N.Y. Judge Consolidates 2 Securities Fraud Cases vs. Encryption Software Firm
U.S. District Judge Pamela Chen for Eastern New York in Brooklyn ordered the consolidation of two securities fraud cases, Glick v. Arqit Quantum (docket 1:23 22-cv-02604) and Weeks v. Arqit Quantum (docket 1:23-cv-02806), said her text-only order Monday. Arqit’s registration statement said the company was preparing to launch its first live service during second-half 2021 and already had signed “major, long-term contracts for its services with large companies and government institutes,” said plaintiff Chris Weeks in an April complaint (see 2304170041). A transcript of an Arqit presentation filed with the SEC in August 2021 quoted executives saying its QuantumCloud encryption-as-a-service technology was “live for service” and the company had $130 million in signed commitments, said Weeks’ complaint. Customers purportedly included the U.K. government, the European Space Agency, BT and Sumitomo, it said. But statements were “untrue” in fact or omission because they misrepresented and failed to disclose that (1) the proposed encryption technology would require “widespread adoption of new protocols and standards for telecommunications that had not yet been adopted," (2) British cybersecurity officials questioned the viability of the encryption technology in 2020, (3) the British government was providing grants to Arqit, 4) the company had little more than an “early-stage prototype” at the time of its merger announcement with Centricus in May 2021, (5) no commercial customer was using the system with live data and (6) most Arqit revenue wasn’t from selling products, said Weeks’ complaint.