See, you must already be familiar with the so-called “Buy Now, Pay Later” thing, right? Well, in this segment, Affirm is without a doubt one of the most famous companies out there in the country. But right now, it is in the headlines for all the wrong reasons. See, we’re referring to the Affirm Lawsuit. Two lawsuits, actually! Yes, on the surface, everything looked great for Affirm, but if you look at the financial outlook of this company, you’ll find major problems, and that’s what these lawsuits are all about.
The Securities Fraud Class Action (2021-2022)
In the year 2022, with February coming just around the corner, Affirm was trending for all the wrong reasons. On 10 February, the company’s official Twitter account released early financial information. That Tweet made it look all very impressive, with an almost 77% jump in revenue.
Investors reacted promptly. The stock price of Affirm shot up some 10% on that very day. But when the earnings obtained their full release, the other half of the story came along-the company declared an official loss of 57 cents per share, much worse than what was in the analysts’ expectations.
What was the reaction? The stock price plummeted in a manner synonymous with ill winds: intraday high of $83.57 to a closing low of $58.68. This speaks of a drop of about 32% in just a single trading day! Investors accused Affirm of being misleading, since they only chose to release the good news while neglecting the negative.
On account of securities fraud, a class action was initiated in the district court for the Northern District of California, presided over by Hon. Vince Girdhari Chhabria. The class included investors who acquired shares of Affirm between February 12, 2021, and February 10, 2022. Lead plaintiffs had until April 29, 2022, to file claims within the representation of the class.
The Data Breach Class Action (2024)
If we fast-forwarded to June 2024, Affirm had another severe problem, and this time it was directly related to its clients.
Affirm has a partnership with Evolve Bank & Trust, which announced a cyberattack on June 25, 2024, by a cybercriminal group. The stolen data, especially information pertaining to persons, was promptly leaked onto the dark web. However, neither Affirm nor Evolve gave a proper disclosure as to what exact information was breached. This ambiguity created much concern among the customers.
By July 3, 2024, Strauss Borrelli and other law firms had started to investigate the breach and prepare class action claims. Customers alleged that Affirm and Evolve neglected to keep highly sensitive personal data safe and thereby exposing it to potential fraud and identity theft.
Lawyers advised affected individuals to:
- Keep copies of the breach notice.
- Enroll in credit monitoring.
- Change account passwords.
- Watch bank statements for unusual charges.
Meaning, customers had to take much-needed precautions on their own so that their data could be worked on safely.
Broader Implications
Both lawsuits highlight big risks for Affirm.
- For investors: The securities case is a classic demonstration of how a trust can collapse in an almost immediate lapse of time in the absence of complete disclosure by a company. There being a single tweet, an incredible mass exodus of stock value followed.
- For customers: The data breach brings with it a classic illustration of how unsafe it can be to have a third-party firm as a partner. Whichever way security fails at any single point, the entire network will feel the bearing of it.
It seems that these cases, when combined, indicate that the company Affirm might be dealing with lawsuits on two fronts: those filed by the customers and the investors.
