RYB Education, Inc. (NYSE: RYB)
The complaint charges RYB and certain of its officers with violations of the Securities Exchange Act of 1934 and/or the Securities Act of 1933. RYB offers educational services, operating kindergarten and pre-schools and providing training in a variety of languages and subjects, including teacher recruitment, guidance, innovative learning, child development, rating systems, parent consulting and other services.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding the Company’s business and operations, including that RYB had failed to establish safety policies to prevent sexual abuse from occurring at its schools, which had exposed children to harm and/or unreasonable risk of harm while in the Company’s care. As a result of defendants’ false statements and/or omissions, RYB American Depositary Receipts (“ADRs”) traded at artificially prices of more than $30 per share during the Class Period.
Then on November 24, 2017, various news outlets reported that police had opened an investigation into RYB after numerous parents accused an RYB nursery of drugging and molesting their children, which was confirmed in a statement by Beijing’s educational authority. According to China’s leading newspaper, Xinhua News Agency, RYB suspended multiple teachers at RYB Education New World after kindergarten students were “reportedly sexually molested, pierced by needles, given unidentified pills,” forced to undress and locked in a dark room. Parents reported that at least eight children had been abused at the school and that the children had given similar accounts with respect to their abuse. On this news, the price of RYB ADRs fell $10.28 per share, or over 38%, to close at $16.45 per share on November 24, 2017.
On the following day, several news outlets reported that Chinese police had detained teachers in connection with the child abuse inquiry. According to police reports, one of the teachers was arrested after needle wounds were found on at least eight children at the kindergarten aged 2 to 6. In a statement issued later that day, RYB announced it had fired the detained teachers, as well as the head of one of its kindergartens.
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