Seagate Faces Class Action Lawsuits After Violating US Sanctions by Selling to Huawei
Hard disk drive maker Seagate was recently fined $300 million by the U.S. Department of Commerce for violating U.S. sanctions that imposed export controls on products sold to Huawei, but this may be just the tip of the iceberg. Over the past two weeks, a number of law firms have filed class action lawsuits against Seagate on behalf of shareholders who claim the company was mistaken for selling millions of hard drives to the banned Huawei.
These sales totaled $1.1 billion, with Seagate’s estimated profit of $150 million. After paying $300 million for this breach, the price will be higher as Seagate goes through a class action lawsuit alleging that it made materially false and/or misleading statements to shareholders regarding its dealings with Chinese tech companies.
The US government banned Huawei from selling a wide class of devices in 2019. Seagate’s competitors Western Digital and Toshiba immediately stopped supplying Huawei with hard drives. However, Seagate insisted its HDD sales were legal, even though Western Digital claimed the devices were subject to US sanctions.
Seagate continued to sell 7.4 million drives to Huawei from August 2020 to September 2021, even signing an unnecessary deal to become Huawei’s “sole supplier” (no one else would sell to Huawei). The issue eventually came to the attention of US Senators, who demanded an investigation. it ultimately $300 million fine This is the amount that the US Department of Commerce has imposed on Seagate ($15 million paid quarterly for five years).
This type of fine is bad for earnings and shareholder value. As such, several law firms are currently seeking lead plaintiffs in class action lawsuits filed against Seagate. In the past two weeks he has received calls from 14 law firms seeking a lead plaintiff (1, 2, 3, Four, Five, 6, 7, 8, 9, Ten, 11, 12, 13, 14) so there is no shortage of legal representation for those affected.
To qualify, litigants must have experienced a loss on Seagate stock purchased between September 15, 2020 and October 25, 2022. The court will select a lead plaintiff on September 8, 2023, after which the class action will proceed against Seagate. The complaint alleges that Seagate made false and/or misleading statements about:
- The nature and scale of Seagate’s HDD sales to Huawei. Including, Seagate significantly accelerated sales to Huawei shortly after the BIS rule went into effect and Seagate’s competitors stopped selling to Huawei.and
- that the underlying details of Seagate’s HDD manufacturing process, including the use of covered U.S. software and technology in the “critical ‘production'” process, violated BIS export regulations in its sale to Huawei;
- As a result, Seagate was in blatant violation of BIS export regulations, which resulted in an ongoing investigation by the U.S. Department of Commerce and resulted in Seagate being fined and fined hundreds of millions of dollars.
- As a result, Defendants’ positive statements regarding the Company’s business, operations and prospects were, at all relevant times, materially misleading and/or lacking a reasonable basis.
The lawsuit comes in what can be easily defined as a difficult time for Seagate, with an industry-wide recession leading to Seagate’s recent announcement of significant job cuts. We have reached out to Seagate for comment and will update as necessary.
