L&K Prevails in Revival of Abengoa Securities Fraud Claims at the Second Circuit of Appeals

Levi & Korsinsky recently prevailed in a securities fraud appeal at the Second Circuit of Appeals in the matter of Sherman v. Abengoa, S.A. (2d Cir. 2025).

In Abengoa, investors who purchased Abengoa's American Depository Shares alleged that the Spanish energy and construction company falsified its financial statements to conceal a severe liquidity crisis that led to its 2016 bankruptcy. Plaintiffs alleged that Abengoa's 2013 SEC registration statement misrepresented that it used the "percentage-of-completion" accounting method accurately, when in fact executives inflated profits, fabricated costs, and shifted expenses between projects to overstate revenue and hide losses. The district court dismissed the claims as untimely and inadequately pleaded, but the Second Circuit reversed in part, holding that the Securities Act claims were timely and plausibly alleged based on detailed insider accounts and corroborating Spanish criminal proceedings. The appellate court reinstated the Securities Act and Exchange Act claims against Abengoa, as well as Securities Act claims against an Abengoa executive and its underwriters.

This decision is significant for a number of reasons, one of which is that the Second Circuit panel held that Plaintiffs had adequately pleaded their claims that Abengoa "orchestrated a fraudulent scheme"; Abengoa was, at the time a multinational corporation and one of Spain's largest companies, and the case involved a large investigation conducted by Levi & Korsinsky and co-counsel uncovering and piecing together legal proceedings and reports in diverse jurisdictions, the findings of which the Second Circuit held could be relied upon as "detailed, independently corroborated, and the product of an independent investigation." Perhaps more importantly, the decision clarifies Second Circuit precedent on materiality and pleading standards in securities fraud cases, affirming that investors may rely on detailed factual allegations drawn from credible external investigations and foreign proceedings. The ruling strengthens investor protections by reaffirming that multinational corporations are accountable for false or misleading disclosures in U.S. markets, regardless of where their misconduct originates. It represents a strong statement of law ensuring that global companies engaging in deceptive accounting and reporting practices can be held responsible under U.S. securities laws. Levi & Korsinsky remains committed to fighting for investors harmed by fraud, misrepresentation, and corporate misconduct, wherever that conduct occurs.