Cemtrex Inc. Monday filed a $170 million libel lawsuit against financial blogger Ricardo Antonio Pearson, whose posting on a financial website last month was blamed for sending the company’s stock sharply lower.
The lawsuit, filed in U.S. District Court in Central Islip, comes less than two weeks after Pearson posted a Feb. 22 blog on the website Seeking Alpha charging that company insiders made undisclosed sales of almost 1 million shares of stock, at the same time that stock promoters were paid more than $1 million by the company to raise the price of its shares.
Cemtrex chief executive Saagar Govil and executive director Aron Govil denied making any undisclosed sales during the stock promotion period last year and early this year.
The day the blog was published, shares of Farmingdale-based Cemtrex fell 33.6 percent to close at $3.40 on the Nasdaq Capital Market. Cemtrex makes electronics, emission monitors and instruments for industrial processes and environmental control.
The lawsuit also says that Pearson, whom it asserts wrote the blog under the name “Richard Pearson,” made “false and defamatory statements” about Cemtrex’s outside accountants and auditors.
Pearson, who describes himself as a short-seller and activist investor, did not respond to messages seeking comment. A short-seller profits when a company’s share price declines.
Thomas Fleming, an attorney at Olshan Frome Wolosky LLP, the Manhattan law firm that filed the lawsuit on behalf of Cemtrex, said that Pearson is believed to be in Santa Monica, California.
Fleming said that unnamed short-sellers could be added to the lawsuit. “It’s our belief that short-sellers operate with other short-sellers,” he said. “That’s what we believe happened here.”
The lawsuit seeks general damages of at least $70 million and punitive damages of at least $100 million.
Shares of Cemtrex fell 8.7 percent to close yesterday at $3.35.