Cheetah Mobile Inc. (CMCM) Accused of Basing Revenue on Fraudulent Activity

According to the complaint arising from violations of the Securities Exchange Act of 1934 by Cheetah Mobile's officers and directors between April 26, 2017, and November 27, 2018, Cheetah Mobile Inc. (CMCM) made materially false and misleading statements regarding its business, operation, and compliance policies. On November 26, 2018, BuzzFeed News reported that certain Cheetah apps then available in the Google Play store were exploiting user permissions as part of an ad fraud scheme. Cheetah’s apps “tracked when users downloaded new apps and used this data to inappropriately claim credit for having caused the download.” BuzzFeed News reported that two of Cheetah’s apps were removed from the Google Play store after publication of the article. On this news, Cheetah’s American depositary receipt (“ADR”) price fell $3.32, or nearly 37%, over the next two trading sessions, closing at $5.48 on November 27, 2018.

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