Ray v. StoneCo Ltd.

Labaton Keller Sucharow serves as lead counsel in a securities class action against StoneCo Ltd. (StoneCo or the Company), a leading provider of financial technology solutions, payment processing, and lending services in Brazil.

The lawsuit alleges that StoneCo and its executives engaged in undisclosed, unsustainable lending practices that significantly hampered the Company’s financial performance and injured investors, causing billions in damages.  In 2019, the Company launched a credit product that offered its merchant customers working capital loans and revolving lines of credit.  StoneCo touted the credit product as the largest financial opportunity for the Company and quickly expanded its credit portfolio.  Unbeknownst to the investors, StoneCo significantly loosened its lending standards to issue as much credit as possible and expand its market share.  Soon, the Company’s unsustainable lending practices caused a sharp increase in delinquency rates.  StoneCo and its executives continued to defraud the market by falsely assuring investors that the Company was improving its credit scoring system and tightening its lending standards.  The Complaint also alleges that StoneCo falsely blamed the rise in delinquency rates on new regulations and COVID-19 restrictions.  In late 2021, StoneCo finally disclosed that it suspended the credit product due to the high delinquency rates and significantly reduced the Company’s financial outlook. On this news, the Company’s stock dropped 34%.

On September 25, 2024, Hon. Gregory H. Woods of the United States District Court for the Southern District of New York denied in part and granted in part the defendants’ motion to dismiss the case.  The Court found that certain of StoneCo’s alleged misrepresentations and omissions related to its unsustainable lending practices and the cause of its rising delinquency rates were misleading.  These statements touted improvements to StoneCo’s credit product and blamed rising delinquencies on regulatory changes and the global pandemic.  The Court further found that StoneCo’s executives knew or recklessly disregarded the falsity of their misstatements when they regularly attended meetings that discussed the undisclosed lending practices.  This decision marks a significant step forward in holding StoneCo accountable for its actions and allows the case to move forward into discovery.

The case is Ray v. StoneCo Ltd., et al, Case No. 1:21-cv-09620 (S.D.N.Y).  Labaton Keller Sucharow represents the Indiana Public Retirement System as lead plaintiff.