you pay CSIR Group; they pay a blogger), but I think this will eventually get noticed by regulators and trouble could ensue.” Id. On December 16, 2013, Tiberend forwarded such an article, written by Defendant Thomas Meyer, to Ber-narda. Bernarda claimed that she did not know Meyer, even though she had approved an article written by Meyer two weeks earlier, on December 3, 2013. Additionally, as alleged by Plaintiffs, either Bernarda or Ahn had approved the very article forwarded by Tiberend. Further, as discussed above, Bernarda had originally warned Ahn about the potential regulatory scrutiny that may arise from hiring DreamTeam. Bernarda stated that she wanted to hire Tiberend, who “treats all authors like ‘journalists.’” These allegations support an inference that Bernarda knew that DreamTeam’s promotional campaign was improper.
Plaintiffs also allege that on November 26, 2013, DreamTeam sent to Bernarda a list of all the articles it had published on Seeking Alpha, including 18 articles with a link to each article. Each of those articles was subject to the Seeking Alpha disclaimer that it was not a paid article. Moreover, this email contained the alias of the purported authors with links to their allegedly fraudulent profile pages, which did not disclose the author’s affiliation with DreamTeam.
Plaintiffs’ allegations are sufficient to support a strong inference of scienter that Bernarda knew or was reckless with the truth about the fact that DreamTeam was paying for promotional articles and other materials to be published without disclosing those promotional materials had been paid for by Galena. As alleged by Plaintiffs, Bernarda approved draft articles that did not contain the required paid promotion disclaimer and received copies of published articles that did not contain the *1169 required paid promotion disclaimer. She knew these articles were part of a paid promotion. She knew or suspected DreamTeám’s campaign was improper. She also falsely denied knowing Meyer when Tiberend forwarded her the article he had written.
Plaintiffs do not, however, allege with particularity Bernarda’s scienter with regard to Lidingo during the relevant time period. The only allegations regarding Bernarda’s knowledge of Lidingo’s relationship with Galena during-the relevant time period are general, conclusory allegations that do not contain the required level of particularity. The specific allegations, including those incorporating by reference the Special Committee Report and its exhibits, relate to Galena’s relationship with Lidingo before the relevant time period. Unlike with Ahn, Plaintiffs offer no particularized allegation that Bernarda knew Galena had an ongoing promotional relationship with Lidingo during the relevant time period. To the contrary, Plaintiffs allege that Bernarda stated that she was told by Ahn that he had not renewed Lidingo’s contract. Thus, Plaintiffs have not sufficiently pled Bernarda’s scienter for Plaintiffs’ claims involving Lidingo’s promotional activities.
c. Dunlap"
The allegations specific to Dunlap in the Consolidated Complaint are that he: (1) signed some of Galena’s SEC filings, which were allegedly false or misleading; (2) drafted a.new insider trading policy in August 2013, shortly after the alleged promotional scheme began, that was less restrictive than the old policy; (3) advised Kriegsman in December 2013 that he should not be selling shares but was aware that Kriegsman intended to sell shares anyway; (4) orchestrated the plan to make numerous small buys to disguise the large insider sales; (5) was included On emails from Lidingo during the relevant time period attaching published articles; (6) was included on emails from Lidingo and Ahn in November 2013 relating to the stock options awarded to Lidingo and the renewed contract with Lindigo; (7) conspired with Ahn to conceal the fact that Ahn had improperly awarded stock options to Lidingo; (8) failed to disclose to the Compensation Committee or Board his knowledge that Ahn had given stock options to Lidingo even though he attended those meétings in November 2013 and January 2014, respectively; and (9) informed Galena insiders in December 2013 that they could not sell Galena stock until March 2014. 20 Plaintiffs do not allege that Dunlap, sold any of his Galena stock.
Considering the Consolidated Complaint as a whole, these factual allegations are not sufficient to show that Dunlap knew or was reckless with the truth about the fact that DreamTeam and Lidingo were causing promotional materials to be published without disclosing that Galena paid them to do so. -Although the allegations are sufficient to show that-Dunlap knew that Galena was in a promotional relationship with Lidingo and that Ahn had improperly awarded stock options to Lidingo, there are no particularized allegations that Dunlap knew that Lidingo was causing promotional publications to be published in a misleading fashion or without the required disclosures. Additionally, although the-allegations are sufficient to show that Dunlap knew directors were selling their stock in violation of Galena’s blackout period, there are no particularized allegations that Dunlap knew or believed these sales were to take advantage of the alleged illicit promotional scheme. The trading blackout period instituted by Dunlap was because of *1170 the insiders’ knowledge of Galena’s earnings report, not the promotional campaign.
d. . Kriegsman
Kriegsman has served on Galena’s Board since 2006. He is the chairman of Galena’s Compensation Committee. He is one of the first Galena insiders to sell any shares; He sold 200,000 shares, approximately 32 percent of his holdings, on January 17, 2014. He sold another 250,000 shares three trading days later, on January 22, 2014, representing approximately 59.5 percent of his then-remaining Galena shares. The next day, January .23, 2014, he sold another 150,000, representing’approximately 88 percent of his then-remaining shares. In total, within the span of five trading days, Kriegsman sold approximately 97 percent of his personally-held Galena stock.
As discussed above, suspicious sales by insiders “weigh heavily in favor of a scien-ter'inference.” Tellabs, 551 U.S. at 325 , 127 S.Ct. 2499 ; see also Zucco, 552 F.3d at 1005 . Evaluating whether sales are suspicious requires considering the amount and percentage of shares'sold,.-the timing of the sales, and whether the sales are consistent with the insider’s trading history. Zucco, 552 F.3d at 1005 . The fact that Kriegsman allegedly sold approximately 97 percent of his personally-held Galena stock within one week when he had not sold any shares for the previous four years, during a time capitalizing on Galena’s artificially-inflated stock price, which had reached its highest value since .2010 the day before Kriegsman began selling his stock, is suspicious. Kriegsman’s stock sales as alleged by Plaintiffs thus weigh heavily in favor of a scienter inference.
Additionally, Plaintiffs allege that Kriegsman was familiar with DreamTeam and how it operated because Kriegsman had hired DreamTeam to promote CytRx, Galena’s former parent company of which Kriegsman was the CEO. CytRx sold more than $74.5 million, of its stock while a DreamTeam client. Kriegsman or his personal assistant at CytRx made changes to articles drafted by undercover 'analyst Mr. Pearson posing as a DreamTeam author. 21 Plaintiffs further allege that CytRx insisted that company management edit and sign off on all articles and that all articles not disclose that the writers were being paid. 22 Kriegsman’s familiarity with DreamTeam and how it operated on behalf of CytRx supports an inference that Kriegsman was familiar with how Dream-Team was operating on behalf of Galena.
Kriegsman began selling his stock on January 17,' 2014, the day after the Galena Board meeting discussed above. Thus, as alleged by Plaintiffs, Kriegsman’s sale was either during a trading blackout period or made immediately after the Board lifted the blackout to allow the insiders to trade at the height of the alleged price inflation, both of which support an inference of scienter.
*1171 Plaintiffs further allege that an agenda item at the October 11, 2013 and January 16, 2014 Board meetings was a discussion of Galena’s investor relations and public relations activities, led by Bernarda. At the time, more than 90 percent of Galena’s investor relations expenses were payments to DreamTeam and Lidingo. It is a plausible inference that DreamTeam and Li-dingo were included in the discussion of Galena’s public relations activities.
Plaintiffs also allege that Galena’s Compensation Committee awarded stock options in November 2013, at a time of year when the Company had never before awarded stock options, to take advantage of the promotional scheme. Kriegsman, as chair of the Compensation Committee, was involved in that decision. Further, on December 19, 2013, Kriegsman sought to exercise his options to buy 200,000 shares of Galena and immediately sell- them for a profit. Dunlap advised that Kriegsman could not sell at that time because of the trading blackout period. Kriegsman was “insistent” but ultimately did not sell until approximately one month later, on January 17, 2014.
Considering the totality of the Consolidated Complaint, there are sufficient allegations to support a strong inference of Kriegsman’s scienter with respect to the alleged promotional scheme. Kriegsman’s sale of his Galena stock is highly suspicious. Additionally, his knowledge of DreamTeam through his exposure and both CytRx and Galena, his attempt to exercise his options for an immediate profit during the promotional campaign, and his participation in granting the unusually-timed stock options all demonstrate that the inference of scienter argued by Plaintiffs is as least as compelling as any opposing inference of nonfraudulent intent.
e. Chin, Nisi, Hiilsberg, and Galliker
Defendant Richard Chin has served on Galena’s Board since 2009 and on the Compensation Committee since 2011. He is a co-founder of Kindred- Bios-ciences, Inc. (“Kindred”), a development-stage pet prescription drug company. Plaintiffs allege that Defendant Chin sold 262,500 shares of his Galena stock, representing -100 percent of Chin’s personally-held Galena stock. Chin sold his shares on January 30, 2014 and February 12, 2014, during the narrow time frame when the other Galena insiders were selling off their shares. Plaintiffs allege that Chin had not sold any of his personally-held Galena stock in the previous four years. ' Chin’s dramatically out-of-line stock sales weigh heavily in showing scienter. Additionally, Plaintiffs’ allegation that Chin was familiar with DreamTeam and how it operated because he had hired DreamTeam to promote-the' stock of Kindred, which sold more than $106 million in shares while a DreamTeam client, supports an inference of scienter. Further, as a member of Galena’s Compensation Committee, Chin participated in the unusually-timed award of stock options in November 2013, during the promotional 'campaign, which also supports an inference of scienter.
. Defendant Rudolph Nisi has served on Galena’s Board since 2009 and on the Compensation Committee since 2009. Plaintiffs allege that Nisi sold 450,000 Galena shares, representing 98.6 percent of his personally-held Galena - stock. Nisi sold his shares on January 17, 2014 • and January 29, 2014.. Plaintiffs allege that Nisi had not sold any personally-held Galena stock in the previous four years. Nisi’s dramatically out-of-line stock sales weigh heavily toward an inference of scienter. Further, as a member of Galena’s Compensation Committee, Nisi participated in the unusually-timed award of stock options *1172 in November 2013, during the promotional campaign, which also supports an inference of scienter.
Defendant Sanford J. Hillsberg has served on Galena’s Board since 2007. Hillsberg is also the managing partner at the law firm TroyGould, which represents various companies that have employed DreamTeam. Plaintiffs allege that Hills-berg sold 450,000 of his Galena stock, representing 93.3 percent of his personally-held Galena stock. Hillsberg sold his shares on January 17, 2014 and January 30, 2014. Plaintiffs allege that Hillsberg had not sold any personally-held Galena stock in the previous four years. Hills-berg’s dramatically out-of-line stock sales weigh heavily toward an inference of scien-ter. Additionally, giving Plaintiffs the benefit of all reasonable inferences, Hills-berg’s association with TroyGould supports an inference that he is familiar with how DreamTeam works and how it allegedly promoted Galena.
Defendant Stephen S. Galliker has served on Galena’s Board since 2007. Gal-liker is also the Chief Financial Officer of Kindred. Plaintiffs allege that Galliker sold 300,000 shares, representing 96.8 percent of Galliker’s personally-held Galena stock. Galliker sold his shares on February 3, 2014. Plaintiffs allege that Galliker had not sold any personally-held Galena stock in the previous four years. Galliker’s dramatically out-of-line stock sale weighs heavily toward an inference of scienter. Additionally, Plaintiffs’ allegation that Galliker was familiar with DreamTeam and how it operated because he had hired DreamTeam to promote the stock of Kindred further supports an inference of scienter.
As with Kriegsman, all of these directors were at the Board meetings held in October 2013 and January 2014 when Galena’s investor and public relations activities were discussed and, as alleged by Plaintiffs, when the trading blackout was purportedly lifted in the January 2014 Board meeting at the height of Galena’s artificially inflated stock price.
Viewing the Consolidated Complaint as a whole, Plaintiffs’ allegations against these directors are sufficient to support a strong inference of scienter with respect to the alleged promotional scheme. This is primarily because of their insider sales. See No. 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. West Holding Corp., 320 F.3d 920, 939-40 (9th Cir.2003) (finding a strong inference of scienter where insiders sold between 88 and 100 percent of their stock in a three-month time period, when the insiders had not previously sold stock in a long period of time and finding that based on the “the large number and percentages of stocks traded, the timing of the sales, and the prior trading history of each defendant, the stock sales that occurred were clearly ‘calculated to maximize the personal benefit from undisclosed inside information,’” despite the fact that most of the insiders had not themselves made any false or misleading statements (citation omitted)). The additional facts relating to scienter, including discussions of the promotional campaign at Board meetings, participation in the unusually-timed award of stock options, and knowledge of DreamTeam based on interactions through companies other than Galena offer further support of an inference of scienter.
f. Schwartz
Plaintiffs allege that Schwartz sold 100,000 of his Galena stock, representing 19.6 percent of Schwartz’s personally-held Galena stock. Schwartz sold his shares on January 30, 2014. Plaintiffs allege that Schwartz had not sold any personally-held Galena stock in the previous four years. The timing of Schwartz’s sale *1173 of his personally-held Galena stock and the fact that the sales were out of line with his prior trading practice may support an inference of scienter. The amount and percentage of shares Schwartz sold, however, do not support an inference of scienter, as larger percentages are usually required. See, e.g., Am. West, 320 F.3d at 939-40 (finding stock sales of between 88 and 100 percent create a strong inference of scien-ter); In re Silicon Graphics Sec. Litig., 183 F.3d 970, 987 (9th Cir.1999) (finding that 43.6 percent and 75.3 percent are “somewhat suspicious” while percentages less than 10 were not suspicious). Thus, Schwartz’s stock sales are not sufficiently “suspicious” and do not, by themselves, support an inference of scienter. The only other allegation relating to Schwartz is that he attended the Galena Board meetings at which the promotional campaign was discussed. Although this is evidence from which some inference of scienter can be inferred, it is not sufficient to show Schwartz had the requisite scienter. Thus, reviewing the Consolidated Complaint as a whole, there are insufficient allegations to support a strong inference of scienter by Schwartz.
g. Galena
“[C]orporate scienter relies heavily on the awareness of the directors and officers.” Glazer Capital Mgmt., LP v. Magistri, 549 F.3d 736, 744 (9th Cir.2008) (quotation marks and citation omitted). The Court has already found that Plaintiffs have adequately alleged the scienter of Ahn and Bernarda, who are officers of Galena, and the Selling Defendants except Schwartz, who are directors of Galena. Them knowledge can be imputed to Galena. Thus, the scienter of Galena'has been adequately alleged.
h. Michael McCarthy
Most of Plaintiffs’ allegations relating to DreamTeam either impermissibly combine the DreamTeam Defendants and the Lidingo Defendants together or generically reference “DreamTeam” without specifically identifying the involvement or knowledge of McCarthy. 23 Plaintiffs do, however, make some allegations specific to McCarthy. Plaintiffs allege that McCarthy was the “head” of DreamTeam throughout the relevant time period, that he corresponded extensively with Ahn and Bernarda, that McCarthy told' an undercover analyst that DreamTeam had a team that monitored and posted on message boards, that McCarthy measured Dream-Team’s success by Galena’s stock price, that McCarthy worked closely with Meyer, and that McCarthy spoke,with Meyer regarding articles that were' waiting for Galena’s approval. 24
Plaintiffs also specifically incorporate by reference into the Consolidated Complaint several of the Special Committee Report exhibits that relate to McCarthy. One exhibit is the November 26, 2013 email from McCarthy to Bernarda attaching links to 18 Seeking Alpha articles that had been published “since we [DreamTeam] started,” none of which contained the required paid promotion disclosure. This email also provided links to the purported biographies of the authors using aliases in the articles, including the allegedly false credentials claimed by the DreamTeam-affiliated aliases and the fact that the biographies did not disclose the authors’ paid *1174 relationship with DreamTeam. Another exhibit specifically incorporated is an email dated February 4, 2014, from McCarthy to Ahn and Bernarda forwarding draft articles for approval. Another is the December 3, 2013 email from Bernarda to McCarthy, among others, approving a draft article, with revisions. The draft articles sent by McCarthy for approval did not contain the required paid promotion disclaimer. 25
Moreover, the Court is instructed to consider all facts alleged in the Consolidated Complaint. Tellabs, 551 U.S. at 322-23 , 127 S.Ct. 2499 ; Zucco, 552 F.3d at 991 . Plaintiffs allege other facts relating to DreamTeam of which it can reasonably be inferred that McCarthy, as. the managing member of DreamTeam, was aware. Plaintiffs allege that DreamTeam’s purported business offices are an empty store front and that DreamTeam charges significantly more than market value for its services. These allegations support an inference that DreamTeam was not engaging in a legitimate business with respect to its work for Galena.
Plaintiffs also allege that DreamTeam’s marketing materials brag about how DreamTeam writers post articles on Seeking Alpha, resulting in more than 6,500 views for a single article. Seeking Alpha, however, generally does not permit paid articles and requires an affirmative statement that articles posted are not the pr'od-uct of a paid transaction. If an article is a paid promotion, it must affirmatively state as much.
Plaintiffs further allege that in December 2012 and January 2013, DreamTeam caused five articles to be published on Seeking Alpha, all of whom were written by the same author using different Dream-Team aliases. Seeking Alpha discovered they were written by the same person and removed the articles. After that discovery, those aliases stopped being used by DreamTeam.
Plaintiffs also allege that DreamTeam attempted to cover up its relationship with Galena after the alleged scheme began being reported in the press. Plaintiffs allege that DreamTeam deleted articles, blogs,' comments, Twitter feeds, and the compensation disclosure noting the $50,000 payment made by Galena.
These allegations, taken collectively, sufficiently support a strong inference that McCarthy knew that DreamTeam was paying authors to use multiple aliases and false credentials to write articles touting Galena without disclosing that the articles were part of a paid promotion. The allegations that McCarthy forwarded both draft and final articles, all of which failed to disclose the paid relationship, show that McCarthy was aware that the articles did not contain the required disclosure. Further, Plaintiffs’ allegations support that *1175 McCarthy knew that the authors it was paying were using aliases and false biographies. It can also be reasonably inferred from Plaintiffs’ allegations that McCarthy knew this was inappropriate because. DreamTeam allegedly charges significantly higher rates for its , services, Seeking Alpha had - previously removed Dream-Team articles for just this reason, and DreamTeam attempted to cover up its relationship with Galena. Plaintiffs’ allegations also support an inference that McCarthy was part of a scheme artificially to inflate Galena’s stock price. Plaintiffs,' however, do not sufficiently allege McCarthy’s scienter with respect to the alleged scheme or misrepresentations arising out of Galena’s relationship with Lidingo.
i.Thomas Meyer
Plaintiffs allege that Meyer was affiliated with DreamTeam, stated to an undercover analyst that Meyer worked for DreamTeam, stated that he worked closely with McCarthy, published articles touting Galena under his own name, published articles touting Galena using several aliases with false credentials, recruited other authors to write articles touting Galena and CytRx for money, and told an undercover analyst that the conditions for writing articles for DreamTeam included not disclosing that the article was paid for and not publishing without the company’s approval. 26 These allegations are sufficient to support a strong inference of Meyer’s scienter that DreamTeam was paying authors to tout Galena without disclosing the paid promotional relationship. Plaintiffs, however, do not sufficiently allege Meyer’s scienter with respect to Galena's relationship with Lidingo.
j. DreamTeam
The DreamTeam Defendants-argue that because Plaintiffs do not adequately plead McCarthy’s scienter, Plaintiffs fail adequately to ■ plead DreamTeam’s scienter. Plaintiffs respond that they adequately plead McCarthy’s scienter, that Meyer is either an employee or an agent of Dream-. Team and his scienter can therefore be imputed onto DreamTeam, or that one of the group scienter pleading exceptions applies.
Because the Court has found that Plaintiffs sufficiently allege McCarthy’s scienter, the scienter of DreamTeam is sufficiently alleged with respect to its relationship with Galena. The Court need not address whether Meyer is an employee or agent of DreamTeam or whether the group pleading doctrines of “collective scienter” or “core operations” scienter are applicable in this case.
k. Kamilla Bjorlin
As with the allegations relating to DreamTeam and its alleged employees, many of the allegations relating to Lidingo are impermissible group allegations. There are several allegations, however, that are specific to Bjorlin. 27 Plaintiffs allege that Bjorlin was the “head” of Li-dingo throughout the relévant time period and that she corresponded extensively with Ahn and Bernarda throughout Lidin-go’s relationship with .Galena.. Plaintiffs allege that in April 2012, Bjorlin sent an email to a Galena manager asking about payment and noting that “the writers are due to be paid on the fifth.” Plaintiffs further allege that in November 2012 Bjor-lin solicited’. Ahn for another promotional campaign, promising that if Lidingo did not increase Galena’s stock price by 25 percent by year’s end, Lidingo would re *1176 fund its fee. Plaintiffs also allege that on April 19, 2013, Bjorlin sent an email reminding Ahn that using Lidingo for promotional services “provided a layer of protection” and was “safer” than performing those services in-house.
Plaintiffs also incorporate by specific reference numerous exhibits to the Special Committee Report that relate specifically to Bjorlin, most of which are emails to and from Bjorlin and Galena. 28 In the emails, Bjorlin describes how a Lidingo promotional campaign worked. She notes that Lidingo assigned writers to Galena, published articles by “our writers” on various websites and distributed them directly via “huge” email campaigns. Bjorlin goes on to describe how Lidingo “leveraged” news releases and used message boards to increase traffic to the published articles and that message boards were “monitored closely” and would continue to be “worked” throughout the promotional campaign. Bjorlin further notes that Lidingo is able to “work directly” with Seeking Alpha. In one email dated April 12, 2013, Bjorlin notes that she has sent Ahn the articles that Lidingo had written. Although these emails are from before the relevant time period, it is a reasonable inference that Lidingo’s services and methods of operation used in 2012 and through April 2013 did not change in July 2013.
With regard to payment, the emails incorporated by reference show that Bjorlin explains to Ahn that Lidingo’s expenses are high. She then notes that Bernarda agreed to cover Lidingo’s expenses in addition to the flat monthly fee. Bjorlin also requests that Lidingo be paid in stock options as well as cash “to ensure we are appropriately compensated for the hard work and the risks, as well as performance.” She also suggests Lidingo receive “an equity stake of some kind.” Plaintiffs allege that Ahn eventually agreed to issue Lidingo stock options. In a November 13, 2013 email, Bjorlin asks Dunlap to provide her with a copy of “the option agreement and any necessary doc[ument]s associated for the execution of the option shares awarded Lidingo from our agreement.”
Bjorlin is also the person at Lidingo who signed its 2012 promotional services contract with Galena. Although the 2013 promotional services contract is not incorporated by reference, it can reasonably be inferred that Bjorlin is familiar with its terms based on the emails showing her negotiations regarding terms, her knowledge of the stock option agreement, and the fact that she signed the 2012 contract.
These allegations are sufficient to support a strong inference of Bjorlin’s scien-ter. The allegations and documents incorporated by reference show that Bjorlin knew Lidingo paid writers, knew Lidingo published articles on Seeking Alpha (which generally prohibits paid promotional articles), and knew those articles did not contain the required paid disclaimers. Further, the allegations that Bjorlin counseled Ahn that having Lidingo operate the promotional campaign offered “protection” and was “safer,” coupled with the fact that Bjorlin sought stock options to compensate for the “risk” that Lidingo was taking supports a strong inference that Bjorlin knew the campaign conducted by Lidingo was improper. If the campaign was not improper, then Lidingo was not facing any particular “risk” by engaging in the campaign. In a legitimate advertising and promotional campaign, the campaign may succeed or fail, but the only “risk” to the public relations firm is the general business risk that if the campaign fails a dissatisfied customer will hire another firm in the future. The inference that Bjorlin was seeking equity-based compensation for Li-dingo, in addition to the $20,000 monthly *1177 fee plus expenses, to counter the normal business risk of losing a customer is not as compelling as the inference that she was seeking such compensation for the risk that Lidingo would be caught engaging in an illegal promotional campaign.
Plaintiffs sufficiently plead Bjorlin’s scienter with respect to the alleged promotional scheme and false or misleading statements relating to Lidingo’s relationship with Galena. Plaintiffs do not, however, sufficiently plead Bjorlin’s scienter with respect to Galena’s relationship with DreamTeam.
l. Lidingo
Because the Court has found that Plaintiffs properly plead Bjorlin’s scienter, the scienter of Lidingo is sufficiently alleged with respect to the alleged promotional scheme and false or misleading statements relating to Lidingo’s relationship with Galena.
m. Conclusion
In sum, Plaintiffs sufficiently allege scienter against: Ahn, Kriegsman, Chin, Nisi, Hillsberg, Galliker, and Galena with respect to the alleged promotional scheme and false or misleading statements arising out of Galena’s relationship with both DreamTeam and Lidingo; Bernarda, DreamTeam, McCarthy, and Meyer with respect to the alleged promotional scheme and false or misleading statements relating to Galena’s relationship with DreamTeam; and Lidingo and Bjorlin with respect to the alleged promotional scheme and false or misleading statements relating to Galena’s relationship with Lidingo. Plaintiffs do not sufficiently allege scienter against Dunlap or Schwartz.
D. First Claim for Relief: Section 10(b) and Rule 10b-5
Section 10(b) 'of the Exchange' Act makes is “unlawful for any person, directly or indirectly ... [t]o use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations the Commission may prescribe.” 15 U.S.C. § 78j. Rule 10b-5, implementing Section 10(b), states:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.
17 C.F.R. § 240 .10b-5.
Defendants argue that in Plaintiffs’ first claim, they allege only a violation under Rule 10b-5(b). The heading of Plaintiffs’ first claim states that it is for violations of Section 10(b) and Rule 10b-5(b). The allegations within that claim, however, are that Galena, Ahn, Bernarda, Dunlap, the DreamTeam Defendants, Meyer, and the Lidingo Defendants 29 “carried out a plan, scheme and course of conduct” to deceive the investing public, “employed devices, schemes and ’ artifices to defraud,” “en *1178 gaged in acts, practices, and a course of conduct” to defraud and “engaged in transactions, practices and a course of. business that operated as a fraud and deceit.” CAC ¶¶253, 255. Additionally, the Consolidated Complaint alleges that the claims asserted “arise under §§ 10(b), 20A, and 20(a) of the Exchange Act ... and Rule 10b-5(a)-(e) promulgated thereunder.” Id. ¶ 13. Moreover, throughout the Consolidated Complaint, Plaintiffs allege that Defendants engaged in a fraudulent “scheme,” including a “scheme to manipulate Galena’s stock. price.” See, e.g., id. ¶¶ 2, 3, 6, 9, 11, 78, 82, 102, 131, 139, 253, 255. The Court.finds the C.onsolidated Complaint provides sufficient notice that Plaintiffs are bringing claims under all three sections of Rule 10b-5, specifically, sections (a), (b), and (c). The Court thus analyzes whether the Consolidated Complaint sufficiently states a claim under any of those three sections.
1. Rule 10b-5(b)
Defendants argue that Plaintiffs’ 10b-5(b) claim fails because Plaintiffs do not adequately plead: (a) a material misrepresentation or omission; (b) that any misrepresentation or omission was “made by” any Defendant; (c) scienter; (d) reliance; and (e) loss causation. The DreamTeam Defendants also argue that Plaintiffs do not adequately, plead that the alleged misrepresentations were made “in connection with” the purchase or sale of a security. Each argument except scienter, which was discussed previously, is- addressed in turn.
a. Material misrepresentations or omissions
Plaintiffs allege both direct misrepresentations* and omissions by Galena and its officers and misrepresentations and omissions through publications placed by DreamTeam or Lidingo.
i. September 13, 2013 8-K filing
Plaintiffs allege that to conduct Galena’s September 2013 secondary offering, on September 13, 2013, Galena entered into an Underwriting Agreement, which was attached as an exhibit to Galena’s 8-K filing with the SEC made that same day. This Underwriting Agreement contained a clause stating that:
The Company has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock or any security of the Company to facilitate the sale or resale of any of the Securities.
CAC.¶ 105. Plaintiffs allege this statement is false because at that time Galena had already hired DreamTeam for the purpose of illegitimately manipulating Galena’s stock price so the insiders could sell their stock at inflated prices.
Defendants respond that this statement is not actionable because it was a private statement between Galena and its.underwriter, Oppenheimer &. Co. (“Oppenheimer”), and was a warranty. only between Galena and Oppenheimer, as a different clause in the -Underwriting Agreement expressly established. Thus, argue Defendants, the investing public was informed that this was a private warranty solely for the benefit of Oppenheimer and the statement is not actionable. Defendants primarily rely on S.E.C. v. Tex. Gulf Sulphur Co., 401 F.2d 833 (2d Cir.1968), for the proposition that a statement must be made “in a manner reasonably calculated to influence the investing public” to be sufficiently connected to the sale or purchase of securities and therefore actionable. 401 F.2d at 862. The Ninth Circuit, however, while noting Texas Gulf Sulphur’s holding, *1179 held that statements are sufficiently “connected” and actionable “if the fraud alleged ‘somehow touches upon’ or has ‘some nexus’ with ‘any securities transaction.’” S.E.C. v. Rana Research, Inc., 8 F.3d 1358, 1362 (9th Cir.1993) (quoting S.E.C. v. Clark, 915 F.2d 439, 449 (9th Cir.1990)); see also S.E.C. v. Zandford, 535 U.S. 813, 824-25 , 122 S.Ct. 1899 , 153 L.Ed.2d 1 (2002) (connection i sufficient if it “coincides” with . securities transactions), “Where the fraud alleged involves public dissemination in a document such as a press release, annual report, investment prospectus or other such document on ivhich an investor would presumably rely, the' ‘in connection with’ requirement is generally met by proof of the means of dissemination and the materiality of the misrepresentation or omission.” Rana Research, 8 F.3d at 1362 (emphasis added); see also Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 691 (9th Cir.2011) (“A statement or omission is misleading in the securities fraud context ‘if it would give a reasonable investor the impression of a state of affairs that differs in a material way from the one that actually exists.’ ”). The Supreme Court also has emphasized that the Exchange Act “should be ‘construed not technically and restrictively, but flexibly to effectuate its remedial purposes.’ ” Zandford, 535 U.S. at 819 , 122 S.Ct. 1899 (quoting Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 151 , 92 S.Ct. 1456 , 31 L.Ed.2d 741 (1972)).
The Ninth Circuit has rejected a similar argument that statements or omissions .in a private contract cannot be actionable in a securities fraud action. Reese, 643 F.3d at 691 . The court held that a statement contained in a private contract that was publicly filed may be actionable. Id. The critical issue for the court in Reese was whether the alleged statement was one upon which a reasonable investor could rely. Id. The court found it not to be, because the allegedly false and misleading statement im the contract was a generic promise to conduct future operations in a prudent manner. Id. The court in Reese explained that as a matter of contractual interpretation, forward-looking promises are not a certification that the promisor will actually perform those acts and that contracts include the concept of “efficient breach.” Id. 30 The court noted that it could be an actionable misstatement “if a reasonable investor would view it as a certificate of [the defendant’s] compliance with that standard.” Id.
Here, the statement contained in the Underwriting Agreement'was publicly disseminated and was part of Galena’s disclosures relating to its secondary offering. The Court finds that the allegedly misleading ' Statement was actionable and was in connection with the sale of a security. Although the Underwriting Agreement contains a clause stating that the warranties and representations were made only to the underwriter, at this stage it is a plausible inference that a reasonable investor would believe that the statements ’and representations made to the underwriter were truthful and could be relied .upon. Unlike in Reese , a reasonable investor could view the representation that Galena had not taken any action to manipulate its stock price as certification of that fact. The allegedly misleading statement therefore reasonably created an impression of a state of affairs — that Galena was not engaging in activities to manipulate its stock price — that differed in a material way from the one that allegedly existed. Id. This representation was one on which a reason *1180 able investor could rely and was material. Thus, the connection requirement is satisfied. Rana Research, 8 F.3d at 1362; see also S.E.C. v. Savoy Indus., Inc., 587 F.2d 1149, 1171 (D.C.Cir.1978) (noting that “this [in connection with] requirement is satisfied whenever it may reasonably be expected that a publicly disseminated document will cause reasonable investors to buy or sell securities in reliance thereon”); S.E.C. v. e-Smart Techs., Inc., 74 F.Supp.3d 306, 321 (D.D.C.2014) (“Because the Samsung release was a public document on which investors would rely, the misrepresentations, were made ‘in connection with’ the sale of securities.”).
Defendants also argue that this statement is not false because Plaintiffs do not state a claim for “market manipulation.” In arguing that Plaintiffs do not allege market manipulation, Defendants rely on the following dicta by the Ninth Circuit generally summarizing the difference between a manipulation claim and an omissions claim:
Here, Investors allege manipulative conduct and omissions by Deutsche Bank. “Manipulation,” the Supreme Court has recognized, “is virtually a term of art when used in connection with securities markets. The term refers generally to practices, such as wash sales, matched orders, or rigged prices, that are intended to mislead investors by artificially affecting market activity.” Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 476 , 97 S.Ct. 1292 , 51 L.Ed.2d 480 (1977) (internal quotation marks and citation omitted). As for omissions, the term generally refers to the failure to disclose material information about a company, as opposed to affirmative manipulation.
Desai v. Deutsche Bank Sec. Ltd., 573 F.3d 931, 938-39 (9th Cir.2009).
The Court finds Defendants’ argument unpersuasive. First, the term “manipulation” as used in the Underwriting Agreement does not appear to be used as narrowly as Defendants suggest. The clause uses broad wording, asserting that Galena has not “directly or indirectly” taken “any action” designed to or that might reasonably be expected to constitute the “stabilization or manipulation” of Galena’s stock price. Second, as discussed below, the Court finds that Plaintiffs adequately allege a “scheme” or “manipulation” claim artificially to inflate Galena’s stock price. Accordingly, the statement that Galena had not taken “any action” to stabilize or manipulate Galena’s stock price is sufficiently alleged to be false.
ii. September 13, 2013 prospectus
Also as part of its secondary offering, Galena published a Prospectus, in which Galena noted that there have been and may continue to be possible fluctuations in its stock price. Galena then explained that price fluctuations are caused by many reasons and provided twelve possible reasons, none of which included the alleged promotional campaign. Defendants argue that the promotional campaign did not need to be disclosed because the listed risks were only risks that might reduce the stock price, not increase it. Ahn separately argues that the campaign did not need to be disclosed because it was alleged to increase the price of stock and an increase is not “fluctuation,” which means both increase and decrease. Both of these arguments are unavailing.
The disclosure provided in the Prospectus does not list reasons the stock price may decline, but reasons the stock price may be “volatile” and “fluctuate.” Volatile and fluctuate both imply movement in two directions — prices increasing and decreasing. See, e.g., Webster’s Third New Int’l Dictionary 2562 (3d ed.2002) (defining “volatile,” with respect to markets, as “subject to or characterized by wide price fluctuations”); Cambridge Business English Die- *1181 tionary (defining “market fluctuation” as “a situation in which share prices go up and down”) (available at http://dictionary. cambridge.org/us/dictionary/business-english/fluctuating-market). The risks disclosed in the Prospectus included risks that could both increase Galena’s stock price (such as clinical trial reports, quarterly operating results, announcements of business or strategic transactions, announcements of regulatory developments, and developments in patent, or technology rights), and risks that could decrease Galena’s stock price (such as public concern regarding the safety of Galena’s products, funds not being available for financing, and the decline in stock prices for other large companies within Galena’s industry). Nothing in the nature of the risks disclosed limits the potential risks to risks that would move Galena’s stock price only in one direction, or necessarily in both directions. Thus, Defendants’ and Ahn’s arguments that the nature of how the alleged paid promotional campaign would affect Galena’s stock price did not fall, within the types of risks that might cause a price fluctuation disclosed in the Prospectus are without merit.
Moreover, the scheme, as alleged, had the risk of making Galena’s stock price both increase and decrease. If the alleged plan was successful, the stock price would increase. If the alleged secret paid promotional campaign came to light, the stock price would decrease, as happened. Additionally, the fact that, as alleged, Company insiders were planning to sell large amounts of personally-held stock after the price was inflated could also result in a decrease in the stock price, after the public became aware of an insider sell-off, even if the alleged promotional campaign was not discovered. Thus, the alleged scheme was a risk that might result in the fluctuation of Galena’s stock price, up or down.
Regardless of whether Galena had an independent duty to disclose the paid promotional campaign in its SEC filings, Rule 1-0b-5(b) “prohibits the telling of material half-truths, where the speaker ‘omit[s] to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.’ ” U.S. v. Laurienti, 611 F.3d 530, 539 (9th Cir.2010) (quoting Rule 10b-5(b)). After Galena chose to disclose a lengthy list of reasons why its stock price might fluctuate, it needed to include in that list the alleged scheme that Galena was manipulating the stock price with the help of DreamTeam and Lidingo. See Ansell v. Laikin, 2011 WL 3274019 , at *4 (C.D.Cal. Aug. 1, 2011) (finding a material omission where “Defendant represented in the Tender Offer that past and future stock price fluctuations were due to factors beyond the Company’s control, but did not disclose that Defendant had been manipulating the-stock price with the help of the stock promoter” because by “failing to mention [the] scheme but listing several other risks” in the Tender Offer, the company “misled investors into believing that the Tender Offer had disclosed all known risks of investing in the Company”),
iii. Galena’s 2013 third quarter 10-Q/A
Plaintiffs allege that Galena’s SEC Form 10-Q/A filed on November 6, 2013, was misleading because the report asserts that it does not omit a material fact and that the signatories have disclosed to Galena’s auditors any fraud that involves management or other employees. Plaintiffs allege that this statement was false or misleading because at that time, Galena had engaged DreamTeam and Lidingo in the scheme illegitimately to boost Galena’s stock price and did not disclose that fact to the auditors. Because the Court finds that Plaintiffs have adequately alleged that Galena made false or misleading statements *1182 and engaged in a fraudulent scheme (discussed further below), the statement that any fraud involving management had been disclosed to auditors was an actionable misrepresentation.
iv. Galena’s Code of Ethics
Plaintiffs allege that Galena’s Code of Ethics, adopted in. January 2012, is false or misleading because Galena’s officers and directors violated it when they engaged in insider trading in January 2014. Even assuming that the Selling- Defendants engaged in insider trading as alleged, the Court finds that the statements in Galena’s Code of Ethics are not actionable statements under Rule 10b-5(b). Plaintiffs do not allege any statement by Galena or an .individual Defendant that he or she was complying with the Code of Ethics when he or she was not complying with the Code of Ethics. The only allegations are that the Code of Ethics was publicly available on the website, includes a sentence that Galena will not sanction or tolerate conduct that risks a violation of federal law, and the Selling Defendants violated the law. This is insufficient to rise to the level of a material misrepresentation for securities fraud. See, e.g., Retail Wholesale & Dep’t Store Union Local, 52 F.Supp.3d 961, 970-71 (N.D.Cal.2014) (finding statements in code of conduct not material and not actionable in the absence of a statement that the company or its employees were complying with the code of conduct); Cement & Concrete Workers Dist. Council Pension, 964 F.Supp.2d 1128, 1138-39 (N.D.Cal.2013) (finding statements in a code of ethics not actionable because they are not material and are merely vague statements of corporate optimism) (gathering cases).
v. Lidingo publications
Plaintiffs allege that the many articles, blogs, and email blasts by Lidingo were misleading because they did not disclose that the publications were part of a paid promotional campaign. Such disclosures are required under Section 17(b) of the Securities Act of 1933. 31 Defendants argue that .Plaintiffs do not sufficiently plead any misleading statement by Lidin-go.
Plaintiffs allege that Lidingo used numerous aliases on Facebook, Twitter, and other social media to call attention to Dre'amTeam and Lidingo articles, thereby giving them more validation; paid writers and was reimbursed by Galena for that expense; published articles and email blasts that did not disclose that they were part of a paid campaign; and provided copies of published articles and email blasts to Ahn and Dunlap. Plaintiffs note an email during Galena’s 2012 engagement of Lidingo, where Lidingo describes itself as having published original articles by its writers on various websites, distributed them directly to hundreds of thousands of investors, used third-party message boards to drive traffic to those articlés, and monitored and “worked” message boards to insert pro-Galena messages. Plaintiffs also allege that Galena’s Special Commits tee, which conducted an investigation into the conduct at issue in this lawsuit, concluded that Lidingo likely had violated federal security laws. 32
The PLSRA requires that for a claim based on a fraudulent statement or omission, the complaint must “specify each statement alleged to have been misleading” and the reasons why that statement is misleading. 15 U.S.C. § 78u-4(b)(l)(B). If an allegation of a statement or omission is based on information and belief, the *1183 complaint must state with particularity all facts on which that belief is formed. Id. “In considering if a complaint meets the heightened requirements of the PSLRA, a court should consider the complaint in its entirety.” WPP Luxembourg Gamma Three Sarl v. Spot Runner, Inc., 655 F.3d 1039, 1052 (9th Cir.2011).
Here, Plaintiffs do not allege with particularity any specific article, email, or blog post published by Lidingo within the relevant time period or why any particular communication is false or misleading. Plaintiffs also do not plead with particularity any specific article caused to be published by Lidingo that failed to contain the required disclosure that it was a paid promotional publication.
The Consolidated Cornplaint, however, contains factual allegations and incorporates by reference emails showing that Lidingo’s services to Galena generally included providing articles and email blasts. These include an April 9, 2013 email in which Bjorlin states that “we [Lidingo]-have already set up huge email campaigns and assigned writers to promote the company”; an April 11, 2013 émail in which Ahn requests Bjorlin send him the “five articles”; the April 12, 2013 email in which Bjorlin notes she has sent Ahn the articles; the April 19, 2013 email in which Bjorlin states that Lidingo has “several articles in the queue” and reminds Ahn that Lidin-go’s services are useful because Lidingo “provides a layer of protection” and a “safer” option; and a November 20, 2013 email in which Ahn requests that Bjorlin send Ahn “the email blast you noted.” Plaintiffs further allege that Galena and Lidin-go entered into a contract for promotional services in July 2013 at significantly higher fees than, the “legitimate” investor relations firm Tiberend received, and that Galena’s Special Committee determined that Lidingo likely violated securities law.
Plaintiffs’ allegations relating to Lidingo are sufficient to support an alleged promotional “scheme” claim under 10b — 5(a) or (c) (discussed further below). To the extent Plaintiffs intend to allege a separately actionable false or misleading .statement under 10b-5(b), however, Plaintiffs do not allege with particularity what is false or misleading about any specific promotional publication issued by Lidingo. Plaintiffs do not identify a single article published as a result of Galena’s relationship with Li-dingo that did not contain the required disclosure that the article was part of a paid promotional campaign. Plaintiffs also fail to identify any specific email or social media post or explain how and why any specific email or post was false or misleading. Plaintiffs’ allegations of Lidingo’s concurrent social media and blog campaign are insufficient Under the PLSRA to plead with particularity a misrepresentation or omission. 33
vi. DreamTeam publications
Defendants do not dispute that the articles touting Galena published by the writers paid by DreamTeam failed to contain the required disclosure that they were paid promotional communications. Defendants instead argue that they cannot be held liable for those false or misleading statements because no Defendant “made” those statements and Plaintiffs fail properly to allege the other elements of a securities fraud claim. The other elements of a *1184 securities fraud claim are analyzed below. With respect to whether Plaintiff sufficiently alleged that the articles published through Galena’s relationship with Dream-Team were false or misleading, the Court finds that has been sufficiently alleged.
Plaintiffs also allege, however, that DreamTeam published false or misleading blog posts, social media posts, and comments on investor websites. Plaintiffs make two specific allegations to this effect. The first is that immediately after causing a promotional article to be published on Seeking Alpha on August 6, 2013, Dream-Team authors then used two aliases to post on Yahoo! Finance comments telling readers to “check out” the article and that the person posting the comment was going to buy Galena stock the next day. The second is that when DreamTeam caused an article to be published on Seeking Alpha on November 27, 2013, that same day on its blog DreamTeam touted that an author had posted a bullish article about Galena on Seeking Alpha, without disclosing DreamTeam’s connection to that author and that article.
Plaintiffs’ allegations relating to Dream-Team’s social media posts support an alleged promotional “scheme” claim under 10b-5(a) or (c) (discussed further below). To the extent Plaintiffs intend to allege a separately actionable false or misleading statement under 10b — 5(b), however, Plaintiffs do not allege with particularity what is false or misleading about those posts. Plaintiffs’ allegations of DreamTeam’s concurrent social media and blog campaign are insufficient under the PLSRA to plead with particularity a misrepresentation or omission. 34
vii. Conclusion
Plaintiffs sufficiently allege under Rule 10b-5(b) actionable misrepresentations or omissions in: (1) the Underwriting Agreement contained in Galena’s September 13, 2013 8-K filing; (2) Galena’s September 13, 2013 prospectus; (3) Galena’s 2013 third quarter 10-Q/A; and (4) the articles published in connection with Galena’s relationship with DreamTeam. Plaintiffs do not sufficiently allege specific misrepresentations or omissions in: (1) Galena’s Code of Ethics; (2) Lidingo publications; and (3) DreamTeam publications other than the published articles. Claims under Rule 10b-5(b) based on those allegations are dismissed.
b. Misrepresentations “made by” Defendants
The Supreme Court recently clarified that only the “maker” of a statement can be held liable for alleged misrepresentations and omissions under Rule 10b-5(b). Janus Cap. Grp., Inc. v. First Derivative Traders, 564 U.S. 135 , 131 S.Ct. 2296 , 180 L.Ed.2d 166 (2011). In Janus, the Supreme Court also explained that the “maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it.” Id. at 2302. The Supreme Court also noted that “[o]ne who prepares or publishes a statement on behalf of another is not its maker.” Id.
The Court has found that there were actionable misrepresentations in three of Galena’s publicly disseminated documents and in the articles published as a result of Galena’s relationship with DreamTeam. The Court next analyzes whether Plaintiffs adequately allege that any of Defendants *1185 against whom Plaintiffs’ Rule 10b-5(b) claim is alleged are the “makers” of those actionable misrepresentations.
i. Galena’s publicly disseminated documents
The Court has found that Plaintiffs sufficiently allege misrepresentations or omissions in: (1) the Underwriting Agreement contained in Galena’s September 13, 2013 8-K filing; (2) Galena’s September 13, 2013 prospectus; and (3) Galena’s 2013 third quarter 10-Q/A. The signatories to those documents, and through them, Galena, are “makers” of statements contained in those documents. See Special Situations Fund III QP, L.P. v. Brar, 2015 WL 1393539 , at *3 (N.D.Cal. Mar. 26, 2015) (finding that the corporate employee who signed the contract was the “maker” of the allegedly false or misleading statements within the contract); S.E.C. v. e-Smart Techs., Inc., 31 F.Supp.3d 69, 80 (D.D.C.2014) (“Courts have consistently held that the signer of a corporate filing is its ‘maker,’ because signing a filing implies ‘ultimate control’ over its contents.”); S.E.C. v. Brown, 878 F.Supp.2d 109, 116 (D.D.C.2012) (“Both before and after the decision in Janus, courts have consistently held that the signer of a corporate filing is its ‘maker.’ ”).
Plaintiffs allege that Ahn signed the Underwriting Agreement. As the signor, Ahn, and Galena through him, are the makers of the allegedly false or misleading statements contained in the Underwriting Agreement. Plaintiffs also allege that Galena’s 2013 third quarter 10-Q/A was signed by Dunlap and Ahn, who also signed its accompanying Sarbanes-Oxley certification. Dunlap and Ahn, as signors, and Galena through them, are the makers of the allegedly false or misleading statements contained in Galena’s 2013 third quarter 10-Q/A. 35
Plaintiffs do not allege, however, who, if anyone, signed Galena’s September 2013 Prospectus. Plaintiffs also do not allege facts regarding who prepared or otherwise was responsible for the content of Galena’s September 2013 Prospectus. Because it is a statement by Galena, Galena is the maker of the allegedly false or misleading statements contained within Galena’s September 2013 Prospectus. Ahn, Dunlap, and Bernarda (the individual defendants at Galena against whom Claim One is asserted), however, are not alleged to have had ultimate authority over the content of the Prospectus. Thus, Plaintiffs have not adequately alleged any individual defendant to be the maker of the allegedly false or misleading statements contained in the Prospectus.
ii. DreamTeam-related articles
Defendants argue that none of them are the “makers” of the allegedly false or misleading articles published through Galena’s relationship with Dream-Team. Defendants argue that the individual authors had the ultimate authority over the content and publication of the allegedly misleading published articles and thus are the only “makers” of the statements contained in those articles. Galena and its officers and directors argue in the alternative that if the individual authors are not *1186 the “makers” of the statements, then DreamTeam and McCarthy are. Conversely, DreamTeam and McCarthy, argue in the alternative that if the individual authors are not the “makers” of the statements, then Galena, Ahn, and Bernarda are. 'As alleged by Plaintiffs, the final authority over the articles belonged to Ahn and Bernarda, and through them, Galena. 36 Thus, they are the “makers” of the statements contained in the published articles.
Plaintiffs allege that Ahn and Bernarda had to, and did, approve every article before it could be published. Plaintiffs also allege that authors paid by DreamTeam were informed that a condition imposed by Galena is that the articles could not be published without Galena’s approval. The publication process used by DreamTeam with its clients was described to one author as: (1) DreamTeam would give the author an assignment; (2) the author would submit a draft article to DreamTeam; (3) DreamTeam would forward the draft to DreamTeam’s “biotech company” client; (4) that client company would edit and approve the article; and (5) DreamTeam would send the approved article back to the author for publication and would pay the author $300.
Plaintiffs allege email correspondence in which Meyer, purporting to speak on behalf of DreamTeam, discussed how one article about Galena did not address a short attack on the Company because the article had been submitted. for approval before the attack but not approved for publication by Galena until after. Meyer noted in the email exchange that Galena took a long time to approve articles and there was nothing he could do about it because it was. “up to [Galena] unfortunately.”- Plaintiffs also -allege that an author submitted an article about Galena and was later informed by Meyer that Galena was putting a hold on the publication of all articles, but that DreamTeam would still pay the author for the article. Plaintiffs further allege that Ahn and Bernarda edited and approved all of these the articles before they were published. Plaintiffs’ allegations show that Ahn and Bernarda, and not DreamTeam or the article’s author, had the final, or ultimate, authority to publish the articles and had the final say about the article’s content. Thus, as alleged, the authors hired by DreamTeam were merely drafting the articles, but Ahn, Bernarda, and Galena, had the final word regarding approved content and whether the article would be published.
Defendants also argue that the articles were written by, and attributed to,- the individual authors. Defendants argue that, under Janus, the attribution -within the articles serves to prove that the authors are the “makers” of the statements contained in the articles.- This argument is unavailing. The Supreme Court in Janus noted that in the “ordinary case” attribution within a statement is “strong evidence” that the statement was made by the party to whom it is attributed. Janus, 131 S.Ct. at 2302 . The allegations in this case, however, contend that this case is not ordinary and the attribution within the articles is virtually meaningless. Most of the articles were written under false aliases, including obvious aliases like “Kingmaker” and ‘Wonderful Wizard.” No reasonable reader would believe that the statements contained in the article were made by someone actually named “Kingmaker” or Wonderful Wizard.” The purported biographies associated with the author aliases also were.allegedly false. The Court thus finds that the attribution contained within the articles themselves is not “strong” evidence that those false *1187 aliases were the “makers” of the statements contained in the articles.
Defendants’ argument that only the individual authors are the “makers” stretches the holding of Janus too far. As alleged in this case, Galena was paying for promotional articles with a requirement and understanding that the articles would not disclose the paid promotional relationship, and with Galena keeping the final say on the content of the articles and whether they could be published. If the Court were to consider the individual authors as the makers of those statements, then companies. could avoid liability under the Exchange Act simply by paying third parties to write and publish false or misleading statements about the company, even when the company retains final decision-making authority over content. The holding in Janus does not support such a broad reading.
The analysis in Janus rested on the fact that one business entity had a statutory obligation to file, and did file, allegedly misleading documents with the SEC, while another legally distinct business entity merely contributed content that the first company could choose whether to include in the SEC filing. Janus, 131 S.Ct. at 2304 . The Supreme Court held that the business entity that contributed the content was not the “maker” and only the entity that decided what content to include in the final filing with the SEC and filed with the SEC was the “maker” of the statements contained in the-SEC filing. No analogous situation is involved here. If the Court were to draw parallels with the facts of Janus, the individual Dream-Team-affiliated authors are more analogous to the company that contributed the draft content (and was not the “maker”) than the company that retained final approval over the documents (the “maker”). Although the authors may be the ones who pressed “send” on a submission to Seeking Alpha and the other online forums, that published the articles, as alleged Ahn and Bernarda are the persons who decided what content to include in the final article and whether any particular article would be published.
Plaintiffs’ argument that the individual DreamTeam-affiliated authors are not the “makers” of the statements contained in the articles is well taken. Plaintiffs also argue, however, that both- Galena and DreamTeam had ultimate authority over the published articles. Plaintiffs cannot have it both ways. Galena and Dream-Team are two separate, legally distinct business entities. If Galena, through Ahn and Bernarda, retained the ultimate authority over the content and publication of the articles, then DreamTeam necessarily did not have ultimate authority oyer those same articles, and vice.versa. The lesson of Janus is that where legally distinct entities are involved, only one entity has the final say in what, if anything, is published. Plaintiffs do not plead that Galena had ultimate authority over some articles and DreamTeam over others. Plaintiffs also do not plead in the. alternative, that Galena had ultimate authority but if not Galena, then DreamTeam. Instead,. Plaintiffs plead that Ahn and Bernarda had to approve every article and that no article could be published without their approval. These allegations assert that Ahn and Ber-narda, and not DreamTeam, had final authority over the articles. See, e.g:, e-Smart Techs., 74 F.Supp,3d at 319-20 (finding it to be “an inescapable conclusion” that the company CEO was the “maker” under Janus of statements contained in a press release because although a public, relations'"'consultant’’drafted the press release, the CEO edited and approved it before publication).
iii. Conclusion
Plaintiffs sufficiently- allege that Ahn and Galena are the makers of the state- *1188 merits contained in the Underwriting Agreement contained in Galena’s September 13, 2013 8-K filing, Galena is the maker of the statements contained in the September 13, 2013 prospectus, and Ahn, Dunlap, and Galena are the makers of the statements contained in Galena’s 2013 third quarter 10-Q/A. Plaintiffs also sufficiently allege that Ahn, Bernarda, and Galena are the makers of the allegedly false and misleading articles published through Galena’s relationship with DreamTeam.
c. Reliance and Materiality
Defendants argue that Plaintiffs have not' sufficiently pled reliance through a fraud-on-the-market theory because there was no allegedly false or misleading information about Galena or its business. Defendants argue that the only allegedly misleading information involved non-company specific information; to wit the identity and potential bias of the authors of the published articles. Plaintiffs respond that the fraud-on-the-market doctrine assumes that in an efficient market a stock price includes all publicly available information, which includes the alleged misrepresentations and omissions involved in this case. In their reply, Defendants do not respond to Plaintiffs’ arguments relating to reliance.
The Supreme Court recently reiterated and reaffirmed the fraud-on-the-market doctrine as follows:
Basic[, Inc. v. Levinson, 485 U.S. 224 , 108 S.Ct. 978 , 99 L.Ed.2d 194 (1988)] held that securities fraud plaintiffs can in certain circumstances satisfy the reliance element of a Rule 10b-5 action by invoking a rebuttable presumption of reliance, rather than proving direct reliance on a misrepresentation. The Court based that presumption on what is known as the “fraud-on-the-market” theory, which holds that “the market price of shares traded on well-developed markets reflects all publicly available information, and, hence, any material misrepresentations.” Id. at 246 , 108 S.Ct. 978 . The Court also noted that, rather than scrutinize every piece of public information about a company for himself, the typical “investor who buys or sells stock at the price set by the market does so in reliance on the integrity of that price”— the belief that it reflects all public, material information. Id. at 247 , 108 S.Ct. 978 . As a result, whenever the investor buys or sells stock at the market price, his “reliance on any public material misrepresentations ... may be presumed for purposes of a Rule 10b-5 action.” Ibid.
Based on this theory, a plaintiff must make the following showings to demonstrate that the presumption of rebanee applies in a given case: (1) that the alleged misrepresentations were publicly known, (2) that they were material, (3) that the stock traded in an efficient market, and (4) that the plaintiff traded the stock between the time the misrepresentations were made and when the truth was revealed.
Halliburton, 134 S.Ct. at 2408 .
The core of Defendants’ argument on reliance appears to be that the alleged misrepresentations and omissions in this case were not material because they were not about Galena’s core business operations. For an omission to be material, “‘there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.’ ” Petrie v. Elec. Game Card, Inc., 761 F.3d 959, 970 (9th Cir.2014) (quoting S.E.C. v. Todd, 642 F.3d 1207, 1215 (9th Cir.2011)). “[A] statement is material if there is a substantial hkelihood that a reasonable investor would consider it important in mak *1189 ing a decision.” United States v. Tarallo, 380 F.3d 1174, 1182 (9th Cir.2004).
For the alleged misrepresentations and omissions the Court has found to be actionable, the Court also finds that they are material. There is a substantial likelihood that a reasonable investor would have found the fact that Galena’s Prospectus and SEC filings did not disclose that the Company and its officers were engaging in fraud or market manipulation to have significantly altered the “total mix” of information. Similarly there is a substantial likelihood that a reasonable investor would have found the fact that the numerous articles touting Galena were sometimes authored by the same persons using different aliases; that the authors used false credentials, and that the authors were paid to tout Galena to alter the total mix of information. See, e.g., Swack v. Credit Suisse First Boston, 383 F.Supp.2d 223, 237 (D.Mass.2004) (holding that the allegation that a stock analyst failed to disclose that his positive rating was the result of a quid pro quo agreement with the rated company was a material misrepresentation or omission); Cyber Media Grp., Inc. v. Island Mortgage Network, Inc., 183 F.Supp.2d 559, 572-73 (E.D.N.Y.2002) (finding that allegations that a stock analyst’s statement that a company was a “double your money stock” without disclosing the analyst’s conflict of interest were sufficient to plead materiality).
d. Loss causation
The Ninth Circuit has discussed the pleading requirements for loss causation as follows:
Broadly speaking, loss causation refers to the causal relationship between a material misrepresentation and the economic loss suffered by an investor. [Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 342 , 125 S.Ct. 1627 , 161 L.Ed.2d 577 (2005)]. Ultimately, a securities fraud plaintiff must prove that the defendant’s misrepresentation was a “substantial cause” of his or her financial loss. In re Daou Sys., Inc., 411 F.3d 1006, 1025 (9th Cir.2005). At the pleading stage, however, the plaintiff need only allege that the decline in the defendant’s stock'price was proximately caused by a revelation of fraudulent activity rather than by changing market conditions, changing investor expectations, or other unrelated factors. Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1062 (9th Cir.2008). In other words, the plaintiff must plausibly allege that the defendant’s fraud was “revealed to the market and caused the resulting losses.” Id. at 1063 (emphasis added).
Loos v. Immersion Corp., 762 F.3d 880, 887 (9th Cir.2014) (emphasis in original); see also Nuveen Mun. High Income Opportunity Fund v. City of Alameda, 730 F.3d 1111, 1119 (9th Cir.2013) (“Typically, to satisfy the loss causation requirement, the plaintiff must show that the revelation of that misrepresentation or omission was a substantial factor in causing a decline in the security’s price, thus creating an actual economic loss for the plaintiff.”) (quotation marks omitted).
Defendants argue that Plaintiffs do not properly to plead loss causation because, as pled by Plaintiffs, the information disclosed in the alleged corrective disclosures was “already publicly available on the internet” and thus was not new information to the market. Specifically, Defendants argue that Plaintiffs’ allegations relating Mr. Matt Gravitt’s February 1, 2014 article “Paying Companies for Stock Promotion and Significant Insider Selling are Major Red Flags” is fatal to Plaintiffs’ claims.
As alleged by Plaintiffs, Mr. Gravitt published an article on Seeking Alpha in which Mr. Gravitt informs the public that *1190 he is suspicious of stocks that are heavily touted on the internet and he researched Galena’s heavy internet promotion. Mr. Gravitt visited the website www. stockpromoters.com and typed in “GALE” 37 and noted that there were.27 different instances of Galena being promoted since March 2012. Mr. Gravitt then found a disclaimer on “the tip-us websi-tem” 38 disclosing that MissionIR received compensation from Galena for promotional services. The day after Mr. Gravitt’s article was published, Galena’s stock price fell by approximately 20 percent on heavy volume. Plaintiffs allege several other disclosures, on February Í2, 13, 14 and March 13, 2014, all exposing further details of the alleged scheme and all resulting in Galena’s stock price falling.
At this stage of the proceedings, the Court finds that the fact that Mr. Gravitt was able to track down a short disclaimer about MissionIR receiving compensation from Galena in an allegedly obscure website after researching Galena’s promotions does not demonstrate that the information regarding Galena’s stock promotions was already in the market and incorporated into Galena’s stock price. There is no 'allegation that the published articles linked to or otherwise referenced the “tip-us” disclaimer or disclosed any relationship between Galena and MissionIR or Dream-Team.
The DreamTeam Defendants argue that the disclaimer placed on DreamTeam’s website that MissionIR received compensation from Galena served to incorporate that information into the market. This argument is unavailing. Persons reading the many published articles about Galena had no way of knowing that those specific materials were connected to DreamTeam or MissionIR, and thus would have had no reason to check DreamTeam’s website for any disclaimer relating to Galena or Mis-sionIR. Moreover, Plaintiffs allege that the authors posted false biographies that did not disclose the author’s connection to either DreamTeam or MissionIR.
The limited disclaimers on “tip-us” or DreamTeam’s website demonstrate the importance of the requirement that paid promoters disclose the paid relationship within the publication itself. It is not reasonable for investors to have to research every stock promotion-related website to make, sure - that each company recommended by purportedly independent analysts and investors has not hired a promotional firm to engage in secret stock .promotions.
The fact that the paid promotional campaign is information that was not incorporated into Galena’s stock price is further evidenced by Plaintiffs’ allegations that after Mr. Gravitt’s February 1, 2014 article was published Galena’s stock price dropped 20 percent, and after Mr. Feuer-stein’s February 12, 2014 article was published Galena’s stock price dropped more than 16 percent. Plaintiffs allege that as the disclosures continued, Galena’s stock price continued to fall. After the February 13 and 14 articles, Galena’s stock price fell 14 percent. After the March 13, .2014 article, Galena’s stock price dropped more than seven percent. If the fact of the promotional scheme was already incorporated into the market price, then these disclosures would not have had such a significant impact on Galena’s stock price.
Although Defendants may provide evidence at summary judgment or trial that the alleged misrepresentations did not *1191 substantially cause Plaintiffs’ losses, at this stage the Court finds that Plaintiffs ade-, quately have alleged that the alleged fraud was revealed to the market through several disclosures in February and March 2014 and caused Galena’s stock price to drop significantly. Cf. W. Virginia Pipe Trades Health & Welfare Fund v. Medtronic, Inc., 57 F.Supp.3d 950, 983 (D.Minn.2014) (rejecting argument that disclosure of drug’s side effects on Federal Drug Administration website was sufficient to preclude allegations of loss causation because it was not appropriate at the pleading stage for the court to investigate and compare the disclosures with the findings of the allegedly misleading studies and articles that downplayed the drug’s side effects, and then determine whether investors would have relied on the studies and not cross-checked against the website disclosures).
e. “In connection with” the purchase or sale of a security
The DreamTeam Defendants also argue that the alleged misstatements and omissions in the articles published through Galena’s relationship with DreamTeam were not “in connection with” the purchase or sale of security. The DreamTeam Defendants argué that is because the only alleged misrepresentations and omissions are that the authors used falsely credentialed aliases and failed to disclose they were being paid to tout Galena. The DreamTeam Defendants’ reading of the “in connection with” requirement is too narrow.
As noted above, alleged misrepresentations are sufficiently connected and actionable if they touch upon or have some nexus with any securities transaction. Rana Research, 8 F.3d at 1362, “Where the fraud alleged involves public dissemination in a document such as a press release, annual report, investment prospectus or other such document on which an investor would presumably rely, the ‘in connection with’ requirement is generally met by proof of the means of dissemination and the materiality of the misrepresentation or omission.” Id. (emphasis added). The articles here were publicly disseminated, and the Court has already found, that the alleged misrepresentations and omissions, are material. The Court further finds that articles touting Galena published by purportedly experienced investors on highly-regarded investment websites are documents on which an investor presumably would rely. This is demonstrated by the increase in the price of Galena stock that allegedly occurred after the articles were published. The published articles are also documents intended to influence the , investing public. Indeed, that was the whole point in publishing them — to raise Galena’s stock price. Accordingly, Plaintiffs sufficiently allege that the articles were “in connection with” the purchase or sale of a security. Cf. S.E.C. v. Trabulse, 526 F.Supp.2d 1001, 1006 (N.D.Cal.2007) (finding, among others, that newsletters that summarized the relevant mutual fund’s performance, current market conditions, and what the markets were expected to do in the future were sufficiently connected with the purchase or sale of a security).
f. Conclusion
Plaintiffs sufficiently allege violations of Rule 10b-5(b) as follows: (1) against Ahn, Bernarda, and Galena for the allegedly false and misleading articles published through Galena’s relationship with Dream-Team; (2) against Ahn and Galena for statements contained in the Underwriting Agreement contained in Galena’s September 13, 2013 8-K filing and in Galena’s 2013 third quarter 10-Q/A; and (3) against Galena for the statements contained in the September 13,- 2013 prospectus.
2. Rule 10b-5(a) and (c)
Rule 10b~5(a) prohibits persons from employing “any device, scheme, or artifice *1192 to defraud” and Rule 10b-5(c) prohibits persons from engaging “in any act,' practice, or course of business which operates or would operate as a fraud or deceit upon any person.” 39 Claims under Rule 10b5-(a) and (c) are generally referred to as claims for “scheme liability.” Scheme liability claims are distinct from claims under Rule 10b-5(b). Rule 10b-5(b) claims are based solely on deceptive statements or omissions, whereas scheme liability claims involve deceptive conduct, which may include deceptive statements or omissions but must also include additional conduct. Spot Runner, 655 F.3d at 1057 (“A defendant may only be liable as part of a fraudulent scheme based upon misrepresentations and omissions under Rules 10b-5(a) or (c) when the scheme also encompasses conduct beyond those misrepresentations or omissions.”); 40 S.E.C. v. Loomis, 969 F.Supp.2d 1226, 1237 (E.D.Cal.2013) (“Yet, the same set of facts may give rise both to a violation of subsection (b) and subsections (a) and/or (c) if plaintiff alleges ‘that the defendants undertook a deceptive scheme or course of conduct that went beyond the misrepresentations.’” (quoting In re Alstom SA, 406 F.Supp.2d 433, 475 (S.D.N.Y.2005))).
To allege a claim for scheme liability, a plaintiff must allege the elements of a securities fraud claim. Stoneridge Invs. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 158 , 128 S.Ct. 761 , 169 L.Ed.2d 627 (2008). Rules 10b-5(a) and (c), however, prohibit, manipulative or deceptive acts, versus material misrepresentations or omissions. Thus, to state a claim for securities fraud based on scheme liability, a plaintiff must allege: (1) the defendant committed a deceptive or manipulative act in furtherance of the alleged scheme; (2) scienter; (3) a connection'between the alleged deceptive or manipulative act and the purchase or sale of a security; (4) reliance upon the alleged deceptive or manipulative act; (5) economic loss; and (6) loss causation. See Halliburton, 134 S.Ct. at 2407 ; Stoneridge, 552 U.S. at 158 , 128 S.Ct. 761 . Further, a defendant may not be held liable for aiding and abetting an alleged scheme — each defendant must be primarily liable under the securities,laws and engage in his or her own deceptive conduct. Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164 , 114 S.Ct. 1439 , 128 L.Ed.2d 119 (1994); see also Cooper v. Pickett, 137 F.3d 616, 624 (9th Cir.1997) (“Central Bank does not preclude liability based on allegations that a group

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/7232535. Public record. Not legal advice.